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, 1998
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number: 0-6511
O.I. CORPORATION
____________________________________________________
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-0728053
______________________ _________________________________
State of Incorporation I.R.S. Employer Identification No.
P.O. Box 9010
151 Graham Road
College Station, Texas 77842-9010
_______________________________________ ___________
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 409-690-1711
Not Applicable
___________________________________________________
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
____ ____
Number of shares outstanding of each of the issuer's classes of
common stock, as of September 30, 1998:
3,401,268 shares
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
Sept. 30, Dec. 31,
1998 1997
ASSETS _________ ________
Current assets:
Cash and cash equivalents . . . . . . $ 647 $ 1,430
Short-term investments. . . . . . . . 3,966 5,710
Accounts receivable . . . . . . . . . 4,054 3,570
Investment in sales-type lease . . . 426 358
Inventories . . . . . . . . . . . . . 5,156 3,778
Current deferred tax asset . . . . . 667 667
Other current assets . . . . . . . . 160 312
-------- --------
Total current assets . . . . . . . 15,076 15,825
Construction in progress . . . . . . . 1,247 84
Property, plant and equipment, net . . 1,467 1,375
Long-term investments . . . . . . . . . 150 435
Investment in sales-type lease, net
of current . . . . . . . . . . . . . 672 531
Other assets. . . . . . . . . . . . . . 795 850
-------- --------
TOTAL ASSETS . . . . . . . . . . . $ 19,407 $ 19,100
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . $ 1,871 $ 1,225
Accrued compensation . . . . . . . . 736 770
Accrued expenses. . . . . . . . . . . 1,976 1,529
-------- --------
Total Current Liabilities . . . . . 4,583 3,524
Deferred income taxes . . . . . . . . . 276 292
-------- --------
TOTAL LIABILITIES . . . . . . . . . 4,859 3,816
Shareholders' equity:
Common stock ($.10 par value) . . . . 410 410
Additional paid in capital. . . . . . 4,380 4,380
Treasury stock. . . . . . . . . . . . (3,063) (972)
Retained earnings . . . . . . . . . . 12,821 11,466
-------- --------
TOTAL SHAREHOLDERS' EQUITY . . . . 14,548 15,284
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY . . . . . . . . . . . . . . . $ 19,407 $ 19,100
======== ========
O.I. CORPORATION
Condensed Consolidated Statement of Earnings
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept 30 Sept 30
__________________ __________________
1998 1997 1998 1997
_________ _______ ________ ________
Net sales . . . . . . . . $ 6,077 $ 5,210 $ 17,653 $ 16,265
Cost of goods sold. . . . 3,321 2,904 9,716 8,587
_________ ________ ________ _______
Gross profit. . . . . . . 2,756 2,306 7,937 7,678
Research and development
expenses. . . . . . . . . 371 427 1,118 1,378
Selling, general and
administrative expenses . 1,776 1,527 5,052 5,181
_________ ________ ________ ________
Operating income. . . . . 609 352 1,767 1,119
Interest income/other income 130 145 397 438
Interest expense . . . . 0 0 0 0
_________ ________ ________ ________
Income before income taxes 739 497 2,164 1,557
Provision for taxes on
earnings. . . . . . . . 277 178 808 552
________ ________ ________ ________
Net income. . . . . . . . $ 462 $ 319 $ 1,356 $ 1,005
======== ======== ======== ========
Weighted average number
of shares outstanding,
basic . . . . . . . . . . 3,436,589 3,879,166 3,632,158 3,943,249
Diluted earnings per
share . . . . . . . . . . $ 0.13 $ 0.08 $ 0.37 $ 0.25
Weighted average number
of shares outstanding,
diluted . . . . . . . . . 3,517,677 3,958,384 3,704,981 4,007,959
Diluted earnings per
share . . . . . . . . . . $ 0.13 $ 0.08 $ 0.37 $ 0.25
Dividends per share . . . -0- -0- -0- -0-
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
Sept 30
________ ________
1998 1997
________ ________
CASH FLOW FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . $ 1,356 $ 1,005
Depreciation and amortization. . . . . . 293 371
Deferred income taxes. . . . . . . . . . (15) 6
Change in working capital. . . . . . . . (870) (325)
(Gain) loss on disposition
of equipment. . . . . . . . . . . . . (15) (40)
________ _______
Net cash flows provided by
operating activities . . . . . . . . . 749 1,017
CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of treasury stock . . . . . . . (2,111) (737)
Issuance of common stock pursuant
to options . . . . . . . . . . . . . . 20 0
________ _______
Net cash flows used in financing
activities . . . . . . . . . . . . . . (2,091) (737)
CASH FLOW USED IN INVESTING ACTIVITIES:
Proceeds from sale of property,
plant and equipment. . . . . . . . . . 38 112
Payment for construction in progress . . (1,163) (36)
Purchase of property, plant and
equipment. . . . . . . . . . . . . . . (366) (272)
Purchase of investments. . . . . . . . . (2,338) (6,265)
Maturity of investments. . . . . . . . . 4,376 5,744
Change in other assets . . . . . . . . . 12 (46)
______ ______
Net cash flows provided by (used in)
investing activities . . . . . . . . . 559 (763)
______ ______
Increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . (783) (483)
Cash and cash equivalents at
beginning of year. . . . . . . . . . . . 1,430 1,963
________ ________
Cash and cash equivalents at
end of quarter . . . . . . . . . . . . . $ 647 $ 1,480
======== ========
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,
1998 and 1997, 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, 1997.
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, 1998 Dec. 31, 1997
______________ _____________
Raw Materials $ 3,124,000 $ 2,138,000
Work in Process 507,000 625,000
Finished Goods 1,525,000 1,015,000
______________ ____________
$ 5,156,000 $ 3,778,000
3. Earnings per Common and Common Equivalent Shares.
The Company adopted Financial Accounting Standards No. 128 (FAS
128), Earnings per Share, for the year ended December 31, 1997.
FAS 128 requires the Company to report both basic earnings per
share, which is based on the weighted average number of common
shares outstanding, and diluted earnings per share, which is based
on the weighted average number of common shares outstanding and all
dilutive potential common shares outstanding. Stock options are
the only dilutive potential common shares the Company has
outstanding for all periods presented. All prior years' earnings
per share data in this report have been recalculated to reflect the
provisions of FAS 128.
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, 1997. 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, 1998 increased 17%
to $6,077,000, compared to $5,210,000 for the third quarter of
1997. Third quarter 1998 sales increased due to an increase in
sales of gas chromatography systems and components, continuous
monitoring systems and flow analyzers, offset in part by a decrease
in the sales of sample preparation products and revenue derived
from service. Sales of total organic carbon analyzers were
relatively flat. Third quarter 1998 domestic sales increased, as
compared to the same period of the prior year. This increase was
partially offset by a decrease in international sales caused by
unfavorable economic conditions in certain international markets.
Sales for the nine months ended September 30, 1998 increased 9% to
$17,653,000, compared to $16,265,000 for 1997. Year-to-date 1998
sales increased due to an increase in the sales of gas
chromatography systems and components, sample preparation products,
flow analyzers and total organic carbon analyzers, offset in part
by a decrease in the sales of continuous monitoring systems and
revenue derived from service. Both domestic and international
sales increased for the nine months ended September 30, 1998,
compared to the same period of 1997.
Gross profit for the third quarter of 1998 was $2,756,000, or 45%
of sales, compared to $2,306,000, or 44% of sales, for the same
quarter of 1997. The increase in third quarter gross profit was
due to the increase in sales, product mix and a decrease in
warranty expense. Gross profit through the third quarter of 1998
was $7,937,000, or 45% of sales, compared to $7,678,000, or 47% of
sales for the same period of 1997. The increase in year-to-date
gross profit dollars was due to the increase in sales volume. The
year-to-date gross profit percent decreased due to product mix.
Research and development (R&D) expenses for the third quarter of
1998 were $371,000, or 6% of sales, compared to 1997 third quarter
expenses of $427,000, or 8% of sales. Year-to-date R&D expenses
through September 30, 1998 were $1,118,000, or 6% of sales,
compared to $1,378,000, or 8% of sales, for the same period of
1997. The decreased amount of R&D expense for the third quarter of
1998 and for the nine months ended September 30, 1998, compared to
the prior period, was due to fewer personnel and a decrease in the
purchase of supplies. In addition, the Company has realized cost
reductions in R&D associated with the consolidation of certain R&D
and engineering functions related to previously acquired
businesses.
Selling, general, and administrative (SG&A) expenses for the third
quarter of 1998 increased 16% to $1,776,000, or 29% of sales,
compared to $1,527,000, or 29% of sales for 1997. Year-to-date
SG&A expenses through September 30, 1998, decreased 2% to
$5,052,000, or 29% of sales, compared to $5,181,000, or 32% of
sales, for the same period of 1997. Third quarter SG&A expenses
increased due to an increase in commission expense, royalties,
advertising, number of personnel and costs associated with
recruitment of new employees. These increases were offset in part
by a decrease in rent expense, contract labor costs and supply
purchases. Year-to-date SG&A expenses decreased due to the
settlement of certain post-closing matters associated with a prior
year asset acquisition, a reduction in rent expense and a decrease
in supply purchases. These decreases were partially offset by an
increase in commission expense, royalties, the number of personnel,
costs associated with the recruitment of new employees and
advertising.
Income before taxes for the third quarter of 1998 increased 49% to
$739,000, or 12% of sales, from 1997 third quarter results of
$497,000, or 10% of sales. Year-to-date income before taxes
increased 39% to $2,164,000 through the third quarter of 1998,
compared to $1,557,000 for the same period of 1997.
The effective tax rate for the third quarter was 37% for 1998,
compared to 36% for 1997. The effective tax rate for the nine
months ended September 30 was 37% in 1998 and 35% in 1997. The
increase in the effective tax rates for 1998 was due to the mix of
sales by state.
Net income for the third quarter 1998 was up 45% to $462,000, or
$0.13 per share diluted, compared to $319,000, or $0.08 per share
diluted in the same period of 1997. The increase in third quarter
net income was due to increased sales, improved gross profit
percentage and decreased R&D expense, partially offset by increased
SG&A expense. Year-to-date net income increased 35% to $1,356,000,
or $0.37 per share (diluted) through the third quarter of 1998,
from $1,005,000, or $0.25 per share (diluted) for the same period
of 1997. The increase in year-to-date net income was the result of
increased sales, decreased SG&A expense, and decreased R&D expense.
Liquidity
Cash and cash equivalents totaled $647,000 as of September 30,
1998, compared to $1,430,000 as of December 31, 1997. Working
capital, as of September 30, 1998, was $10,493,000, compared to
$12,301,000 as of December 31, 1997. The decrease in working
capital was primarily due to the purchase of treasury stock and
payment for the construction of a new manufacturing facility in
College Station. Working capital, as a percentage of total assets,
was 54% as of September 30, 1998, compared to 64% as of December
31, 1997. The current ratio was 3.29 to 1 at September 30, 1998,
as compared to 4.49 to 1 at December 31, 1997. Total liabilities
as a percentage of equity was 33% as of September 30, 1998,
compared to 25% as of December 31, 1997.
Net cash flow provided by operating activities for the nine months
ended September 30, 1998, was $749,000, compared to $1,017,000 for
the same period of 1997. The decrease in cash flow provided by
operating activities for the nine months ended September 30, 1998
was primarily due to an increase in inventory and accounts
receivable, offset in part by an increase in net income and
accounts payable. The increase in accounts receivable was due to
the increase in sales. Inventory levels increased as a result of
a buildup of GC/MS systems so that the Company might offer more
rapid delivery for leases, rentals and sales of these systems. Net
cash flow used in financing activities for the nine months ended
September 30, 1998 was $2,091,000, compared to $737,000 for the
same period of 1997. The increase in cash flow used in financing
activities was due to increased purchases of treasury stock. Net
cash flow provided by (used in) investing activities for the nine
months ended September 30, 1998 was $559,000, compared to
($763,000) for the same period of 1997. The increase in cash flow
provided by investing activities was primarily the result of fewer
purchases of investments, offset in part by payments for the
construction of a new manufacturing facility in College Station.
Management regularly evaluates opportunities to acquire products or
businesses complementary 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.
Year 2000 Compliance
Many computer systems experience problems handling dates in and
beyond the year 1999. This problem is commonly referred to as the
Year 2000 problem. During 1998, the Company began a review of its
internal systems and its products for Year 2000 compliance. There
are some internal applications that are not Year 2000 compliant,
and the Company plans to replace or upgrade these systems by
mid-1999. The Company has evaluated its products and believes that
most of the products it is currently shipping are Year 2000
compliant. The Company has plans to upgrade the products that are
not Year 2000 compliant and anticipates completion of this process
during 1999. The Company believes it has no legal obligation to
upgrade previously shipped products that are not Year 2000
compliant but may make available for sale to customer's fixes for
certain products. No assurances can be made as to this matter.
Based on assessments completed to date and compliance plans in
process, the Company does not expect that costs related to the Year
2000 problem will have a material impact on its financial
condition. However, if appropriate modifications are not made by
the Company's suppliers and service providers on a timely basis, or
if the Company's actual costs or timing for the Year 2000 date
conversion differ materially from its present estimates, the
Company's operations and financial results could be significantly
and adversely affected. Some risks associated with the Year 2000
problem are beyond the ability of the Company to control, including
the extent that the Company's suppliers and service providers
identify and correct potential Year 2000 problems. As a result,
the Company may incur unexpected expenditures in connection with
Year 2000 compliance.
PART II: Other Information
Item 1. Legal Proceedings: None
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: Pursuant to the Company's Bylaws,
stockholder proposals submitted for consideration at the
Company's 1999 Annual meeting of Stockholders must be
delivered to the Corporate Secretary no later than March
12, 1999 but no earlier than February 10, 1999. If such
timely notice of a stockholder proposal is not given, the
proposal may not be brought before the Annual Meeting.
If timely notice is given but is not accompanied by a
written statement to the extent required by applicable
securities laws, the Company may exercise discretionary
voting authority over proxies with respect to such
proposal if presented at the Company's 1999 Annual
Meeting of Stockholders.
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 23, 1998 BY: /s/ Julie Wright
__________________________
Julie Wright, Controller
Date: October 23, 1998 BY: /s/ William W. Botts
___________________________
William W. Botts, President
<TABLE> <S> <C>
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reference to such financial
statements.
</LEGEND>
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