SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER: 0-6511
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O. I. CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-0728053
State of Incorporation I.R.S. Employer Identification No.
P.O. Box 9010
151 Graham Road
College Station, Texas 77842-9010
(Address of Principal Executive Offices) (Zip Code)
(409) 690-1711
Registrant's telephone number, including area code
Not Applicable
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1997:
3,879,367 shares<PAGE>
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(unaudited)
June 30 Dec 31
1997 1996
ASSETS ------- -------
Current assets:
Cash and cash equivalents $ 1,532 $ 1,963
Short-term investments 3,274 5,138
Accounts receivable 4,629 3,928
Investment in sales-type lease 286 312
Inventories 3,700 3,780
Current deferred tax asset 810 810
Other current assets 295 299
------- -------
Total current assets 14,526 16,230
Property, plant and equipment, net 1,516 1,548
Investment in sales-type lease, net of current 495 301
Long-term investments 1,454 0
Other assets 946 1,107
------- -------
TOTAL ASSETS $18,937 $19,186
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,330 $ 1,309
Accrued compensation 534 637
Accrued expenses 1,907 1,893
------- -------
Total current liabilities 3,771 3,839
Deferred income taxes 399 386
------- -------
TOTAL LIABILITIES 4,170 4,225
Shareholders' equity:
Common stock ($.10 par value) 410 414
Additional paid in capital 4,434 4,587
Treasury stock, at cost (836) (113)
Retained earnings 10,759 10,073
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TOTAL SHAREHOLDERS' EQUITY 14,767 14,961
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $18,937 $19,186
======= ======= <PAGE>
O.I. CORPORATION
Condensed Consolidated Statement of Earnings
(In thousands, except share and per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1997 1996 1997 1996
------ ------ ------- -------
Net sales $ 5,735 $ 5,094 $ 11,056 $ 9,742
Cost of goods sold 2,947 2,689 5,684 4,859
------ ------ -------- -------
Gross profit 2,788 2,405 5,372 4,883
Res. and dev. expenses 431 486 951 931
Selling, general and
administrative expenses 1,950 1,696 3,654 3,494
------ ------ -------- -------
Operating income 407 223 767 458
Interest income/other income 153 141 293 261
Interest expense 0 0 0 0
------- ------- -------- -------
Income before income taxes 560 364 1,060 719
Provision for taxes on
earnings 196 140 374 281
-------- -------- -------- --------
Net income $ 364 $ 224 $ 686 $ 438
======== ======== ======== ========
Weighted average number
of shares outstanding 3,990,025 4,137,953 4,032,132 4,113,374
Earnings per share $ 0.09 $ 0.05 $ 0.17 $ 0.11
Dividends per share -0- -0- -0- -0-
<PAGE>
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 686 $ 438
Depreciation and amortization 256 235
Deferred income taxes 13 6
Change in working capital, net
of effect from purchase of
Alpkem (864) (927)
------------ -----------
Net cash flows provided by
(used in) operating activities 91 (248)
CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of treasury stock (734) (486)
Issuance of common stock 0 10
------------ -----------
Net cash flows provided by
(used in) financing activities (734) (476)
CASH FLOW USED IN INVESTING ACTIVITIES:
Proceeds from sale of property,
plant and equipment 88 2
Purchase of property, plant
and equipment (247) (175)
Purchase of Alpkem (1996) 0 (505)
Purchase of investments (4,243) (5,676)
Maturity of investments 4,652 2,632
Investment in patents (13) (36)
Change in deposits (25) 2
----------- -----------
Net cash flows provided
(used in) investing activities 212 (3,756)
INCREASE (DECREASE) IN CASH
and cash equivalents (431) (4,480)
Cash and cash equivalents
at beginning of year 1,963 5,503
---------- ---------
Cash and cash equivalents
at end of quarter $ 1,532 $ 1,023
========== =========
<PAGE>
O.I. CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The accompanying unaudited consolidated financial statements
have been prepared by O.I. Corporation and include all
adjustments which are, in the opinion of management,
necessary for a fair presentation of financial results for
the three and six months ended June 30, 1997 and 1996,
pursuant to the rules and regulations of the Securities and
Exchange Commission. All adjustments and provisions included
in these statements are of a normal recurring nature. All
significant intercompany balances and transfers have been
eliminated. For further information regarding the
Company's accounting policies, refer to the Consolidated
Financial Statements and related notes included in the
Company's Annual Report and Form 10-K for the year ended
December 31, 1996.
The Company develops, manufactures, markets, and services
analytical monitoring and sample preparation products,
components and systems used to prepare samples for analysis
and to detect, measure, and analyze chemical compounds.
Sales of the Company's products are recorded based on
shipments of products and no substantial right of return
exists.
2. INVENTORIES.
June 30, 1997 Dec. 31, 1996
------------- -------------
Raw Materials $ 2,090,000 $ 2,365,000
Work in Process $ 511,000 $ 458,000
Finished Goods $ 1,099,000 $ 957,000
------------ ------------
$ 3,700,000 $ 3,780,000
3. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES.
Earnings per common and common equivalent share is computed
using the weighted average number of shares of common stock
and common stock equivalents outstanding during the period.
Common stock equivalents include the number of shares
issuable upon exercise of dilutive stock options, less
the number of shares that could have been repurchased with
the exercise proceeds using the treasury stock method.
4. RECLASSIFICATION.
Certain amounts in the prior periods have been reclassified
to conform with the current period presentation.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Form 10Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included in this Form 10Q that
address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future,
are forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of
its experience and its perception of historical trends, current
conditions, expected future developments and other factors it
believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, many
of which are beyond the control of the Company and which are
discussed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996. Investors are cautioned that any such
statements are not guarantees of future performance and that actual
results or developments may differ materially from those projected
in the forward-looking statements.
OPERATING RESULTS
Net sales for the second quarter of 1997 increased 13% to
$5,735,000, compared to $5,094,000 for 1996. This increase was due
to an increase in the sales of the Company's continuous monitoring
products, gas chromatography components and systems and total
organic carbon analyzers, offset in part by a decrease in sales of
sample preparation products and flow analyzers. International
sales were down slightly, primarily due to a decrease in sales to
Europe. The Company conducted sales training for its European
distributors during the second quarter, and distributors projected
improved international sales for the second half of 1997.
Year-to-date sales through June 30, 1997 increased 13% to
$11,056,000, compared to $9,742,000 for 1996. Year-to-date sales
through June 30, 1996 include $232,000 received in February 1996
in connection with the settlement of a lawsuit. Year-to-date
sales were impacted by the same factors that affected second
quarter 1997 sales.
Gross profit increased to $2,788,000, or 49% of sales, for the
second quarter of 1997, compared to $2,405,000, or 47% of sales,
for the same quarter of 1996. The increase in gross profit
dollars was due to the increase in sales. The increase in gross
profit percent was due to a decrease in cost related to service
revenue and increased manufacturing efficiency due to volume
increases, offset in part by an increase in warranty expense.
Year-to-date gross profit increased to $5,372,000 through June 30,
1997 compared to $4,883,000 for the same period of 1996.
Year-to-date gross profit, as a percent of sales, was 49% for 1997
and 50% for 1996. Year-to-date gross profit was impacted by the
same factors that affected second quarter 1997 gross profit.
Research and development (R&D) expenses for the second quarter of
1997 were $431,000, or 8% of sales, compared to $486,000, or 10%
of sales for the same period of 1996. Year-to-date R&D expenses
through June 30, 1997 increased 2% to $951,000, or 9% of sales,
compared to $931,000, or 10% of sales, for the same period of
1996. The decreased amount of R&D expense for the second quarter
of 1997, compared to the prior period, was due to fewer personnel,
offset in part by an increase in the purchase of supplies. The
increase in year-to-date R&D expense was due to an increase in
consulting fees and an increase in the purchase of supplies,
offset by fewer personnel.
Selling, general, and administrative (SG&A) expenses for the
second quarter of 1997 increased 15% to $1,950,000, or 34% of
sales compared to $1,696,000, or 33% of sales, for 1996. SG&A
expenses for the second quarter of 1997 were higher than 1996 due
to an increase in personnel, commission expense, consulting fees,
and the purchase of supplies, offset in part by a decrease in
legal fees. The Company incurred legal fees of approximately
$31,000 in the second quarter of 1997 compared to $365,000 in the
second quarter of 1996. The second quarter 1996 fees were offset
in part by a reserve established for litigation in the amount of
$165,000. These legal fees were related to a patent infringement
lawsuit filed against a competitor in March 1995. On May 23,
1997, the U.S. Court of Appeals for the Federal Circuit in
Washington, D.C. upheld the lower court's summary judgement that a
competitor did not infringe the Company's patents. Year-to-date
SG&A expenses through June 30, 1997, increased 5% to $3,654,000,
or 33% of sales, compared to $3,494,000, or 36% of sales, for the
same period of 1996. Year-to-date SG&A expenses increased due to
the factors discussed above. Year-to-date legal fees related to
the patent infringement case were approximately $49,000 in 1997
compared to $789,000 in 1996. The 1996 amount was offset in part
by the reserve established in 1995 of $165,000.
Income before tax for the second quarter of 1997 amounted to
$560,000, an increase of 54% from 1996 second quarter results of
$364,000. Year-to-date income before tax increased 47% to
$1,060,000 through June 30, 1997, compared to $719,000 for the
same period of 1996. The higher profit for 1997 was due to
increased sales volume and lower legal fees, offset in part by
increased operating expenses. The effective tax rates for the
second quarter were 35% in 1997 and 38% in 1996. The decrease in
the effective tax rate for 1997 was due to an increase in the
estimated tax savings from the Company's foreign sales corporation
and the mix of sales by state. Net income after tax for the
second quarter 1997 increased 63% to $364,000, or $0.09 per share,
compared to $224,000, or $0.05 per share in the same period of
1996. Year-to-date net income after tax increased 57% to
$686,000, or $0.17 per share through June 30, 1997, from $438,000,
or $0.11 per share for the same period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1,532,000 as of June 30, 1997,
compared to $1,963,000 as of December 31, 1996. Working capital,
as of June 30, 1997, was $10,755,000, a decrease of 13%, compared
to $12,391,000 as of December 31, 1996. The decrease in working
capital was primarily due to the purchase of approximately
$1,450,000 in investments maturing in 1998 and the purchase of
treasury stock. Working capital, as a percentage of total assets,
was 57% as of June 30, 1997, compared to 65% as of December 31,
1996. The current ratio was 3.85 to 1 at June 30, 1997, as
compared to 4.23 to 1 at December 31, 1996. Total
liabilities-to-equity was 28% as of June 30, 1997, compared to 28%
at December 31, 1996.
Net cash flow provided by (used in) operating activities for the
six months ended June 30, 1997, was $91,000, compared to
($248,000) for the same period of 1996. The increase in cash flow
provided by operating activities for the first six months in 1997
was primarily due to an increase in net income, offset in part by
an increase in accounts receivable and investment in sales-type
leases. The increase in accounts receivable and investment in
sales-type leases was primarily due to the increase in sales. Net
cash flow used in financing activities for the six months ended
June 30, 1997 was $734,000 compared to $476,000 for the same
period of 1996. The increase in cash flow used in financing
activities was due to the purchase of treasury stock. On February
17, 1997 the Company's Board of Directors authorized the purchase
of up to 400,000 shares of common stock, in addition to the
purchase of 400,000 shares previously authorized in December 1995.
Net cash flow provided by (used in) investing activities for the
six months ended June 30, 1997 was $212,000, compared to
($3,756,000) for the same period of 1996. The increase in cash
flow provided by investing activities resulted from a decrease in
the purchase of investments. The Company is in the planning phase
of a facilities expansion at its College Station location to
accommodate future growth and consolidate certain existing
operations. The preliminary budget for the project is $1,500,000.
The Company plans to complete the expansion 1998.
Management regularly evaluates opportunities to acquire products
or businesses complimentary to the Company's operations. Such
acquisition opportunities, if they arise and are successfully
consummated, may involve the use of cash, or, depending upon the
size and terms of the acquisitions, may involve equity or debt
financing. Although the Company has completed four acquisitions
in the past 42 months, the Company cannot guarantee that it will
be able to successfully consummate any future acquisitions or
that, if consummated, they will have either a short-term or a
long-term positive effect on the Company's results of operations.
Part II: OTHER INFORMATION
Item 1. Legal Proceedings: On March 3, 1995, the Company filed a
patent infringement complaint against the Tekmar Company
in the Galveston Division of the U.S. District Court. On
June 17, 1996, a Motion by Defendant for Summary Judgment
of Non-Infringement was granted. The Company appealed the
decision to the U.S. Court of Appeals for the Federal
Circuit in Washington, D.C. On May 23, 1997, the U.S.
Court of Appeals upheld the Summary Judgement of
Non-Infringement.
Item 2. Changes in Securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: At
the Company's Annual Meeting of Shareholders on May 12,
1997, the following members were elected to the Board of
Directors:
Votes For Withheld
--------- --------
Jack S. Anderson 3,290,772 28,893
William W. Botts 3,290,457 29,208
J. Lester Heath 3,290,772 28,893
Edwin B. King 3,290,802 28,863
Craig R. Whited 3,290,802 28,863
The following proposals were also approved at the Company's
Annual Meeting:
Votes For Against Abstain
--------- ------- -------
Ratification of Price
Waterhouse as the
Company's auditors 3,221,945 93,094 4,626
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
O.I. CORPORATION
(Registrant)
Date: 7/25/97 BY: /s/ Julie Wright
Julie Wright, Controller
Date: 7/25/97 BY: /s/ William W. Botts
William W. Botts, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet and the condensed consolidated statement of
earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
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<PERIOD-END> JUN-30-1997
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0
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