SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from _________ to __________
O. I. CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-0728053
State of Incorporation I.R.S. Employer Identification No.
P.O. Box 9010
151 Graham Road
College Station, Texas 77842-9010
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:409/690-1711
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of the issuer's classes of
common stock, as of September 30, 1997:
3,878,367 shares<PAGE>
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(unaudited)
Sept 30, Dec 31,
1997 1996
ASSETS _______ _______
Current assets:
Cash and cash equivalents $1,480 $1,963
Short-term investments 2,905 5,138
Accounts receivable 3,794 3,928
Investment in sales-type lease 280 312
Inventories 3,565 3,780
Current deferred tax asset 810 810
Other current assets 318 299
_______ _______
Total current assets 13,152 16,230
Property, plant and equipment, net 1,461 1,548
Long-term investments 2,753 0
Investment in sales-type lease,
net of current 539 301
Other assets 940 1,107
_______ _______
TOTAL ASSETS $ 18,845 $ 19,186
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,053 $ 1,309
Accrued compensation 445 637
Accrued expenses 1,872 1,893
_______ _______
Total current liabilities 3,370 3,839
Deferred income taxes 393 386
_______ _______
TOTAL LIABILITIES 3,763 4,225
Shareholders' equity:
Common stock ($.10 par value) 410 414
Additional paid in capital 4,433 4,587
Treasury stock (839) (113)
Retained earnings 11,078 10,073
______ ______
TOTAL SHAREHOLDERS' EQUITY 15,082 14,961
______ ______
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 18,845 $ 19,186
====== ======
<PAGE>
O.I. CORPORATION
Condensed Consolidated Statement of Earnings
(In thousands, except share and per share data)
(unaudited)
Three Nine
Months Ended Months Ended
Sept 30 Sept 30
________________ ________________
1997 1996 1997 1996
______ ______ ______ ______
Net sales $ 5,210 $ 5,107 $16,265 $14,848
Cost of goods sold 2,904 2,662 8,587 7,521
______ ______ ______ ______
Gross profit 2,306 2,445 7,678 7,327
Research and development
expenses 427 425 1,378 1,355
Selling, general and
administrative expenses 1,527 1,831 5,181 5,325
_____ _____ _____ _____
Operating income 352 189 1,119 647
Interest income/other income 145 119 438 380
Interest expense 0 0 0 0
____ _____ _____ _____
Income before income taxes 497 308 1,557 1,027
Provision for taxes on
earnings 178 123 552 406
_____ _____ _____ _____
Net income $ 319 $ 185 $1,005 $ 621
===== ===== ===== =====
Weighted average number
of shares outstanding 3,955,691 4,174,994 4,020,637 4,145,091
Earnings per share $ 0.08 $ 0.04 $ 0.25 $ 0.15
Dividends per share -0- -0- -0- -0-
<PAGE>
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Nine Months Ended
Sept 30 Sept 30
1997 1996
_______ _______
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,005 $ 621
Depreciation and amortization 371 370
Deferred income taxes 6 20
Change in working capital, net of
effect from purchase of Alpkem
Corporation (1996) (325) (949)
(Gain) loss on disposition of
equipment (40) (4)
_______ ______
Net cash flows provided by (used in)
operating activities 1,017 58
CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of treasury stock (737) (605)
Issuance of common stock pursuant
to options 0 10
______ ______
Net cash flows provided by (used in)
financing activities (737) (595)
CASH FLOW USED IN INVESTING ACTIVITIES:
Proceeds from sale of property,
plant & equipment 112 11
Purchase of property, plant and
equipment (308) (257)
Purchase of Alpkem Corporation 0 (513)
Purchase of investments (6,265) (6,990)
Maturity of investments 5,744 4,201
Change in other assets (46) (62)
______ _______
Net cash flows provided by (used
in) investing activities (763) (3,610)
______ _______
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (483) $(4,147)
Cash and cash equivalents at
beginning of year $ 1,963 $ 5,503
______ ______
Cash and cash equivalents at
end of quarter $ 1,480 $ 1,356
====== ======
<PAGE>
O.I. CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The accompanying unaudited financial statements have been
prepared by O.I. Corporation and include all adjustments
which are, in the opinion of management, necessary for a fair
presentation of financial results for the three and nine
months ended September 30, 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. 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.
Sept. 30, 1997 Dec. 31, 1996
______________ _____________
Raw Materials $ 2,070,000 $ 2,365,000
Work in Process 496,000 458,000
Finished Goods 999,000 957,000
______________ ____________
$ 3,565,000 $ 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.
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 ofits 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.
RESULTS OF OPERATIONS
Sales for the third quarter ended September 30, 1997 increased 2%
to $5,210,000, compared to $5,107,000 for the third quarter of
1996. Third quarter 1997 sales increased due to an increase in
sales of total organic carbon analyzers, gas chromatography
systems and sample preparation products including microwave
digestion products, offset in part by a decrease in the sales of
flow analyzers. International sales for the third quarter of 1997
increased 10% over the same period of 1996.
Sales for the nine months ended September 30, 1997 increased 10%
to $16,265,000, compared to $14,848,000 for 1996. Year-to-date
1997 sales increased due to an increase in the sales of continuous
emissions monitoring products and total organic carbon analyzers,
offset in part by a decrease in the sales of sample preparation
products. International sales for the nine months ended September
30, 1997, were essentially flat compared to the same period of
1996.
Gross profit for the third quarter of 1997 was $2,306,000, or 44%
of sales, compared to $2,445,000, or 48% of sales for the same
quarter of 1996. The decrease in third quarter gross profit was
due to product mix and an increase in warranty expense. Gross
profit through the third quarter of 1997 was $7,678,000, or 47% of
sales, compared to $7,327,000, or 49% of sales for the same period
of 1996. The increase in year-to-date gross profit dollars was
due to the increase in sales volume. The year-to-date gross
profit percent was affected by the same factors that caused the
third quarter 1997 gross profit to decrease.
Research and development (R&D) expenses for the third quarter of
1997 were $427,000, or 8% of sales, compared to 1996 third quarter
expenses of $425,000, or 8% of sales. Year-to-date R&D expenses
through September 30, 1997 were $1,378,000, or 8% of sales,
compared to $1,355,000, or 9% of sales, for the same period of
1996.
Selling, general, and administrative (SG&A) expenses for the third
quarter of 1997 decreased 17% to $1,527,000, or 29% of sales,
compared to $1,831,000, or 36% of sales for 1996. Year-to-date
SG&A expenses through September 30, 1997, decreased 3% to
$5,181,000, or 32% of sales, compared to $5,325,000, or 36% of
sales, for the same period of 1996. Third quarter SG&A expenses
decreased due to the timing of the accrual for a discretionary
contribution to the Company's 401(k) plan and a decrease in
advertising and legal expense. The decreases in expenses were
offset in part by increases in certain expenses including:
commissions, consulting fees and the purchase of supplies. Year-
to-date SG&A expenses decreased due to a decrease in legal
expenses, offset in part by increased commissions, consulting
fees, and the purchase of supplies. Third quarter 1996 legal
expenses related to the Company's claim that a competitor
infringed a patent of the Company were approximately $200,000,
offset in part by $25,000 from a reserve established in 1995.
There were no legal expenses related to such case in the third
quarter of 1997. Legal billings for the patent infringement
matter through September 30, 1996 were approximately $973,000,
offset in part by $190,000 from a reserve established in 1995.
Year-to-date 1997 legal expenses related to this patent
infringement case were approximately $49,000.
Income before taxes for the third quarter of 1997 increased 61%
to $497,000, or 10% of sales, from 1996 third quarter results of
$308,000, or 6% of sales. Net income for the third quarter 1997
was up 72% to $319,000, or $0.08 per share, compared to $185,000,
or $.04 per share in the same period of 1996.
Year-to-date income before taxes increased 52% to $1,557,000
through the third quarter of 1997, compared to $1,027,000 for the
same period of 1996. The effective tax rate was 35% in 1997 and
40% 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. Year-to-
date net income increased 62% to $1,005,000, or $0.25 per share
through the third quarter of 1997, from $621,000, or $0.15 per
share for the same period of 1996. The increase in year-to-date
net income was the result of increased sales, decreased SG&A
expense, and a lower effective tax rate.
LIQUIDITY
Cash and cash equivalents totaled $1,480,000 as of September 30,
1997, compared to $1,963,000 as of December 31, 1996. Cash, cash
equivalents and investments as of September 30, 1997 were
$7,138,000 compared to $7,101,000 as of December 31, 1996. Working
capital, as of September 30, 1997, was $9,782,000, compared to
$12,391,000 as of December 31, 1996. The decrease in working
capital was primarily due to the purchase of approximately
$2,750,000 of investments maturing in 1998. Working capital, as a
percentage of total assets, was 52% as of September 30, 1997,
compared to 65% as of December 31, 1996. The current ratio was
3.90 to 1 at September 30, 1997, as compared to 4.23 to 1 at
December 31, 1996. Total liabilities as a percentage of equity
was 25% as of September 30, 1997, compared to 28% as of December
31, 1996.
Net cash flow provided by operating activities for the nine months
ended September 30, 1997, was $1,017,000, compared to $58,000 for
the same period of 1996. The increase in cash flow provided by
operating activities for the first nine months of 1997 was
primarily due to an increase in net income and a decrease in
accounts receivable and inventory. Net cash flow used in financ-
ing activities for the nine months ended September 30, 1997 was
$737,000, compared to $595,000 for the same period of 1996. The
increase in cash flow used in financing activities was due to
increased purchases of treasury stock. Net cash flow used in
investing activities for the nine months ended September 30, 1997
was $763,000, compared to $3,610,000 for the same period of 1996.
The decrease in cash flow used in investing activities was
primarily the result of fewer purchases of investments. The
Company is in the final 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 was $1,500,000. The Company plans to complete
the expansion in 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 four years, 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 September 29, 1997, O.I.
Corporation announced the successful resolution of a
claim regarding the ownership of the RFA(TM) 300 product
line. The settlement is in the form of a Stipulated
Judgment signed by the parties and entered by The
Honorable David Gernant, Circuit Court Judge for
Multnomah County, Oregon, to resolve disputes of
ownership of the RFA(TM) 300 products.
Under the Stipulated Judgment, OI was declared the owner
of the RFA(TM) and RFA(TM) 300 trademarks as well as the
tooling used to manufacture the RFA(TM) 300 product
line. The Company did not receive any payment and was
not required to make any payment to the Plaintiff in
accordance with the terms of the Stipulated Judgment.
Item 2. Changes in Securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a Vote of
Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
O.I. CORPORATION
(Registrant)
Date: October 28, 1997 BY: /s/ Julie Wright
Julie Wright
Controller
Date: October 28, 1997 BY: /s/ W. W. Botts
William W. Botts
President & CEO
<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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
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<SECURITIES> 2,905
<RECEIVABLES> 4,056
<ALLOWANCES> 262
<INVENTORY> 3,565
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<PP&E> 3,769
<DEPRECIATION> 2,308
<TOTAL-ASSETS> 18,845
<CURRENT-LIABILITIES> 3,370
<BONDS> 0
0
0
<COMMON> 410
<OTHER-SE> 14,672
<TOTAL-LIABILITY-AND-EQUITY> 18,845
<SALES> 16,265
<TOTAL-REVENUES> 16,265
<CGS> 8,587
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</TABLE>
