<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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.)
151 GRAHAM ROAD, BOX 9010
COLLEGE STATION, TEXAS 77842-9010
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (409) 690-1711
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock
----------------
(Title of class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10K. X
---
The aggregate market value of the voting stock (based upon the March 1, 1996
average of the high and low trade prices of these shares from the National
Association of Securities Dealers) of O.I. Corporation held by non-affiliates
was approximately $12,225,168.
Number of shares outstanding of each of the issuer's classes of common stock,
as of March 1, 1996: 3,942,750 shares.
Item 9 and Part III information are incorporated by reference to the proxy
statement for the annual meeting of shareholders to be held May 7, 1996.
<PAGE> 2
PART I
ITEM 1. BUSINESS
O. I. Corporation (the Company) was organized as a corporation in 1963, in
accordance with the Business Corporation Act of the State of Oklahoma, as
Clinical Development Corporation, a builder of medical and research
laboratories. In 1969, the Company headquarters were moved from Oklahoma City,
Oklahoma to College Station, Texas, where the Company became involved in
commercializing technology developed in the School of Oceanography at Texas A&M
University. In July 1969, the Company's name was changed to Oceanography
International Corporation. In July 1980, the Company's name was changed to
O.I. Corporation, and in January 1989, to better align the company name with
the products offered and markets served, the Company began doing business as
O.I. Analytical. On January 4, 1994, the Company acquired all the stock of CMS
Research Corporation (CMS) of Birmingham, Alabama and accounted for the
transaction as a pooling of interests. As a result of this accounting
treatment, the Company's financial statements have been restated for 1992 and
1993. See Note 2 to the Consolidated Financial Statements contained herein.
On June 24, 1994, the Company purchased substantially all of the assets and
assumed certain liabilities of Floyd Associates, Incorporated (Floyd) of Lake
Wylie, South Carolina and accounted for the transaction as an asset purchase.
On February 9, 1995, the Company acquired all the stock of Laboratory
Automation, Inc. (LAI) of Columbia, Missouri, and accounted for the transaction
as a purchase.
The Company develops, manufactures, markets and services analytical,
monitoring, and sample preparation products, components, and systems used to
detect, measure, and analyze chemical compounds. The Company's analytical
instruments and systems are used primarily in testing and research laboratories
that are involved in the regulation, testing, and disposal of environmental
contaminants in air, water, and soil. CMS, founded in 1986, develops,
manufactures, and markets instruments used as continuous emissions monitoring
systems (CEM) or continuous monitoring systems (CMS), thus the origin of the
company name. The systems are used for monitoring for volatile organic
compounds (VOCs) and chemical warfare agents. LAI, formed from the divestment
of ABC Laboratories, of Columbia, Missouri, develops, manufactures, and markets
gel permeation chromatography (GPC) systems, Soxhlet extraction, liquid/liquid
extraction, and solvent purification systems. The Company also manufactures
expendables and accessories required to support its products.
The Company entered an agreement on June 1, 1994 to distribute a Thermal
Extraction (ThermEx(TM)) device and cryogenic cooling device, both inlet
systems for gas chromatography. The Company and supplier mutually agreed to
terminate the Agreement effective December 6, 1995. The supplier purchased
from the Company all supplier products in the Company's inventory, and agreed
to provide warranty and service relating to products sold under the contract by
the Company. Sales under the agreement were not material to the Company's
operating results for the period December 31, 1995 nor for the period ending
December 31, 1994.
Gas Chromatography Instruments The Company designs, manufactures, markets,
and services components for gas chromatography, including detectors and sample
introduction instruments. Gas chromatography, developed in 1952, is an
analytical technique that separates organic compounds based on their unique
physical and chemical properties. The use of gas chromatography in a number of
diverse applications has lead to the continuous development of a broad range of
sample introduction and detector devices. Advances in the field are based on
technology improvements which provide sample introduction, faster analysis,
lower level detection, and ease of use. Set forth below are descriptions of
certain gas chromatograph instruments (GCs) currently manufactured by the
Company.
- - The Electrolytic Conductivity Detector (ELCD) selectively detects trace
quantities of organic halogen, sulfur, and nitrogen. It is primarily used
for analyzing volatile organic compounds, pesticides, and poly-chlorinated
biphenyls (PCBs) in drinking water, wastewater, soil, and air as required
in U.S. Environmental Protection Agency (EPA) Methods 502.2 and 601.
2
<PAGE> 3
- - The Photoionization Detector (PID) selectively detects trace quantities of
aromatic and olefinic compounds, which are ionized by an ultra-violet light
source. It is primarily used in VOC analysis, as required in U.S. EPA
Methods 502.2 and 601, underground storage tank monitoring, and
pharmaceutical applications.
- - The Flame Ionization Detector (FID) selectively detects materials that
ionize in an air/hydrogen flame.
- - The Tandem PID/ELCD Detector combines the PID and ELCD for detection of
VOCs in soil, water, and air. The unique tandem design requires only one
GC detector port, increasing GC capability.
- - The Tandem PID/FID Detector combines the PID and FID to detect aromatic
hydrocarbons. It is primarily used to analyze water, soil, or waste
samples for aromatics associated with fuels and underground storage tank
monitoring.
- - The Purge-and-Trap Sample Concentrator (P&T) concentrates trace amounts of
a liquid, solid, or gaseous sample for introduction into a GC.
Autosamplers sequentially transfer samples to the P&T for automated
sampling and increased laboratory productivity.
- - The Headspace Sampler concentrates trace amounts from a gaseous sample for
introduction into a GC.
GC Analyzer Systems The Company integrates its gas chromatography components
with a GC and a GC column to form GC analyzer systems. The Company's VOC
Analyzer System, BTEX Analyzer System (Benzene, Toluene, Ethylbenzene, and
Xylenes), Pesticide Analyzer System, and HF (Hydrogen Fluoride) Analyzer System
are available in different configurations to meet market needs.
Organic Carbon Analyzer Systems The Company designs, manufactures, markets,
and services Total Organic Carbon (TOC) Analyzers that are primarily used to
measure organic and inorganic carbon levels in ultrapure water, drinking water,
groundwater, wastewater, soils, and solids. The Company's TOC Analyzer is used
in testing required by the U.S. EPA. The TOC Analyzer is also used in testing
associated with U.S. pharmaceutical methods, the manufacture of semiconductors,
power generation, and oceanographic research.
Continuous Emissions Monitoring (CEM) Systems The Company designs,
manufactures, markets, and services a continuous air monitoring analyzer for
monitoring VOCs. The U.S. Government has been the largest buyer of the
Company's CEM analyzer with the primary application being monitoring of
chemical warfare agents. The Company is involved in an ongoing attempt to
position CEM products to serve the commercial market. The Company believes the
commercial market segments of potential applications include VOC monitoring of
incineration of hazardous waste, landfill gases, Clean Air Act compliance and
industrial hygiene. The CEM analyzer design is based on gas chromatography
technology and includes a variety of configurations including a GC mainframe,
sample inlets, separation, detectors, and data handling:
- - Sample Inlets include injectors, sample loops, concentrators, and
autosamplers.
- - Separation is accomplished using a gas chromatographic column. The
Company's modular design includes detector(s), electronics, sampling
system, and gas supplies. The quick disconnect design provides for rapid
column and detector replacement.
- - Detection includes flame-ionization, photoionization, flame photometric,
and electrolytic conductivity.
- - Data Handling and Reporting is accomplished with proprietary software that
provides for sequencing multiple sample inlet lines, integration of
detector signals, alarm parameters, data calculation, and report
conditions.
Sample Preparation Products and Systems The Company designs, manufactures,
markets, and services sample
3
<PAGE> 4
preparation instrumentation used to prepare sample matrices for analysis. The
most time-consuming part of chemical analysis is sample preparation.
Procedures, techniques, and instruments that can reduce total sample
preparation time are highly desirable in analyzing chemical compounds. Several
methods for use of microwave techniques in the preparation of samples for
metals analysis are pending approval by the EPA. Microwave digestion serves
multiple markets, including environmental, biological, metallurgical,
geological, and industrial. Applications include acid digestion of aqueous
inorganic samples in accordance with proposed EPA and other defined methods.
The Company's microwave product features a modular design, including mainframe
oven, both integrated and separate temperature and pressure control systems,
and an external exhaust system. Through the use of specially designed
digestion vessels, the Company's microwave system can process up to twelve
samples simultaneously. The Company's patented digestion vessels' safety
features include a disk for pressure relief and double-wall construction. By
acquiring LAI, the Company broadened its sample preparation product line to
include the following:
- - Automated Gel Permeation Chromatography (GPC) systems are used for
preparation of tissue, food, industrial and environmental samples prior to
analysis. Systems process up to 23 samples with unattended operation. The
GPC system is widely recognized in regulatory methods for sample cleanup,
including FDA, USDA and EPA.
- - ExCell Liquid/Liquid Extractors provide electronically assisted extractions
for up to six, one-liter aqueous samples in less than two hours.
Programmable microprocessor controls automate all steps of sample handling,
extraction and system rinsing. These ExCell extractors provide for the
fastest possible sample preparation with minimal labor and enhanced
recoveries.
- - Soxtherm Soxhlet Extractors automate all traditional soxhlet methods for
preparing solid samples. They extract up to six samples simultaneously
five times faster than manual techniques. All extraction functions are
automated, including solvent evaporation and recovery. The Soxtherm
extractor conforms to current EPA methods.
The Company is a value-added reseller (VAR) for analytical instruments
manufactured by Hewlett-Packard Company (HP). Under the terms of the Company's
VAR agreement with HP, the Company purchases HP analytical instruments,
including GCs, and integrates them with Company-manufactured components and
markets these analytical systems for environmental analysis to comply with EPA
500, 600, and 8000 Series Methods, and for other non-environmental chemical
analysis. The VAR agreement provides that HP will forward to the Company sales
leads for systems comprising the Company's products. The Company also conducts
its own marketing to generate sales leads. The Company obtains orders,
configures systems, ships, installs, and provides support to products sold
pursuant to the VAR agreement. The VAR agreement is renewable annually;
however, there are no assurances that the agreement will be renewed.
Management believes that there are alternative means of distributing the
Company's products and obtaining similar GC products as those now purchased
from HP. The Company and HP annually evaluate the benefits of continuing the
agreement. In 1994, HP began offering a product that competes with one
component sold by the Company; accordingly, the Company continues to measure
the value of the arrangement. Should the Company choose to pursue alternative
sales strategies, GCs typically can be purchased at a more favorable discount
in an original equipment manufacturers' (OEM) arrangement with HP, as well as
other GC suppliers.
All of the Company's assets are located in the United States and all sales are
conducted in U.S. dollars. There have been no sales or transfers between
industry segments or geographic areas during the last five fiscal years.
Estimated
4
<PAGE> 5
net revenue attributable to the United States, export revenue as a group, and
the number of countries in which export revenue was made are as follows:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994 1993 1992 1991(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Revenue:
United States $ 15,110 $ 16,794 $ 16,860 $ 19,239 $ 16,633
Export 2,832 1,562 1,552 1,540 1,309
---------- ---------- ---------- --------- ---------
Total $ 17,942 $ 18,356 $ 18,412 $ 20,779 $ 17,942
========== ========== ========== ========= =========
% of Revenue:
United States 84% 91% 92% 93% 93%
Export 16% 9% 8% 7% 7%
---------- ---------- ---------- --------- ---------
Total 100% 100% 100% 100% 100%
========== ========== ========== ========= =========
Number of countries - export 31 26 28 28 23
</TABLE>
(1) The 1991 amounts do not include the operations of CMS.
MANUFACTURING The Company manufactures products at three locations. The
Company's manufacturing capabilities include electro-mechanical assembly,
testing, integration of components and systems and calibration of configured
systems. The Company believes that its manufacturing processes are documented
as it understands the requirements to meet applicable domestic and
international regulations and standards.
The Company's policy has been to have its products certified to safety
standards by one or more of the following agencies: Underwriters Laboratories
(UL), Canadian Standards Association (CSA) and/or the European Committee for
Electrotechnical Standardization (CE). These agencies and others also certify
that instruments meet certain performance standards and that advertised
specifications are accurate.
As of January 1, 1996, instruments imported in Europe are required to have a CE
mark. During 1995, the Company incurred expenses relating to product
modification and certification testing to ensure that certain of its products
typically sold in Europe comply with CE requirements.
MARKETING The Company markets and sells analytical components and systems that
it produces and purchases for resale, provides on-site support services, and
distributes expendables and accessories required to support the operation of
products sold. The Company markets its analytical instruments through a direct
sales staff and through domestic and international independent manufacturers'
representatives and distributors. The Company's marketing program includes
advertising, direct mail, seminars, trade shows, and telemarketing. The
Company also benefits in the selling process from marketing assistance received
from HP in connection with the VAR agreement.
TECHNICAL SUPPORT The Company's technical support staff provides support after
the sale to ensure customer satisfaction. The Company offers training courses
and publishes technical information for its customers. Products sold by the
Company generally include a 90-day to one-year warranty. Customers may also
purchase service contracts that provide coverage after the expiration of the
initial warranty. Service work not performed under warranty or service
contract is charged on a time, travel, and material basis. The Company
installs and services its products through its field service personnel in the
United States and Canada and through distributors and manufacturers'
representatives internationally.
RESEARCH AND DEVELOPMENT The analytical instrumentation industry is subject to
rapid changes in technology. The Company's success is heavily dependent on its
ability to continually improve its existing products and to introduce new
products. Research and development costs, relating to both present and future
products, are expensed as incurred. Research and development expenses were
$1,937,000 in 1995, $1,809,000 in 1994, and $1,051,000 in
5
<PAGE> 6
1993. The Company actively pursues development of potential new products,
including custom configured GC systems and components, instrument control and
data reporting software systems, dedicated analyzers, microwave systems, and
other sample preparation products.
PATENTS The Company holds both United States and international patents and has
United States and international patent applications pending. The Company
currently holds 14 patents, 1 of which expires before the year 2000, and 13 of
which expire between the years 2001 and 2011. As a matter of policy, the
Company vigorously pursues and protects its proprietary technology positions
and seeks patent coverage on all technology developments that it regards as
material and patentable. The Company's general policy has been to seek patent
protection when possible for those inventions and improvements likely to be
incorporated into its products. While the Company believes that all of its
patents and applications have value, no single patent or application is in
itself essential to the Company's existence.
COMPETITION The Company encounters aggressive competition in all aspects of
its business activity. The Company competes with many firms in the design,
manufacture, and sale of analytical instruments, principally on the basis of
product technology and performance, quality and reliability, sales and
marketing ability, product support, delivery, and price. Most of the Company's
competitors have significantly greater financial resources, broader market
coverage and global distribution, greater breadth of product line and other
resources than the Company.
EMPLOYEES As of December 31, 1995, the Company had a total of 134 full-time
employees. The Company employs scientists and engineers who perform research
and development on potential new products. To protect the Company's
proprietary information, the Company has employment and confidentiality
agreements with its employees who come in contact with such information. None
of the Company's employees are covered by a collective bargaining agreement.
Management believes that relations between the Company and its employees are
excellent.
EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company,
their ages, positions, and offices, as of March 1, 1996, are as follows:
<TABLE>
<CAPTION>
Name Age Position Date Elected to Position
---- --- -------- ------------------------
<S> <C> <C> <C>
William W. Botts 53 President, Chief Executive Officer and 1985
Chairman of the Board 1986
William R. Hart 59 Vice President/Director of Marketing 1991
Dr. Gary D. Sides 48 Vice President 1994
Jane A. Smith 47 Vice President/Corporate Secretary 1990
Dennis D. Schupp 51 Vice President 1995
</TABLE>
Prior to joining the Company, William W. Botts was Executive Vice President and
Chief Operating Officer of The Brandt Company, a privately owned oil field
service company headquartered in Houston, Texas, which was sold to TRW, Inc. in
August 1982. He was named Vice President and General Manager of the Brandt
Division of TRW Inc, a position he held until he joined the Company as
President and Chief Operating Officer on February 1, 1985. Mr. Botts was named
Chief Executive Officer of the Company on July 19, 1985, and Chairman of the
Board of Directors of the Company on May 26, 1986.
Prior to joining the Company, William R. Hart was Division Sales Manager for
the Hewlett-Packard Company's Avondale Division from 1976 to 1980. In 1980, he
was named Product Marketing Manager for the Gas
6
<PAGE> 7
Chromatography Product Line at the Avondale Division. In 1982, he moved to
Houston, Texas as Hewlett-Packard's Analytical Product's Group Sales Manager
for the Southwest District. Mr. Hart joined the Company in October of 1991 as
Vice President/Director of Marketing.
Gary D. Sides, Ph.D., was employed with Southern Research Institute, a
not-for-profit group in Birmingham, Alabama from 1977 to 1986. He founded CMS
in June 1986, and served as the President and Chairman of the Board from 1986
to 1994. On January 4, 1994, he was named Vice President of the Company and
continues his role as President of CMS.
Jane A. Smith has been employed with the Company since 1973. She was named
Assistant Corporate Secretary in 1976 and Corporate Secretary in 1986. On May
22, 1990, Mrs. Smith was named Vice President/Corporate Secretary.
Dennis D. Schupp was employed with Amtrak from 1972 to 1976. From 1976 to 1982
he held various positions with Marnon Industries of Grain Valley, Missouri. In
1982 he was employed by Solna, Inc. of Joplin and Kansas City, Missouri, where
he served as Vice President-Manufacturing from 1982-1983, Executive Vice
President (1983-1984) and President (1984-1989). In May 1989 he joined Sunglo
Products of Kansas City, Missouri as General Manager. In February, 1990, Mr.
Schupp joined ABC Laboratories as Chief Operating Officer. On September 15,
1993, LAI was organized as an independent company at which time he became
president of LAI. On May 2, 1995, he was named Vice President of the Company
and continues his role as President of LAI.
ENVIRONMENTAL REGULATIONS The Company believes it is in compliance with
federal, state, and local laws and regulations involving the protection of the
environment. The Company routinely handles small amounts of materials that may
be deemed hazardous. Hazardous materials are primarily introduced into the
Company's products by end users rather than by the Company. The Company
believes there will be no material effect upon its capital expenditures,
earnings, and competitive position caused by its compliance with federal,
state, or local provisions regulating the discharge of materials into the
environment or relating to the protection of the environment.
SOURCES OF RAW MATERIALS The Company produces its products from raw materials,
component parts, and other supplies that are generally available from a number
of different sources. The Company has few long-term contracts with suppliers.
For certain of its purchased materials, the Company has developed preferred
sources on the basis of quality and service. There are several purchased
components that are supplied by single source suppliers. There can be no
assurance that these preferred or single sources will continue to make
materials available in sufficient quantities, at prices, and on other terms and
conditions that are adequate for the Company's needs. However, there is no
indication that any of these preferred or single sources will cease to do
business with the Company. The Company believes that in the event of any such
cessation, adequate alternate sources will be available, although perhaps at
increased costs to the Company. In addition, substitute components may require
reconfiguration of certain products and may cause delays in filling customer
orders. Although the Company occasionally uses subcontractors, such
arrangements are not material to its business.
BACKLOG - OPEN ORDERS The Company's backlog of orders on December 31, 1995 was
approximately $1,458,000, compared to $1,693,000 as of December 31, 1994, and
$2,249,000 as of December 31, 1993. The Company's policy is to include in its
backlog only purchase orders or production releases that have firm delivery
dates within one year. Recorded backlog may not result in sales because of
purchase order changes, cancellations, or other factors. The Company
anticipates that substantially all of its present backlog of orders will be
shipped or completed during 1996.
MAJOR CUSTOMERS No single customer accounted for more than 10% of revenue in
1995, 1994 or 1993. Federal, state and municipal governments accounted for 26%
of revenue in 1995, 33% in 1994 and 24% in 1993. Export sales accounted for
16% of revenue in 1995, an increase from 9% in 1994 and 8% in 1993.
7
<PAGE> 8
- -------------------------------------------------------------------------------
ITEM 2. PROPERTIES
The Company's headquarters, research, and manufacturing operations occupy
approximately 28,650 square feet of space located on 11.29 acres of land in
College Station, Texas. The Company rents and uses for storage a 4,500 square
foot facility on a separate tract of land within one quarter mile from the
Company's headquarters. CMS' headquarters, including research and development,
customer service, and manufacturing operations, occupy approximately 9,490
square feet, located in Hoover, a subdivision of Birmingham, Alabama. This
space is leased until October 1998. LAI's headquarters, research and
development, customer service and manufacturing operations occupy 11,700 square
feet located in Columbia, Missouri. This space is leased until July 1997.
Facilities are well suited and adequate to meet the Company's present
operational requirements.
- -------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS
On March 3, 1995, the Company filed a patent infringement complaint against a
competitor in the Galveston Division of the U.S. District Court. The Company
alleges that a product manufactured and sold by the competitor infringes on
U.S. Patent No. 5,358,557 and 5,470,380 issued to the Company. The suit seeks
to enjoin the manufacture and sale of the alleged infringing product 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 its lawsuit against a vendor and
received approximately $290,000 in consideration thereof.
- -------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company,
through solicitation of proxies or otherwise, during the fourth quarter of
1995.
- -------------------------------------------------------------------------------
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
COMMON STOCK MARKET INFORMATION The Company's common stock trades on the
Nasdaq Stock Market under the symbol: OICO. Information below is contained in
a statistical report provided to the Company by the National Association of
Securities Dealers, Inc. (NASD). The range of high and low trade prices for
the Company's common stock for 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter 4 5/8 3 3/4 5 5/8 4 3/8
Second Quarter 4 1/2 3 1/4 5 1/4 4 1/4
Third Quarter 4 2 3/4 5 4
Fourth Quarter 3 3/4 2 1/2 5 3 3/4
</TABLE>
NOTE: The above quotations represent prices between dealers and do not
include retail markup, markdown, or commission and may not necessarily
represent actual transactions.
8
<PAGE> 9
DIVIDENDS The Company has never paid dividends. Management does not
anticipate paying any dividends in the near future.
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK As of March 1, 1996, there were
approximately 1,230 holders of record of the Company's common stock.
- -------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
($ in thousands except per share amounts) 1995 1994 1993 1992 1991(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income statement data:
- ----------------------
Net revenue $ 17,942 $ 18,356 $ 18,412 $ 20,779 $ 17,942
Income before income taxes 1,507 2,131 2,257 3,003 2,753
Net income 1,023 1,545 1,405 1,950 1,825
Earnings per share $ 0.24 $ 0.37 $ 0.34 $ 0.47 $ 0.52
Balance sheet data:
- -------------------
Total assets $ 17,700 $ 15,979 $ 14,706 $ 12,470 $ 9,550
Working capital 11,855 11,156 9,876 7,784 4,927
Shareholders' equity 14,212 12,882 11,150 9,485 6,806
Common size income statement data:
- ----------------------------------
Net revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue 51.5 55.2 54.4 53.7 50.5
--------- ---------- --------- --------- ---------
Gross profit 48.5 44.8 45.6 46.3 49.5
Selling, general and administrative 32.3 25.5 29.1 25.7 27.8
Research and development 10.8 9.9 5.7 7.3 7.1
--------- ---------- --------- --------- ---------
Operating income 5.4 9.4 10.8 13.3 14.6
Other income (expense), net 3.0 2.2 1.5 1.1 0.7
--------- ---------- --------- --------- ---------
Income before income taxes 8.4 11.6 12.3 14.4 15.3
Provision for income taxes 2.7 3.2 4.7 5.0 5.1
--------- ---------- --------- --------- ---------
Net income 5.7% 8.4% 7.6% 9.4% 10.2%
========= ========== ========= ========= =========
</TABLE>
(1) The 1991 amounts do not include the operations of CMS.
- -------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On February 9, 1995, the Company acquired Laboratory Automation, Inc. (LAI),
d.b.a. ABC Instruments, an environmental instruments company headquartered in
Columbia, Missouri. Under the terms of the agreement, the Company made a
$1,000,000 capital investment in LAI, which was used to retire outstanding
long-term debt, and the Company subsequently acquired all of the remaining
shares of LAI stock in exchange for 76,479 shares of the Company's common stock
and $117,000. The acquisition was recorded using the purchase method of
accounting and, accordingly, the acquired operations of LAI have been included
in the results of operations since the date of
9
<PAGE> 10
acquisition. The purchase price has been allocated to the net assets acquired
based on estimated fair market values at the date of acquisition. For the
twelve months ended November 30, 1994, LAI reported sales of $3,300,000 and a
net loss of $151,000.
On December 6, 1995, The Company and Ruska Instruments Corporation of Houston,
Texas, mutually agreed to terminate a marketing agreement, which began June 1,
1994. Sales under the agreement were not material to the Company's operating
results for the period ending December 31, 1995 nor for the period ending
December 31, 1994.
SUMMARY Net revenue decreased 2% in 1995, compared to 1994, while net income
was down 34% for the same period. Net revenue was affected by volume decreases
in most of the Company's products, resulting from adverse market conditions in
the environmental testing markets served by the Company. The volume decreases
were partially offset by sales of LAI's products. During 1995, the Company
achieved income before income taxes of 8% of revenue, as compared to 12% in
1994. The Company's financial position as of December 31, 1995 reflects an
increase in working capital of 6% compared to 1994, with cash and cash
equivalents of $5,503,000. Earnings per share were $0.24 in 1995 and $0.37 in
1994.
RESULTS OF OPERATIONS Net revenue was $17,942,000 in 1995, compared to
$18,356,000 in 1994, and $18,412,000 in 1993. Export revenue increased by 81%
to $2,832,000 in 1995, while domestic revenue decreased 10% to $15,110,000.
The Company believes its operations were impacted by adverse market conditions
which affected all companies serving the environmental instruments market.
Market conditions of the commercial testing labs industry have been
significantly influenced by continued consolidation among environmental testing
laboratories. This consolidation has resulted in fewer testing labs and, as a
result thereof, excess equipment which has been sold at discounted prices to
end users.
Sales of TOC Analyzers, GC Detectors, field service, and microwave digestion
systems increased in 1995 over sales in 1994. The Company introduced and began
shipping in the second quarter of 1995 a new TOC Analyzer Model 1010 and
autosampler accessory Model 1051 both replacing prior generation products.
Sales of TOC analyzers increased due to the new product and efforts to sell to
non-environmental industries, such as pharmaceutical and semiconductor.
Microwave product sales were higher in 1995 due to a full year of sales
compared to six months of sales in 1994, and sales of sample preparation
products acquired in the acquisition of LAI were higher in 1995, compared to no
such sales in the prior year.
Sales of GC sample introduction products declined in 1995 due to a competitor
selling an alleged infringing product and shrinking demand in the environmental
market. Sales of GC analyzer systems, including VOC systems and BTEX systems,
were lower in 1995 as compared to 1994. These declines were partially offset
by sales of HF analyzers. The HF analyzer, which is used in the petrochemical
industry, is an example of the Company using its existing products to perform
new applications that serve non-environmental markets.
Sales of CEM systems decreased in 1995 compared to 1994 due primarily to the
timing of the U.S. government purchase of chemical warfare agent monitoring
systems. Repositioning the CEM product platform so that it can perform
applications in the commercial market has taken longer than the Company
anticipated. Management remains optimistic about achieving growth in new
markets by use of the CEM product platform and continues to work to position
the product to benefit from such new opportunities.
In January 1995, the Company introduced a program that allows customers to rent
and lease equipment, as an alternative to buying. The rental program aids
customers who have a short-term sample analysis demand that
10
<PAGE> 11
exceeds the capacity of their current instruments. Revenue from rentals was
immaterial in 1995. Leases are generally three to five years and allow
customers to manage their cash out flow against the income generated by their
instruments. Sales under leasing arrangements accounted for approximately
$600,000 of revenue in 1995.
International revenues increased by 81% to $2,832,000, or 16% of total revenue
in 1995 compared to $1,562,000, or 9% of total revenue in 1994, and $1,552,000,
or 8% of total revenue in 1993. The Company has 35 distributors and
representatives in 38 countries at December 31, 1995, compared to 33
distributors and representatives in 37 countries at December 31, 1994.
Gross profit was 48% in 1995, compared to 45% in 1994, and 46% in 1993. During
1995, gross profit increased due to decreased warranty costs and decreased
depreciation expense related to demonstration equipment.
Selling, general, and administrative (SG&A) expenses were $5,797,000 in 1995,
or 32% of revenue, compared to $4,688,000, or 26% of revenue in 1994, and
$5,358,000, or 29% of revenue in 1993. The increase in SG&A expenses from 1994
to 1995 resulted from increased legal expenses, increased sales expense
relating to international travel and the addition of direct sales people.
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. The trial date for this complaint
is currently set for July 22, 1996. While legal expenses to date have been
significant, Management expects these costs to increase in preparation for
trial. Management believes it is in the best interest of the stockholders to
pursue this litigation in order to protect the Company's intellectual property.
Research and development (R&D) expenditures amounted to $1,937,000, or 11% of
revenue in 1995, compared to $1,809,000, or 10% of revenue in 1994, and
$1,051,000, or 6% of revenue in 1993. The increased amount of R&D expense from
1994 to 1995 was the result of increased salaries, partially offset by a
decrease in consulting fees and a decrease in the purchase of supplies and
equipment. Additionally, the Company incurred expenses relating to product
redesign and certification to qualify certain of its products for the CE mark.
After the acquisition of CMS in January 1994, its founder and president,
together with support personnel, commenced efforts to develop new products, and
their related salaries and expenses were accordingly accounted for as R&D
expense.
Interest income increased 32% to $483,000 in 1995 from $366,000 in 1994, which
increased 62% from $226,000 in 1993. The increase in interest income is due to
an increase in cash during 1995, higher interest rates in 1995 as compared to
1994, and interest income relating to sales type leases of $31,000 for 1995,
compared to none in 1994.
Income before income taxes declined 29% to $1,507,000 or 8% of revenue in 1995
from $2,131,000 or 12% of revenue in 1994, which decreased 6% from $2,257,000,
or 12% of revenue in 1993. Income before tax declined in 1995 compared to 1994
due to decreased sales, increased SG&A expenses and increased R&D expenses,
offset in part by increased gross margin and interest income.
The Company's effective income tax rate was 32% in 1995, compared to 28% in
1994, and 38% in 1993. The effective income tax rate for 1995 increased from
1994 primarily due to an increase in state tax expense, a decrease in the tax
credit relating to research and development, and the receipt of a federal
income tax refund in 1994 relating to an amendment of the Company's 1992
return. The R&D tax credit decreased because the credit expired on June 30,
1995.
Net income decreased 34% to $1,023,000, or 6% of revenue for 1995 compared to
$1,545,000, or 8% of revenue for 1994, which increased 10% from $1,405,000, or
8% of revenue for 1993.
Earnings per share was $0.24 for 1995, compared to $0.37 for 1994 and $0.34 for
1993.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES The Company considers a number of liquidity
measures that aid in measuring the Company's ability to meet its financial
obligations. Such ratios, working capital, and changes in cash and cash
equivalents as of the end of the Company's last three years are as follows:
<TABLE>
<CAPTION>
($ in thousands) 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
LIQUIDITY MEASURES
Ratio of current assets to current
liabilities 4.8 4.9 4.1
Total liabilities to equity 25% 24% 32%
Days sales in accounts receivable 67 65 43
Average annual inventory turnover 4.0 4.7 4.6
Working capital $ 11,855 $ 11,156 $ 9,876
CHANGES IN CASH AND CASH EQUIVALENTS
Net cash provided (used) by:
Operating activities $ 1,561 $ 146 $ 2,264
Investing activities 1,094 (5,870) (141)
Financing activities 0 130 216
Net increase (decrease) in:
Cash and cash equivalents $ 2,655 $ (5,594) $ 2,339
Cash and cash equivalents:
Beginning of year 2,848 8,442 6,103
End of year 5,503 2,848 8,442
</TABLE>
Working capital increased 6%, or $699,000 to $11,855,000 in 1995, compared to
$11,156,000 in 1994. The current ratio of 4.8 for 1995 was down slightly from
4.9 for 1994. The Company's cash position increased to $5,503,000 in 1995 from
$2,848,000 in 1994. Average annual inventory turnover was lower at 4.0 in
1995, compared to 4.7 in 1994 due to the decline in sales and higher inventory
levels at LAI. The number of days of sales in accounts receivable increased to
67 days in 1995, from 65 days in 1994, due to an increase in international
sales, which typically have more extended term arrangements than domestic
sales. Current liabilities increased to $3,137,000 in 1995 from $2,845,000 in
1994 due to an increase in unearned revenue and accrued expenses relating to
state taxes. Total liabilities represented 25% of equity in 1995, compared to
24% in 1994.
Net cash flow provided by operating activities for 1995 was $1,561,000,
compared to $146,000 in 1994. The increase in cash flow from operations in
1995 was primarily due to a decrease in accounts receivable and inventory,
offset in part by an increase in accrued liabilities and a decrease in net
income. All working capital account changes are net of the effect of the
purchase of LAI. Net cash flow provided by (used in) investing activities for
1995 was $1,094,000, compared to ($5,870,000) in 1994. The increase in cash
flow from investing activities was primarily due to the maturity of
investments, offset in part by the acquisition of LAI. Net cash flow provided
by financing activities was $-0- in 1995, compared to $130,000 in 1994. The
cash flow provided by financing activities in 1994 was due to the exercise of
employee stock options, while none were exercised in 1995.
The Company has historically been able to fund working capital and capital
expenditures from operations, and expects to be able to finance its 1996
working capital requirements from cash on hand and funds generated from
operations. The Company has no material capital commitments in 1996.
CHANGING PRICES/EFFECT OF INFLATION Inflation has not had a material impact on
the Company's operations. The prices of some components purchased by the
Company have increased in the past several years due in part to decreased
volume. Certain other material and labor costs have increased, but the Company
believes that such increases are approximately consistent with inflation rates
generally. The Company believes that competition based
12
<PAGE> 13
on price is the significant factor affecting its customers' buying decisions.
There is no assurance that the Company can pass along cost increases in the
form of price increases or sustain profit margins that have been achieved in
prior years.
- -------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING Management is responsible
for the integrity and objectivity of the data included in this report. We
believe we have provided financial information (both audited and unaudited)
that is representative of the Company's operations, reliable on a consistent
basis, and relevant for a meaningful appraisal of the Company. The financial
statements have been prepared in accordance with generally accepted accounting
principles. Where necessary, they reflect estimates based on management's
judgment.
Established accounting procedures and related systems of internal control
provide reasonable assurance that assets are safeguarded, that the books and
records properly reflect all transactions, and that policies and procedures are
implemented by qualified personnel. Management periodically reviews the
accounting and control systems.
The Company's Audit Committee, composed of at least two members of the Board of
Directors who are not employees of the Company, meets regularly with
representatives of management and the independent accountants to monitor the
functioning of the accounting and control systems and to review the results of
the audit performed by the independent accountants. The independent
accountants and Company employees have full and free access to the Audit
Committee without the presence of management.
The Audit Committee recommends independent accountants for appointment by the
Board.
The independent accountants conduct an objective, independent examination of
the financial statements. Their report appears as a part of the Company's
Annual Report on Form 10-K.
/s/ Julie A. Wright
------------------------------------
Julie A. Wright, Controller
/s/ William W. Botts
------------------------------------
William W. Botts, President/CEO
13
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of
O. I. Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 29 present fairly, in all material
respects, the financial position of O.I. Corporation and its subsidiaries at
December 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Houston, Texas
February 5, 1996
14
<PAGE> 15
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31
--------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,503,322 $ 2,848,032
Investments held to maturity 2,621,160 5,138,889
Accounts receivable-trade, net of allowance for
doubtful accounts of $270,018 and $194,092, respectively 3,273,170 3,292,359
Investment in sales-type leases 245,632
Inventories 2,422,849 2,160,355
Deferred tax assets 735,000 243,333
Other current assets 191,174 317,837
-------------- -------------------
Total current assets 14,992,307 14,000,805
Property, plant and equipment, net 1,590,804 1,503,891
Investment in sales-type leases, net of current 363,072
Other assets 753,391 474,681
-------------- -------------------
Total assets $ 17,699,574 $ 15,979,377
============== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 849,697 $ 993,409
Accrued liabilities 2,287,263 1,851,774
-------------- -------------------
Total current liabilities 3,136,960 2,845,183
-------------- -------------------
Deferred income taxes 351,000 251,722
-------------- -------------------
Commitments and contingencies (Note 11)
-------------- -------------------
Stockholders' equity:
Preferred stock, $0.10 par value, 3,000,000 shares authorized,
no shares issued and outstanding
Common stock, $0.10 par value, 10,000,000 shares authorized,
4,116,129 and 4,039,650 shares issued and outstanding, respectively 411,613 403,965
Additional paid-in capital 4,730,669 4,432,401
Retained earnings 9,069,332 8,046,106
-------------- -------------------
14,211,614 12,882,472
-------------- -------------------
Total liabilities and stockholders' equity $ 17,699,574 $ 15,979,377
============== ===================
</TABLE>
15
<PAGE> 16
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
(Restated)
<S> <C> <C> <C>
Net revenue $ 17,942,343 $ 18,356,194 $ 18,412,092
Cost of revenue 9,240,786 10,135,286 10,021,509
------------- ------------ ----------------
Gross profit 8,701,557 8,220,908 8,390,583
Selling, general and administrative expenses 5,796,883 4,688,486 5,357,861
Research and development expenses 1,936,792 1,809,190 1,050,712
------------- ------------ ----------------
Operating income 967,882 1,723,232 1,982,010
Other income (expense):
Interest income 483,499 366,091 225,908
Other income 60,494 42,944 56,223
Interest expense (4,649) (1,043) (7,438)
------------- ------------ ----------------
Income before income taxes 1,507,226 2,131,224 2,256,703
Provision for income taxes (484,000) (586,536) (851,451)
------------- ------------ ----------------
Net income $ 1,023,226 $ 1,544,688 $ 1,405,252
============= ============ ================
Earnings per share $ 0.24 $ 0.37 $ 0.34
============= ============ ================
</TABLE>
16
<PAGE> 17
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
(Restated)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,023,226 $ 1,544,688 $ 1,405,252
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 447,527 399,700 388,115
Deferred income taxes (242,000) (19,673) (101,061)
Gain on disposition of property (16,039) (2,743) (29,168)
Amortization of unearned compensation and
other compensation 47,634 27,263
Changes in assets and liabilities,
net of the effect of the purchase of LAI:
Accounts receivable 370,013 (1,110,122) 6,765
Inventories 593,363 12,182 80,408
Other assets (186,547) (243,901) (11,262)
Accounts payable (501,477) (103,346) (342,892)
Accrued liabilities 72,541 (377,842) 840,572
------------- ------------- ----------------
Net cash provided by operating activities 1,560,607 146,577 2,263,992
------------- ------------- ----------------
Cash flows from investing activities:
Purchase of property, plant and equipment (251,781) (369,502) (131,104)
Proceeds from sale of assets 36,150 10,206 38,315
Purchase of LAI (1,173,706)
Purchase of investments (3,425,359) (7,526,026)
Maturity of investments 5,917,000 2,300,000
Investment in patents and other intangibles (7,621) (284,966) (47,771)
------------- ------------- ----------------
Net cash provided by (used in) investing activities 1,094,683 (5,870,288) (140,560)
------------- ------------- ----------------
Cash flows from financing activities:
Principal payments on capital lease obligations (16,532)
Proceeds from issuance of common stock 129,760 232,430
------------- ------------- ----------------
Net cash provided by financing activities 0 129,760 215,898
------------- ------------- ----------------
Net increase (decrease) in cash and cash equivalents 2,655,290 (5,593,951) 2,339,330
Cash and cash equivalents:
Beginning of year 2,848,032 8,441,983 6,102,653
------------- ------------- ----------------
End of year $ 5,503,322 $ 2,848,032 $ 8,441,983
============= ============= ================
Supplemental disclosures of cash flow information:
Cash paid during year for:
Interest $ 4,705 $ 301 $ 1,682
Income taxes 621,135 646,561 885,259
</TABLE>
17
<PAGE> 18
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unearned
Compensation
Common Stock Additional and
----------------------- Paid-in Stockholder Retained
Shares Amount Capital Loans Earnings
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992, 3,953,983 $ 395,398 $ 4,180,865 $ (187,237) $ 5,096,166
as restated
Amortization of unearned compen-
sation charged to operations
and repayment of stockholder
loans 63,681
Exercise of stock options 64,667 6,467 189,545
Net income 1,405,252
--------- ---------- ----------- ----------- ------------
Balance, December 31, 1993,
as restated 4,018,650 401,865 4,370,410 (123,556) 6,501,418
Amortization of unearned compen-
sation charged to operations
and repayment of stockholder
loans 123,556
Exercise of stock options and
employee stock awards 21,000 2,100 51,738
Tax benefit associated with
exercised options 10,253
Net income 1,544,688
--------- ---------- ----------- ------------ -----------
Balance, December 31, 1994 4,039,650 403,965 4,432,401 0 8,046,106
Issuance of shares in conjunction
with the acquisition of LAI 76,479 7,648 298,268
Net income 1,023,226
--------- ---------- ----------- ------------ -----------
Balance, December 31, 1995 4,116,129 $ 411,613 $ 4,730,669 $ 0 $ 9,069,332
========= ========== =========== ============ ===========
</TABLE>
18
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
O.I. Corporation (the Company) was organized in 1963. The Company develops,
manufactures, markets and services analytical, monitoring, and sample
preparation products, components, and systems used to prepare sample for
analysis and to detect, measure, and analyze chemical compounds.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. Financial
statements for the year ended December 31, 1993 have been restated to give
effect to an acquisition which was accounted for as a pooling of interests (See
Note 2). All significant intercompany transactions have been eliminated in
consolidation.
REVENUE RECOGNITION Revenue and the related cost of sales are generally
recognized upon shipment of goods with no substantial right of return.
CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with an original maturity
of three months or less to be cash equivalents.
INVESTMENTS In January 1994, the Company adopted Statement of Financial
Accounting Standards (FAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities. The adoption of FAS No. 115 did not have a material
effect on the Company's financial position or results of operations. The
Company's investments in debt securities are classified as held to maturity as
the Company has the positive intent and ability to hold the investments until
maturity. These investments are reported at amortized cost.
LEASES The Company's leasing operations consist of the leasing of analytical
instruments. The majority of the Company's leases are classified as sales-type
leases. These leases expire over the next five years.
INVENTORIES Inventories consist of electronic equipment and various components
and are stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.
PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment is recorded at
cost and depreciated over the estimated useful lives using the straight-line
method.
PRODUCT WARRANTIES Products are sold with warranties ranging from 90 days to
one year. Estimated expenses associated with these warranties are accrued in
the accompanying financial statements. The Company also sells extended product
warranties typically covering a period of nine months. Revenue from extended
warranties is recorded ratably over the period and warranty charges are
expensed as incurred.
RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as
incurred.
INCOME TAXES In January 1993, the Company adopted FAS No. 109, Accounting for
Income Taxes. The adoption of FAS 109 changed the Company's method of
accounting for income taxes from the deferred method to an asset and liability
approach. Previously, the Company deferred the past tax effects of timing
differences between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
BUSINESS SEGMENT AND MAJOR CUSTOMERS The Company operates in a single segment.
No single customer
19
<PAGE> 20
accounted for more than 10% of revenue in 1995, 1994, or 1993. Federal, state
and municipal governments accounted for 26% of revenue in 1995, 33% in 1994,
and 24% in 1993. For the year ended December 31, 1995, export sales accounted
for approximately 16% of total revenue. The information relating to 1993 has
been restated to include the operations of CMS.
OTHER ASSETS Other assets primarily include acquired patents, licenses,
customer lists, and trademarks that are amortized on a straight-line basis over
10-17 years.
EARNINGS PER SHARE Earnings per share is calculated using the weighted-average
number of shares outstanding assuming exercise of dilutive stock options. The
number of shares that would be issued from the exercise of stock options has
been reduced by the number of shares that could have been purchased from the
proceeds at the estimated fair market value of the Company's common stock. For
purposes of the earnings per share calculation, the 650,000 shares issued in
exchange for all of the outstanding shares of common stock of CMS have been
treated as if they had been issued and outstanding for all periods presented.
The weighted-average number of shares used in the computation was 4,287,556 in
1995, 4,156,922 in 1994, and 4,172,317 in 1993.
CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of investments
and trade receivables. The Company places its available cash in money market
funds and short-term investment grade domestic corporate bonds. The Company's
short-term investments are subject to fluctuations based on interest rates
prevailing in the market place.
The Company sells its products to large corporations, environmental testing
laboratories, and governmental agencies. The majority of its customers are
located in the United States and all sales are denominated in the U.S. dollar.
Concentrations of credit risk with respect to trade receivables are limited due
to the financial stability of the customers comprising the Company's customer
base. The Company performs ongoing credit evaluations of its customers to
minimize credit risk. As of December 31, 1995 and 1994, the Company had no
significant concentrations of credit risk related to accounts receivable.
However, the U.S. government does constitute a significant percent of the
Company's sales. Because of the recent budget problems, the Company may
experience slower than usual payment from its U.S. government accounts. Any
budget cuts affecting the chemical warfare programs or the U.S. Environmental
Protection Agency may have a negative impact on the Company's future sales.
USE OF ESTIMATES The preparation of financial statements in accordance with
generally accepted accounting principles requires the use of management
estimates and judgments.
RECENT ACCOUNTING DEVELOPMENTS In the fourth quarter of 1995, the Company
adopted FAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. The adoption of FAS 121 did not have a
material effect on the Company.
In October 1995, the FASB issued FAS No. 123, Accounting for Awards of
Stock-based Compensation to Employees. The Statement encourages but does not
require the fair value based method of accounting for stock compensation awards
at the date the awards are granted. Companies that continue to measure
compensation cost for plans using the existing standards will have to disclose
the effect on net income had the company recognized expense for options based
on the fair market value method. FAS 123 is effective for transactions entered
into in fiscal years beginning after December 15, 1995. The Company is
currently unable to determine the effects, if any, that the adoption of FAS 123
will have on the Company's future results of operations.
RECLASSIFICATIONS Certain prior year amounts have been reclassified to
conform to current year presentation.
20
<PAGE> 21
- -------------------------------------------------------------------------------
NOTE 2: ACQUISITIONS
On February 9, 1995, the Company acquired LAI, an environmental instruments
company headquartered in Columbia, Missouri. Under the terms of the agreement,
the Company made a $1,000,000 capital investment in LAI, which was used to
retire outstanding long-term debt, and acquired all of the shares of LAI stock
in exchange for 76,479 shares of the Company's common stock and $117,000. In
addition, $880,000 of liabilities of LAI were reflected on the Company's
consolidated balance sheet as of the closing date. The acquisition was
recorded using the purchase method of accounting and, accordingly, the acquired
operations of LAI have been included in the results of operations since the
date of acquisition. The purchase price has been allocated to the net assets
acquired based on estimated fair market values at the date of acquisition. Pro
forma results of operations for 1994 as if the acquisition had occurred at the
beginning of 1994 are as follows:
<TABLE>
<CAPTION>
(Unaudited)
(In 000's)
--------------
<S> <C>
Revenues $ 21,632
Net income $ 1,469
Earnings per Share $ 0.35
==============
</TABLE>
On January 4, 1994, the Company acquired CMS, a Birmingham, Alabama based
company which specializes in the design, manufacture, and sale of air quality
monitoring and analysis devices. In connection with the acquisition, the
Company issued 650,000 shares of its common stock in exchange for all of the
common stock of CMS. This acquisition was accounted for as a pooling of
interests. Accordingly, the financial statements for 1993 have been restated
to include the accounts of CMS. There were no intercompany transactions
between the Company and CMS prior to the acquisition.
The Company reports its financial results on a calendar year-end basis, whereas
CMS operated on a May 31 fiscal year-end basis. For the purposes of applying
pooling-of-interests accounting, CMS' financial statements were restated for
the year ended December 31, 1993 and combined with the Company's operations in
subsequent years.
The following summarizes the revenues and net income of the separate companies
for the periods preceding the acquisition:
<TABLE>
<CAPTION>
1993
--------------
<S> <C>
Revenues:
Company $ 15,357,092
CMS 3,531,000
Adjustments (476,000)
-------------
Combined $ 18,412,092
=============
Net income:
Company $ 1,418,252
CMS 63,000
Adjustments (76,000)
-------------
Combined $ 1,405,252
=============
</TABLE>
The combined financial information of the Company and CMS contains adjustments
to conform the revenue recognition, product warranty costs, and certain other
accounting policies of the two companies. Certain reclassifications have also
been made to make classifications for certain items consistent between the
companies.
On June 24, 1994, the Company purchased substantially all of the
assets of Floyd, a North Carolina corporation headquartered in Lake Wylie,
South Carolina. Floyd manufactures and markets microwave products used to
prepare chemical compounds for analysis. The acquisition was for cash and
royalties on future sales.
21
<PAGE> 22
- -------------------------------------------------------------------------------
NOTE 3: INVESTMENTS
Investments considered held to maturity at December 31, 1995, consist of the
following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Market Unrealized Unrealized
Cost Value Holding Gains Holding Losses
----------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Corporate bonds $ 2,621,160 $ 2,621,662 $ 1,330 $ (828)
</TABLE>
All of the investments at December 31, 1995 are scheduled to mature within one
year. Market value is based upon quoted market prices for the investments.
Short-term investments at December 31, 1994, consist of the following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Market Unrealized Unrealized
Cost Value Holding Gains Holding Losses
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Corporate bonds $ 4,662,714 $ 4,648,240 $ 97 $ 14,571
U.S. Treasury Notes 1,000,939 998,902 2,037
-----------
Total 5,663,653
Less investments classified
as cash equivalents 524,764
-----------
$ 5,138,889
===========
</TABLE>
- -------------------------------------------------------------------------------
NOTE 4: NET INVESTMENT IN SALES-TYPE LEASES
The following sets forth the components of the net investment in sales-type
leases as of December 31, 1995:
Future minimum lease payments to be received are:
<TABLE>
<S> <C>
1996 $ 245,632
1997 $ 201,318
1998 $ 100,850
1999 $ 41,088
2000 $ 19,816
------------
608,704
Less: amount relating to interest 89,218
------------
Present value of minimum lease
payments to be received $ 519,486
============
</TABLE>
The Company had no sales-type leases as of December 31, 1994.
22
<PAGE> 23
- -------------------------------------------------------------------------------
NOTE 5: INVENTORIES
Inventories, which include material, labor, and overhead, on December 31, 1995
and 1994, consist of the following:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 1,116,559 $ 1,262,262
Work-in-process 531,388 369,827
Finished goods 774,902 528,266
------------- ------------
$ 2,422,849 $ 2,160,355
============= ============
</TABLE>
- -------------------------------------------------------------------------------
NOTE 6: PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment on December 31, 1995 and 1994, consists of the
following:
<TABLE>
<CAPTION>
Estimated
Useful lives 1995 1994
------------------------------------------------------------------------------
<S> <C> <C>
Land $ 41,221 $ 41,221
Buildings 33-40 years 1,474,391 1,474,391
Furniture and equipment 3-10 years 2,049,542 1,969,845
------------ -----------
3,565,154 3,485,457
Less accumulated depreciation
and amortization (1,974,350) (1,981,566)
------------ -----------
$ 1,590,804 $ 1,503,891
============ ===========
</TABLE>
- -------------------------------------------------------------------------------
NOTE 7: ACCRUED LIABILITIES
Accrued liabilities on December 31, 1995 and 1994, consist of the following:
<TABLE>
<CAPTION>
1995 1994
---------------------------------------------------------------------------
<S> <C> <C>
Accrued compensation $ 482,515 $ 545,216
Accrued warranties 639,438 633,570
Accrued acquisition expenses 54,867 225,000
Accrued legal expenses 209,483 11,000
Unearned revenue 209,717 114,765
Other liabilities and accrued expenses 691,243 322,223
------------- ------------
$ 2,287,263 $ 1,851,774
============= ============
</TABLE>
- -------------------------------------------------------------------------------
NOTE 8: STOCK OPTION AND STOCK PURCHASE PLAN
In 1987, the Company established a stock option and stock appreciation rights
plan (1987 Plan) qualified under Section 422 of the Internal Revenue Code of
1986. The 1987 Plan provides for the granting of options for the
23
<PAGE> 24
purchase of up to 500,000 shares of common stock of the Company with the
options having an exercise price of not less than the par value of such stock.
Employees of the Company are eligible for such grants. The options generally
expire ten years from the date of grant and generally vest over three years
from the date of grant. During 1991, the stockholders approved an amendment to
the 1987 Plan allowing restricted stock grants. As a result of such amendment,
the 1987 Plan allows for stock grants subject to vesting requirements that may
be determined at the time of such grant. During 1995, the Company granted
10,500 options under the 1987 Plan.
During 1992, the Company's Board of Directors, and during 1993, the Company's
stockholders, approved the O.I. Corporation 1993 Incentive Compensation Plan
(1993 Plan). The 1993 Plan provides for the granting of options to purchase up
to 500,000 shares of the Company's common stock with the options having an
exercise price of not less than the par value of such stock. Employees and
non-employee directors of the Company are eligible for such grants. The
options generally expire ten years from the date of grant. During 1995, the
Company granted 74,000 options under the 1993 Plan. The 1993 Plan also allows
for the granting of stock appreciation rights (SARs) and stock awards, although
none have been granted.
Options outstanding under the 1987 Plan and the 1993 Plan have exercise prices
equal to the market value on the date of grant, except for 120,000 nonqualified
options granted under the 1987 Plan.
Outstanding options under the 1987 Plan, and the 1993 Plan, as of December 31,
1995, 1994, and 1993, are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------------------------------------------------
(Restated)
<S> <C> <C> <C>
Outstanding, beginning of year 401,101 356,500 426,500
Granted 84,500 71,100 27,000
Exercised -0- (21,000) (64,667)
Forfeited or cancelled (26,701) (5,499) (32,333)
--------- --------- ---------
Outstanding, end of year 458,900 401,101 356,500
========= ========= =========
Exercisable, end of year 268,304 250,175 243,505
========= ========= =========
</TABLE>
Exercise prices of options outstanding at December 31, 1995 ranged from $0.10
to $14.00, of which the average exercise price was $3.85. Options forfeited or
cancelled during 1995 ranged from $3.94 to $6.00. During 1994, options were
exercised at a price of $0.56, and options forfeited or cancelled ranged from
$3.63 to $6.00. During 1993, options were exercised at prices ranging from
$0.81 to $4.00, and options forfeited or cancelled ranged from $3.63 to $14.00.
In 1989, the Company established an Employee Stock Purchase Plan. Under the
plan provisions, employees may purchase shares of the Company's common stock on
a regular basis through payroll deductions. Any person who is a full-time
employee of the Company is eligible to participate in the plan, with each
participant's purchases limited to 10% of annual gross compensation. The plan
is administered by the Compensation Committee of the Board of Directors.
Shares of common stock are purchased in the open market. The Company pays all
commissions and contributes an additional 15% for the purchase of shares that
are distributed to eligible participating employees. The Company's
contribution to the plan was not significant in any of the years reported. The
aggregate number of shares of common stock available for purchase under this
plan is 200,000. As of December 31, 1995, 25,184 shares had been purchased
under the plan.
24
<PAGE> 25
- -------------------------------------------------------------------------------
NOTE 9. PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of up to
3,000,000 shares of preferred stock with $0.10 par value per share. The voting
rights, dividend rate, redemption price, rights of conversion, rights upon
liquidation, and other preferences are subject to determination by the Board of
Directors. As of December 31, 1995, no preferred stock had been issued.
- -------------------------------------------------------------------------------
NOTE 10. INCOME TAXES
The Company adopted FAS No. 109, Accounting for Income Taxes, in 1993. The
adoption had no material effect on the Company's consolidated financial
position. The Company's operations are only taxed under domestic
jurisdictions.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------
1995 1994 1993
--------------------------------------------------------------------------------------------
(Restated)
<S> <C> <C> <C>
Current provision:
Federal $ 587,000 $ 541,503 $ 796,003
State 139,000 64,706 65,270
Deferred provision (242,000) (19,673) (9,822)
--------- ---------- -----------
$ 484,000 $ 586,536 $ 851,451
========= ========== ===========
</TABLE>
The provision for income taxes differs from the amount computed by applying the
federal statutory rates for the following reasons:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------
1995 1994 1993
--------------------------------------------------------------------------------------------
(Restated)
<S> <C> <C> <C>
Tax at statutory rate 34.0% 34.0% 34.0%
State income taxes, net of federal
benefit 3.1 2.0 1.9
Research and development credit (5.9) (0.1)
Permanent differences 6.3
Changes in valuation allowance (13.8)
Other, net 2.5 (2.6) 1.9
---------- ---------- ----------
32.1% 27.5% 37.7%
========== ========== ==========
</TABLE>
25
<PAGE> 26
Deferred tax liabilities (assets) are comprised of the following at December
31, 1995 and 1994:
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1994
------------------------------
<S> <C> <C>
Noncurrent:
Depreciation $ (255,369) $ (260,320)
Deferred compensation 73,548 62,475
Intangibles (113,224)
Other (4,475) (2,560)
----------- -----------
Total noncurrent $ (299,520) $ (200,405)
=========== ===========
Current:
Warranty reserve $ 242,731 $ 172,330
Accrued acquisition expenses 18,645 76,500
Bad debt allowance 100,812 65,991
Inventory reserve 203,508 65,464
Uniform capitalization 63,184 48,492
Accrued commissions 5,694 11,900
Accrued legal 56,700
Accrued vacation 43,763 10,960
----------- -----------
Total current $ 735,037 $ 451,637
----------- -----------
Net tax asset before valuation allowance 435,517 251,232
Valuation allowance (51,517) (259,621)
----------- -----------
Net deferred tax liability (asset) $ 384,000 $ (8,389)
=========== ===========
</TABLE>
In connection with the acquisition of LAI in February 1995, the future tax
effects of the differences between the tax bases and the fair values of
acquired net assets were recorded, resulting in a net increase in deferred tax
assets of approximately $150,000.
The net change in the valuation allowance for deferred tax assets during 1995
is a decrease of $208,000. The change results from management's change in
judgment about the realizability in future years of the related deferred tax
assets.
- -------------------------------------------------------------------------------
NOTE 11: EMPLOYEE BENEFIT PLANS
The Company maintains a Retirement Savings Plan (the Plan) for its employees
that allows participants to make contributions by salary reduction pursuant to
Section 401(k) of the Internal Revenue Code. The Company's contributions to
the Plan are discretionary. Employees vest immediately in their contributions
and vest in the Company's contributions ratably over five years. The Company
contributed $90,000, $90,000 and $90,950 to the Plan for the years ended
December 31, 1995, 1994, and 1993, respectively.
- -------------------------------------------------------------------------------
NOTE 12: COMMITMENTS AND CONTINGENCIES
The Company has agreed to pay the former owner of Floyd Associates,
Incorporated a royalty equal to 5% of the net revenue earned from microwave
based products up to a maximum amount of $1,182,500. No minimum payments are
required in the agreement. The Company recognized royalty expense of $28,233
and $9,000 in 1995
26
<PAGE> 27
and 1994, respectively.
The Company has entered into operating leases for certain of its facilities.
These operating leases expire in 1997 and in 1998. Rental expense recognized
in 1995, 1994, and 1993 was $184,000, $133,000 and $130,000, respectively.
Future minimum rental payments under these leases for the years 1996, 1997, and
1998 are $198,502, $156,745, and $94,109, respectively.
During 1995, the Company filed two separate complaints; one against a
competitor alleging patent infringement and the other against a vendor alleging
breach of contract. In February 1996, the Company settled the breach of
contract lawsuit and expects to receive approximately $290,000 in consideration
thereof.
- -------------------------------------------------------------------------------
NOTE 13: RELATED PARTY TRANSACTION
In January 1996, the Company purchased from Gary D. Sides, Vice President of
the Company, 162,658 shares of the Company's common stock at a price of $2.75
per share. The Company also purchased 10,721 shares from an employee of CMS at
the same price.
Pursuant to a consulting agreement, the Company paid a former officer $25,000
in 1995. This agreement was terminated in June 1995; however, the former
employee continues to provide consulting services at the request of the
Company.
- -------------------------------------------------------------------------------
NOTE 14: QUARTERLY INFORMATION (UNAUDITED)
Quarterly financial information for 1995 and 1994, is summarized as follows:
<TABLE>
<CAPTION>
($ in thousands, except per share amounts) First Second Third Fourth
1995 Qtr. Qtr. Qtr. Qtr.
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenue $ 4,702 $ 4,425 $ 4,450 $ 4,365
Gross profit 2,184 2,113 2,158 2,247
Net income 203 221 300 299
Earnings per share $ 0.05 $ 0.05 $ 0.07 $ 0.07
</TABLE>
<TABLE>
<CAPTION>
($ in thousands, except per share amounts) First Second Third Fourth
1994 Qtr. Qtr. Qtr. Qtr.
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenue $ 4,829 $ 4,632 $ 4,437 $ 4,458
Gross profit 2,108 2,082 2,016 2,015
Net income 391 390 320 444
Earnings per share $ 0.09 $ 0.09 $ 0.08 $ 0.11
</TABLE>
- -------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
27
<PAGE> 28
- -------------------------------------------------------------------------------
PART III
- -------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the identification, business experience, and
directorships of each director and nominee for director of the Company,
required by Item 401 of Regulation S-K and presented in the section entitled
"Election of Directors-Nominees for Board of Directors" of the Company's Proxy
Statement for the annual meeting of shareholders on May 7, 1996, is hereby
incorporated by reference. See Item 1 for information relating to the
identification and business experience of the Company's executive officers.
- -------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION
The information relating to the cash compensation of directors and officers,
required by Item 402 of Regulation S-K and presented in the section entitled
"Election of Directors-Compensation of Directors" and "Election of Directors-
Compensation of Officers" of the Company's Proxy Statement for the annual
meeting of shareholders on May 7, 1996, is hereby incorporated by reference.
- -------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information relating to security ownership required by Item 403 of
Regulation S-K, which is presented in the sections entitled "Security Ownership
of Certain Beneficial Owners" and "Election of Directors-Directors and
Executive Officers" of the Company's Proxy Statement for the annual meeting of
shareholders on May 7, 1996, is hereby incorporated by reference.
- -------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to relationships and transactions required by Item 404
of Regulation S-K, which is presented in the section, "Election of Directors --
Executive Compensation -- Certain Transactions, Employment Contracts,
Termination of Employment and Change-in-Control Arrangements" of the Company's
Proxy Statement for the annual meeting of shareholders on May 7, 1996, is
hereby incorporated by reference.
28
<PAGE> 29
- -------------------------------------------------------------------------------
PART IV
- -------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements of O.I. Corporation and its
subsidiary that are included in Part II, Item 8:
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants 14
Consolidated Balance Sheet 15
Consolidated Statement of Income 16
Consolidated Statement of Cash Flows 17
Consolidated Statement of Stockholders' Equity 18
Notes to Consolidated Financial Statements 19
</TABLE>
(a) 2. Financial Statement Schedules required to be filed by Item 8 of this
Form: All schedules are omitted as they are not required, or are not
applicable, or the required information is included in the financial
statements or notes thereto.
(a) 3. Exhibits
3.1 Articles of Incorporation of the Company, as amended (filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-8
(No. 33-24505) and incorporated herein by reference).
3.2 Bylaws of the Company (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (No. 33-24505) and
incorporated herein by reference).
*10.1 Amended and Restated 1987 Stock Option and SAR Plan (filed as
Exhibit 4.3 to the Company's Registration Statement on Form S-8
(No. 33-24505) and incorporated herein by reference).
*10.2 Employee Stock Purchase Plan (filed as Exhibit 4.3 to the
Company's Registration Statement on Form S-8 (No. 33-62209) and
incorporated herein by reference).
*10.3 Employment Agreement between the Company and William W. Botts
(filed as Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989, and incorporated
herein by reference).
10.4 Value-Added Reseller Agreement between the Company and
Hewlett-Packard Company (filed as Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1989
and incorporated herein by reference).
*10.5 Nonqualified Stock Option Agreement between the Company and
William R. Hart (filed as Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference).
29
<PAGE> 30
*10.6 1993 Incentive Compensation Plan (filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference).
10.7 Registration Rights Agreement among O.I. Corporation and the
former shareholders of CMS Research Corporation dated January
4, 1994 (filed as Exhibit 10.8 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
24.1 Consent of Price Waterhouse LLP
99.1 The O.I. Corporation definitive Proxy Statement, dated March
25, 1996 is incorporated by reference as an Exhibit hereto for
the information required by the Securities and Exchange
Commission, and, except for those portions of such definitive
proxy statement specifically incorporated by reference
elsewhere herein, such definitive proxy statement is deemed not
to be filed as a part of this report.
(b) Reports on Form 8-K.
No Form 8-K was filed for the quarter ended December 31, 1995.
- -----------
* Management contract or compensatory plan or arrangement.
30
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-24505 and No. 33- 62209 and NO. 33-66822) of
O.I. Corporation of our report dated February 5, 1996 appearing on page 14 of
this Form 10-K.
PRICE WATERHOUSE LLP
Houston, Texas
February 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,503,322
<SECURITIES> 2,621,160
<RECEIVABLES> 3,543,188
<ALLOWANCES> 270,018
<INVENTORY> 2,422,849
<CURRENT-ASSETS> 14,992,307
<PP&E> 3,565,154
<DEPRECIATION> 1,974,350
<TOTAL-ASSETS> 17,699,574
<CURRENT-LIABILITIES> 3,136,960
<BONDS> 0
<COMMON> 411,613
0
0
<OTHER-SE> 13,800,001
<TOTAL-LIABILITY-AND-EQUITY> 17,699,574
<SALES> 17,942,343
<TOTAL-REVENUES> 17,942,343
<CGS> 9,240,786
<TOTAL-COSTS> 3,877,118
<OTHER-EXPENSES> 3,856,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,649
<INCOME-PRETAX> 1,507,226
<INCOME-TAX> 484,000
<INCOME-CONTINUING> 1,023,226
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,023,226
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
<PAGE> 1
SCHEDULE 14 INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
O.I. CORPORATION
------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Bowne of Houston
------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title or each class of securities to which transaction applies:
--------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11;(1)
--------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(1) Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------
3) Filing Party:
---------------------------------------------
4) Date Filed:
---------------------------------------------
<PAGE> 2
O.I. CORPORATION
O.I. CORPORATION BUILDING
151 GRAHAM ROAD, P.O. BOX 9010
COLLEGE STATION, TEXAS 77842-9010
(409) 690-1711
March 25, 1996
Dear Shareholder:
You are invited to attend the annual meeting of shareholders which will be
held at the Hyatt Regency Hotel, 1200 Louisiana Street, Houston, Texas on
Tuesday, May 7, 1996, at 3:00 p.m.
The matters to be considered at the meeting are described in the formal
notice and proxy statement accompanying this letter. Such matters consists of:
(i) the election of directors;
(ii) the ratification of the appointment of independent auditors;
(iii) the transaction of such other business as may properly come
before the meeting.
After completing the business of the meeting, we will discuss fiscal year
1995 results and the current outlook for the Company. There will be a period
for questions and discussion with the Company's officers and directors.
If you plan to be present, please notify the Secretary of the Company so
that the necessary arrangements can be made for your attendance. Regardless of
whether you plan to personally attend, it is important that your shares be
represented at the meeting; therefore, please date, sign and return your
postage-paid proxy card at your earliest convenience.
William W. Botts
President and
Chief Executive Officer
<PAGE> 3
O.I. CORPORATION
151 GRAHAM ROAD, P.O. BOX 9010
COLLEGE STATION, TEXAS 77842-9010
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1996
To the Shareholders of O.I. Corporation:
You are hereby notified that the Annual Meeting of Shareholders of O. I.
Corporation will be held on Tuesday, May 7, 1996 at 3:00 p.m. at the Hyatt
Regency Hotel, 1200 Louisiana Street, Houston, Texas, for the purposes of
considering and voting upon the following matters proposed by the Board of
Directors:
(i) the election of directors;
(ii) the ratification of the appointment of independent auditors;
(iii) the transaction of such other business as may properly come
before the meeting.
The stock transfer books will not be closed, but only shareholders of
record at the close of business on March 11, 1996, will be entitled to notice
of and to vote at the meeting.
You are cordially invited to attend the meeting. Even if you plan to
attend, you are requested to date, sign and return the enclosed proxy at your
earliest convenience on the enclosed card. You may revoke your proxy at any
time prior to exercise.
By Order of the Board of Directors
Jane A. Smith
Vice President-Corporate Secretary
March 25, 1996
<PAGE> 4
O.I. CORPORATION
151 GRAHAM ROAD, P.O. BOX 9010
COLLEGE STATION, TEXAS 77842-9010
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of O.I. Corporation (the
"Company") in connection with the solicitation of proxies to be used in voting
at the annual meeting of shareholders to be held on May 7, 1996. It is first
being mailed to shareholders on or about March 25, 1996. The enclosed proxy is
solicited on behalf of the Board of Directors of the Company. The person
giving the enclosed proxy has the power to revoke it by giving notice to the
Secretary in person, or by written notification actually received by the
Secretary, at any time prior to its being exercised.
The Company will bear the cost of the solicitation of the proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of stock. It is possible that
further solicitation of proxies will be made by telephone or oral communication
with some shareholders of the Company following the original solicitation. All
further solicitations will be made by either the Company's transfer agent or by
regular employees of the Company, neither of whom will be additionally
compensated therefor.
GENERAL INFORMATION
The mailing address of the Company's principal executive offices is O.I.
Corporation, P.O. Box 9010, College Station, Texas 77842-9010. The Company's
telephone number is (409) 690-1711, and its FAX number is (409) 690-0440.
VOTING SECURITIES OUTSTANDING
As of March 11, 1996, there were 3,942,750 shares of common stock, par value
$0.10 per share, ("Common Stock"), of the Company issued and outstanding, and
each share is entitled to one vote. Only holders of Common Stock of record at
the close of business on March 11, 1996, will be entitled to vote at the
meeting. In determining the number of shares entitled to vote on any matter,
shares not voted on a matter (including elections) will not be treated as
entitled to vote. A share shall be treated as being present at the meeting
whether or not such shares are voted.
In the absence of a quorum (1,971,376 shares) at the meeting, either in person
or by proxy, the meeting may be adjourned from time to time for not more than
29 days, without notice, other than announcement at the meeting, until a quorum
shall be formed.
1
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of the Company's Common
Stock with respect to each person known by the Company to be the beneficial
owner of more than five percent of the Company's currently outstanding shares
as of December 31, 1995.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
-------------------- -------------------- --------
<S> <C> <C>
William W. Botts . . . . . . . . . . . . . . . . . . 296,000(1) 7.2%
P.O. Box 9010
College Station, Texas 77842-9010
</TABLE>
_______________
(1) Includes 190,000 shares subject to presently exercisable options.
ELECTION OF DIRECTORS
PROPOSAL 1: THE BOARD OF DIRECTORS HAS NOMINATED AND URGES YOU TO VOTE
FOR THE FIVE NOMINEES LISTED BELOW. PROXIES SOLICITED HEREBY WILL BE SO VOTED
UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES. THE AFFIRMATIVE VOTE
OF THE HOLDERS OF A PLURALITY OF THE SHARES OF COMMON STOCK PRESENT IN PERSON
OR BY PROXY AT THE MEETING AND ENTITLED TO VOTE IS REQUIRED FOR APPROVAL OF
THIS PROPOSAL.
At the meeting, five (5) directors are to be elected to serve for the ensuing
year and until their respective successors are elected and qualified, in
accordance with the provisions of the bylaws. The shareholders are being asked
to vote for the election of Messrs. Anderson, Botts, Heath, King, and Whited.
Each of such nominees is currently a member of the Board of Directors, with the
exception of Mr. Whited. Unless otherwise marked, the shares represented by
the enclosed proxy will be voted "FOR" the election as directors of the five
(5) nominees named above. The proxy cannot be voted for a greater number of
persons than the number of nominees named. If any nominee becomes unavailable
for any reason, or if a vacancy should occur before the election (which events
are not anticipated), the shares represented by the enclosed proxy may be voted
for such person as may be determined by the holders of such proxy.
NOMINEES FOR BOARD OF DIRECTORS
The nominees to serve as directors of the Company until the next annual meeting
of shareholders and until their successors are elected and qualified, and
certain information with respect to the business experience of each nominee
during the last five years, is set forth below.
WILLIAM W. BOTTS. Mr. Botts has served on the Board of Directors since
1985. Prior to joining the Company, Mr. Botts was Executive Vice-President and
Chief Operating Officer of The Brandt Company, a privately owned oil field
service company headquartered in Houston, Texas until it was sold to TRW, Inc.
in August 1982. At the time of such sale, he was named Vice-President and
General Manager of the Brandt Division of TRW Inc. Mr. Botts served in that
position until he was elected President and Chief Operating Officer of the
Company on February 1, 1985, Chief Executive Officer on July 19, 1985, and
Chairman of the Board of Directors on May 26, 1986.
JACK S. ANDERSON. Mr. Anderson has served on the Board of Directors since
1980. Prior to joining the Company, Mr. Anderson was Senior Vice President of
NL Petroleum Services in Houston, Texas from June 1969 to September 1980. He
was Executive Vice President and Director of GEO International, Houston, Texas
from October 1980 to October 1983, and from October 1983 until the present, he
has served as President of Jasada
2
<PAGE> 6
Corporation, an investment firm located in Houston, Texas. Mr. Anderson has
served since November 1983 as President of Anlo Energy, Inc., a mining company.
Mr. Anderson serves as an executive officer and director of Califone
International located in Los Angeles, California and Virosafe Inc. located in
Houston, both of which are privately owned companies.
J. LESTER HEATH. Mr. Heath has served on the Board of Directors since
1985. Prior to joining the Company, Mr. Heath was President of the Vector
Cable Company, Sugarland, Texas from 1972 until his retirement in 1981. Vector
Cable Company, a manufacturer of cable, is a wholly-owned subsidiary of
Schlumberger, Inc., a diversified oil field service company. From 1983 to
1988, Mr. Heath served as President of National Line Products, Inc., of
Houston, Texas, an industrial products distributor. He currently serves as
President of Lester Heath Consultants, Inc., and Secretary and Director of
Virosafe, Inc., Houston, Texas.
EDWIN B. KING. Mr. King has served on the Board of Directors since
February 1995. Prior to joining the Company, Mr. King was President of Gulf
Chemical & Metallurgical Co., of Texas City, Texas, a chemical and
metallurgical processing company from 1969 to 1984. From 1984 to the present,
Mr. King has held the position of President and director of Asoma Instruments,
Inc. of Austin, Texas, an analytical instrument manufacturer; and President,
co-owner, and director of Jumbo Mining Company, a mining company whose
principal operations are located in Winnemucca, Nevada and Delta, Utah. He
also serves as director of Asoma (Utah) Inc. He was elected as a director of
the Company on February 13, 1995.
CRAIG R. WHITED. From 1975 to the present, Mr. Whited has held numerous
financial and consulting positions. From 1975 to 1979, he was a CPA,
management consultant, and supervisor for the auditing firm of Deloitte,
Haskins & Sells CPAs, Los Angeles, California. From 1979 to 1986, he served as
Vice President of Finance for Penberthy Lumber Company, a major hardwood lumber
products manufacturer and importer, Los Angeles, California. From 1986 to
1988, he served as President and Chief Financial Officer of Connor Forest
Industries, Inc., a major domestic hardwood lumber products grower and
manufacturer, with offices in California, Michigan and Texas. From 1987 to
1988, he served as Senior Vice President and Chief Financial Officer of
Bridgewater Resources Corporation, the domestic holding company of a European
conglomerate engaged in the manufacture of lumber products, electronics, and
real estate development, with offices in California, Michigan, New York, and
Texas. From 1988 to the present, Mr. Whited has served as President and Chief
Executive Officer of The Oxford Group, Inc., a management and financial
consulting firm, with offices in both Los Angeles, California and Las Vegas,
Nevada.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to (i) the name and age
of each director and nominee for director, (ii) the total number of shares of
common stock of the Company beneficially owned by each director and nominee for
director, by each of the executive officers named below under "Compensation of
Executive Officers--Summary Compensation Table," and by all directors and
executive officers as a group and (iii) the percentage of the outstanding
common stock so owned by each, as of March 1, 1996. Unless otherwise
indicated, each person named in the table owns the shares listed below and has
sole voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF CLASS
D IRECTOR OF BENEFICIAL OF COMMON
NAME AND TITLE AGE SINCE OWNERSHIP STOCK
<S> <C> <C> <C> <C>
William W. Botts 53 1986 296,000(1) 7.2
President, Chairman of the Board
Chief Executive Officer
Jack S. Anderson 70 1980 18,000(2) *
Director
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C>
J. Lester Heath 74 1985 14,000(2) *
Director
Edwin B. King 68 1995 13,000(3) *
Director
Craig R. Whited 49 88,600 2.2
Director Nominee
William R. Hart 59 44,794(4) 1.1
Vice President/Director of Marketing
Gary D. Sides 48 4,000(5) --
Vice President
Dennis D. Schupp 51 12,120 *
Vice President
Directors and executive officers as a group 508,714(6) 12.4%
</TABLE>
_______________
* Beneficial ownership of less than 1% of the class is omitted.
1. Includes 90,000 shares subject to presently exercisable options.
2. Includes 3,000 shares subject to presently exercisable options.
3. Includes 1,000 shares subject to presently exercisable options.
4. Includes 38,001 shares subject to presently exercisable options.
5. Shares subject to presently exercisable options.
6. Includes 149,501 shares subject to presently exercisable options.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Directors are elected at each annual meeting of shareholders and serve until a
successor shall be elected and qualified at an appropriate annual meeting of
the shareholders. Vacancies may be filled by a majority of the remaining
directors. The Company's Board of Directors met five times during 1995. The
Board of Directors has a standing Executive Committee, Stock Option and
Compensation Committee, Finance and Audit Committee and a special Product
Technology Committee. The Company does not have a Nominating Committee.
During 1995, the Executive Committee met once, the Stock Option and
Compensation Committee met once, and the Finance and Audit Committee met twice.
Each member of the Board of Directors attended all the meetings of the Board of
Directors and the committees of which such person was a member during 1995.
EXECUTIVE COMMITTEE. The Executive Committee consists of Messrs. Anderson and
Botts. During intervals between meetings of the Board of Directors, this
committee may exercise all the powers and authority of the Board of Directors,
subject only to such limitations as may be provided by law or by the Board of
Directors, in the management of the business and affairs of the Company.
STOCK OPTION AND COMPENSATION COMMITTEE. The Stock Option and Compensation
Committee (the "Compensation Committee") consists of Messrs. Anderson, Heath
and King. Functions of this committee are to approve and recommend to the
Board of Directors the approval of remuneration arrangements of directors and
senior management personnel, adopting, subject to Board approval, compensation
plans for officers and directors and administering and granting benefits
pursuant to such plans.
FINANCE AND AUDIT COMMITTEE. The Finance and Audit Committee consists of
Messrs. Anderson, Heath, and King. The function of this committee is to (A)
investigate and study matters relating to the operations and finances
4
<PAGE> 8
of the Company, (B) meet periodically with the Company's management and its
independent public accountants to review (i) their reports relating to their
examination of the financial statements and of the internal accounting control
systems of the Company, (ii) their recommendations for strengthening internal
controls and improving operating procedures and (iii) compliance by Company
personnel with Company policies relating to various governmental laws and
regulations dealing with ethics, conflicts of interest and disbursements of
corporate funds, and (C) to give advice and make recommendations with respect
to such matters.
COMPENSATION OF DIRECTORS
Non-employee directors received a fee of $1000 for each Board of Directors
meeting attended and $500 for each committee meeting attended. Directors who
are also officers or employees of the Company receive no additional
compensation for attendance at such Board or committee meetings. For the
fiscal year ended December 31, 1995, directors fees paid were: Mr. Anderson,
$7,000; Mr. Botts, $0; Mr. Heath, $7,000; and Mr. King, $6,500.
As a result of shareholder approval of the Company's 1993 Incentive
Compensation Plan, each non-employee director was granted a stock option for
1,000 shares at an exercise price of $3.50 (the fair market value of a share of
Common Stock on May 2, 1995, the day of grant). The options (i) have an
exercise price equal to the fair market value of a share of Common Stock on the
date of grant; (ii) vest six months from the date of grant, (iii) are
exercisable to the extent vested for a period of (a) three months following
termination of service as a director for reasons other than retirement,
disability, death or cause and (b) generally, twelve months following
termination of service as a director for retirement, disability or death; (iv)
have a term of ten years and; (v) are exercisable in full following a "change
in control" event (as defined in the Incentive Plan).
COMPENSATION OF EXECUTIVE OFFICERS
The following table lists, for the year ended December 31, 1995, cash
compensation paid by the Company to each of the most highly compensated
executive officers whose cash compensation exceeded $100,000 during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------- -------------
All Other
Options/ Compen-
Name and Salary Bonus SARs sation
Principal Position Year ($) ($)(1) (#)(2) ($)(3)
- ------------------ ---- ---------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
William W. Botts 1995 $ 134,962 $ -0- 50,000 $ 21,046
President/Chief 1994 $ 145,000 $ -0- -0- $ 21,459
Executive Officer 1993 $ 145,000 $ 10,000 -0- $ 24,965
Dr. Gary D. Sides 1995 $ 94,423 $ 12,231 (5) 5,000 $ 4,716
Vice President 1994 $ 101,859 $ 12,231 (5) 20,000 $ 1,809
William R. Hart 1995 $ 90,170 $ -0- 5,000 $ 7,323
Vice President/ 1994 $ 100,000 $ -0- 8,000 $ 8,828 (4)
Director of Marketing 1993 $ 96,808 $ 10,000 8,000 $ 10,315
</TABLE>
_______________
1. The above amounts include bonuses paid in January for the previous year.
5
<PAGE> 9
2. No SARs were granted to the named executives.
3. The amounts in this column represent contributions to the 401K Plan for
each of the named executives as well as a life insurance premium in the
amount of $15,000 per year for Mr. Botts.
4. This amount includes $780 for the Company's contribution to the Employee
Stock Purchase Plan.
5. This amount reflects an annual bonus that is paid to Dr. Sides as a result
of an agreement with CMS Research Corporation.
The following table sets forth certain information with respect to stock
options granted to the indicated persons between January 1, 1995 and December
31, 1995.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------
% of Total
Number of Options/ Potential
Securities SARs Realizable Value
Underlying Granted to at Assumed Annual
Options/ Employees Exercise or Rates of Stock
SARs in Fiscal Base Price Expiration Price Appreciation
Name Granted(#)(1) Year ($/Sh) Date for Option Term (2)
- ------------------- ------------- ----------- ------------ --------------- ---------------------
5% ($) 10% ($)
------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gary D. Sides 5,000 6% $2.50 Dec. 6, 2005 $ 20,361 $ 32,422
William W. Hart 5,000 6% $2.50 Dec. 6, 2005 $ 20,361 $ 32,422
William W. Botts 50,000 62% $2.50 Dec. 6, 2005 $ 203,612 $ 324,218
</TABLE>
_______________
1. Options vest 33-1/3% annually from date of grant. No SARs were granted.
Exercisability may be accelerated upon the occurrence of a "change in
control event" (as defined in the Company's 1987 Stock Option and SAR
Plan).
2. The Securities and Exchange Commission requires disclosure of the potential
realizable value. The disclosure assumes the option will be held for the
full ten-year term prior to exercise. Such option may be exercised prior
to the end of such ten-year term.
CERTAIN TRANSACTIONS, EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS. Under the terms of an employment agreement
with the Company effective May 17, 1995 and terminating May 17, 1996, Mr.
Botts, a Director of the Company, is performing executive duties as President
and Chief Executive Officer of the Company. Compensation paid pursuant to this
agreement includes an annual salary as determined by the Board of Directors
(such amount is included in the Cash Compensation Table above), a life
insurance policy and an automobile allowance. The employment agreement remains
in effect until its expiration date, unless Mr. Botts dies, becomes disabled or
violates his duty of loyalty to the Company following a change in control of
the Company. If Mr. Botts is terminated for any reason, other than as set
forth in the preceding sentence, following a change in control of the Company,
he will be entitled to up to three years of salary continuation.
As a result of the acquisition of CMS Research Corporation ("CMS"), the Company
entered into an employment agreement with Gary D. Sides, effective January 4,
1994 and terminating January 4, 1997. Pursuant to the agreement, Dr. Sides was
appointed Vice President of O.I. Corporation and performs executive duties as
President of CMS Research Corporation. Compensation paid to Dr. Sides pursuant
to the agreement includes an annual salary as determined by the Board of
Directors and an automobile allowance. If Dr. Sides is terminated under the
agreement, for reason other than breach of the agreement, he will be entitled
to up to three years of salary continuation.
6
<PAGE> 10
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY
The Company's primary business objective is to maximize shareholder value over
the long term. To help accomplish this objective, the Committee has developed
an overall executive compensation philosophy with goals as follows:
o Attract, retain, and motivate key executives;
o Reward performance rather than create a sense of entitlement;
o Align executive and shareholder interests by stock ownership;
o Assure that objectives for corporate and individual performance are
established and measured.
For comparison of peer performance, and in order to maintain consistency in the
Company's method of determining executive compensation for 1995, the Company
used a method for selecting comparable companies, which included searches in
various data bases from the NASDAQ National Market System, Media General
Financial Services, and Standard Industrial Classification (SIC) Codes 382
(Laboratory and Analytical Instruments) and 3823 (Process Control Instruments),
as shown in the graph on Page 9 hereof. Management believes that SIC Code 382
contains companies which most closely represent an established grouping of
which the Company may be called a peer. The Company was not able to obtain
compensation information for all of the companies in SIC Code 382; however,
certain companies within such classification (including Andros, Arizona
Instruments, CEM, Dionex, Isco, Perkin Elmer, TSI, and Thermo Instruments) were
compared to the Company in terms of growth in revenue, operating profit, net
income, earnings per share, average return on assets and equity and
compensation of executive management. Compensation of Company executives was
set to correspond to a range of what is believed to be between the mid-to-high
end of compensation ranges for executives in such companies, with further
consideration based on the Company's performance compared to such companies.
It should be noted, however, that the CEO and other executive officers are at
risk for compensation through both bonuses and stock option appreciation, as
reflected in the 1994 and 1995 compensation.
BASE SALARIES
The Committee reviews annually each executive's base salary. Base salaries are
targeted at median levels for public companies of O.I. Corporation's relative
size, as discussed above, but are determined primarily by individual
performance relative to achieving Company goals. It is believed that base
salaries paid in 1995 to the named executive and the CEO were consistent with
such policy.
When evaluating individual performance, the Committee considers the executive's
efforts in promoting Company values; contribution to the Company's financial
performance; developing and executing a strategic plan for growth in revenues
and net income; improving product quality; specific job responsibilities, prior
experience, job knowledge, and written performance appraisals for each
executive. No specific weights have been assigned to the various factors.
The base salary of Mr. William W. Botts (Chairman of the Board, CEO, and
President of the Company) and other executives of the Company were reviewed at
the December 1995 meeting of the Compensation Committee. In view of the
Company failing to meet certain predetermined financial goals relating to
growth in sales, net income, earnings per share, return on assets, and
shareholders' equity for the 1995 fiscal year, Mr. Botts and Mr. Hart, as
reflected in the Summary Compensation Table on page 5 of this proxy statement,
voluntarily reduced their base salary as part of a cost containment program
initiated in June 1995. Until such reduction, Mr. Botts' salary had remained
substantially at the same level since December 1991. Mr. Hart's compensation
plan includes a base salary and a sales commission plan, which provides for a
sales commission paid on the amount of sales of certain products. Some
officers of the Company did receive salary increases based on individual
performance during 1995.
7
<PAGE> 11
ANNUAL CASH INCENTIVES
Annual cash bonuses provide executives with direct financial incentives to
achieve corporate and individual performance goals. Written individual
performance appraisals and the extent to which the Company met its financial
goals for growth in revenue, operating profit, net income, earnings per share,
and average return on assets and equity are used in determining bonuses for
each executive. Performance is also judged on the achievement of business plan
goals relating to improving product quality and productivity and growth through
new product development and acquisitions. No specific weights have been
assigned to the various factors.
During 1995, the markets served by the Company remained soft, substantial
consolidation occurred among the buyers to whom the Company sells its products,
and therefore, management performance was evaluated on an officer's ability to
change strategy and cope with such market conditions, including his or her
ability to hold market share, contain cost, and maintain customer satisfaction,
as well as develop new products and acquire additional products or businesses.
No bonuses were awarded for 1995 despite the development and implementation of
a strategy which maintained profitability in spite of a declining market demand
for the Company's products. As shown in the Summary Compensation Table on page
5 of this proxy statement, Mr. Botts and Mr. Hart did not receive bonuses. Dr.
Sides received a bonus in accordance with an agreement with CMS, which was
entered prior to the merger of CMS and the Company. Such agreement provides
that Dr. Sides will receive a bonus of $3,057 per quarter until June, 1997.
LONG-TERM INCENTIVES (STOCK OPTIONS)
Long-term incentives are provided pursuant to the Company's 1993 Incentive
Compensation Plan. The Committee determines annually the total amount of
options that will be made available to the Company's executives. The amount of
options granted each year are based on the executive's total compensation
package and reflect the desire of the Compensation Committee to encourage
equity ownership by the Company's executives in order to provide an appropriate
link to the interest of the stockholders, to reward prior performance, and to
provide long-term incentive award opportunities.
The stock option grants for 1995 were determined based on the performance of
each executive with respect to their contribution to the Company's financial
performance, measured as discussed above, together with an appraisal of the
extent to which pre-established objectives were achieved, as well as the
Committee's perception of the executive's ability and potential to contribute
to the growth and profitability of the Company, to identify changing business
conditions (such as market changes and competitive threats), and to respond
with appropriate business strategies. No specific weights have been assigned
to the foregoing factors. In 1995, grants covering 50,000 shares were made to
Mr. Botts, 5,000 to Mr. Hart, 5,000 to Dr. Sides (granted in accordance with
the terms of the Company's acquisition of CMS and the Company), and a total of
20,500 shares to other employees.
Mr. Botts, as reflected in the Summary Compensation Table on page 5 of this
proxy statement, received stock options for 50,000 shares for the year ended
1995. This decision was based on both the Company's achievement of certain
predetermined goals for the 1995 fiscal year as well as the Committee's
consideration of Mr. Botts' failure to receive stock option grants in 1992,
1993, and 1994. The 1995 grants are designed to insure Mr. Botts' long-term
perspective for Company and stock price performance.
SUMMARY
The Committee believes that the incentive compensation program for the
executives of the Company is comparable to the compensation programs provided
by comparable companies and serves the best interest of the shareholders of the
Company. The Committee also believes that annual performance pay is
appropriately linked to individual performance, the Company's annual financial
performance, and shareholder value. The Company intends to continue its
program for setting executive compensation as outlined above.
8
<PAGE> 12
The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.
The foregoing report is given by the following members of the Compensation
Committee:
Jack S. Anderson
J. Lester Heath
Edwin B. King
9
<PAGE> 13
FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG O.I. CORPORATION, NASDAQ MARKET INDEX AND PEER GROUP INDEX
Set forth below are a line graph and a table comparing the yearly percentage
change in the cumulative total shareholder return (change in year-end stock
price plus reinvested dividends) on the Company's Common Stock against the
cumulative total return of the NASDAQ Market Index and a peer group index
consisting of public companies with the Company's Standard Industrial
Classification ("SIC") Code (Laboratory and Analytical Instruments) for the
period of five years beginning at the beginning of fiscal year 1991. The SIC
Code for Laboratory and Analytical Instruments includes over ninety (90)
issuers, such as Andros, Arizona Instrument, CEM, Dionex, Isco, Perkin Elmer,
Thermo Instrument and TSI.
<TABLE>
<CAPTION>
===================================================================================
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
O.I. CORPORATION 100 431 153 128 97 73
- -----------------------------------------------------------------------------------
SIC CODE 382 100 144 158 182 187 278
- -----------------------------------------------------------------------------------
NASDAQ MARKET INDEX 100 128 130 156 163 212
===================================================================================
</TABLE>
The foregoing stock price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act or under the
Exchange Act, except to the extent that the Company specifically incorporates
this graph by reference, and shall not otherwise be deemed filed under such
acts.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above.
The Company will not make or endorse any predictions as to future stock
performance.
10
<PAGE> 14
RATIFICATION OF INDEPENDENT AUDITORS
PROPOSAL 2: THE BOARD OF DIRECTORS HAS UNANIMOUSLY SELECTED PRICE
WATERHOUSE AND URGES YOU TO VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
SUCH FIRM, AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE YEAR 1996. PROXIES
SOLICITED HEREBY WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN
THEIR PROXIES. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMMON
STOCK PRESENT IN PERSON OR BY PROXY AT THE MEETING AND ENTITLED TO VOTE IS
REQUIRED FOR APPROVAL OF THIS PROPOSAL.
By action of the Board of Directors, Price Waterhouse has been selected as
independent auditors of the Company for the year ending December 31, 1996, and
the Board of Directors proposes the ratification of such selection. Price
Waterhouse was chosen as independent auditors for the Company during 1995 for
the year ended December 31, 1995. A member or members of the firm of Price
Waterhouse will be present at the annual meeting of shareholders and will be
available to respond to appropriate questions.
During the Company's two most recent fiscal years and the subsequent period
preceding March 17, 1992, there were not any disagreements with the former
accountants on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
SHAREHOLDERS PROPOSALS
No shareholder's proposals were received for inclusion in this Proxy Statement.
The Company has also adopted Bylaw provisions which require the nominations of
persons for election to the Board of Directors and the proposal of business by
shareholders at an annual meeting of shareholders must fulfill certain
requirements which include the requirement that notice of such nominations or
proposals must be delivered to the Secretary of the Company not less than 60
days nor more than 90 days prior to the anniversary of the prior annual
meeting. In order to be timely for next year's annual meeting such notice must
be delivered between February 7, 1997 and March 8, 1997.
OTHER MATTERS
Management knows of no other matters to be brought before the annual meeting of
shareholders at the time and place indicated in the notice thereof; however, if
any additional matters are properly brought before the meeting, the persons
named in the enclosed proxy shall vote the proxies in their discretion in the
manner they believe to be in the best interest of the Company.
The accompanying form of proxy has been prepared at the direction of the Board
of Directors of the Company, of which you are a shareholder, and is sent to you
at the request of the Board of Directors. The proxies named therein have been
designated by your Board of Directors.
The Management of the Company urges you, even if you presently plan to attend
the meeting in person, to execute the enclosed proxy and mail it immediately.
You may revoke your proxy and vote in person if you are able to attend.
O.I. CORPORATION
By Order of the Board of Directors
Jane A. Smith
Vice President-Corporate Secretary
March 25, 1996
11
<PAGE> 15
PROXY O.I. CORPORATION PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) William W. Botts and Jane A. Smith,
and each of them, lawful attorneys and proxies of the undersigned to vote as
Proxy at the Annual Shareholders' Meeting of O.I. Corporation (herein the
"Company") to be held on Tuesday, May 7, 1996, and any adjournment(s) thereof
according to the number of votes owned by the undersigned as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
PROPOSAL 1: The Election of Directors.
<TABLE>
<S> <C>
[ ] FOR all nominees [ ] FOR all nominees (except as listed below)
[ ] WITHHOLD AUTHORITY to vote for all nominees
Jack S. Anderson J. Lester Heath Craig R. Whited
William W. Botts Edwin B. King
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME IN THE
SPACE PROVIDED BELOW.)
_________________________________________________________________________________________________________________________
FOR AGAINST ABSTAIN
PROPOSAL 2: The Ratification of the Appointment of Auditors. [ ] [ ] [ ]
In accordance with their discretion, said Attorneys and Proxies are authorized to vote upon such other matters or
proposals not known at the time of solicitation of this proxy which may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. If no
direction is made, this proxy will be voted for Proposals 1 and 2. Any prior proxy is hereby revoked.
, 1996
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Signature
-----------------------------------------------------------------------------------
Signature if held jointly
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS AT THE LEFT. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED PERSON. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. THANK YOU.
</TABLE>
