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, 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 June 30, 1998:
3,549,013 shares
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(unaudited)
June 30, Dec 31,
1998 1997
ASSETS _______ _______
Current assets:
Cash and cash equivalents . . . . . . . $ 1,668 $ 1,430
Short-term investments. . . . . . . . . 3,826 5,710
Accounts receivable . . . . . . . . . . 3,563 3,570
Investment in sales-type lease. . . . . 366 358
Inventories . . . . . . . . . . . . . . 4,814 3,778
Current deferred tax asset. . . . . . . 668 667
Other current assets. . . . . . . . . . 265 312
_______ _______
Total current assets. . . . . . . . . 15,170 15,825
Construction in progress . . . . . . . . 578 84
Property, plant and equipment, net . . . 1,476 1,375
Investment in sales-type lease,
net of current . . . . . . . . . . . 619 531
Long-term investments. . . . . . . . . . 910 435
Other assets . . . . . . . . . . . . . . 811 850
_______ _______
Total assets. . . . . . . . . . . . . $19,564 $19,100
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . $ 2,062 $ 1,225
Accrued compensation. . . . . . . . . . 798 770
Accrued expenses. . . . . . . . . . . . 1,675 1,529
_______ _______
Total current liabilities . . . . . . 4,535 3,524
Deferred income taxes. . . . . . . . . . 268 292
_______ _______
Total liabilities . . . . . . . . . . 4,803 3,816
Shareholders' equity:
Common stock ($.10 par value) . . . . . 410 410
Additional paid in capital. . . . . . . 4,381 4,380
Treasury stock, at cost.. . . . . . . . (2,389) (972)
Retained earnings . . . . . . . . . . . 12,359 11,466
_______ _______
Total shareholders' equity. . . . . . 14,761 15,284
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY . . . . . . . $19,564 $19,100
======= =======
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
__________________ __________________
1998 1997 1998 1997
________ ________ ________ ________
Net sales. . . . . . . . . $ 5,752 $ 5,735 $ 11,577 $ 11,056
Cost of goods sold . . . . 3,292 2,947 6,396 5,684
________ ________ ________ ________
Gross profit . . . . . . . 2,460 2,788 5,181 5,372
Res. and devel. expenses . 363 431 747 951
Selling, general and
admin. expenses. . . . . 1,499 1,950 3,276 3,654
________ ________ ________ ________
Operating income . . . . . 598 407 1,158 767
Int. income/other income . 136 153 266 293
Interest expense . . . . . 0 0 0 0
________ ________ ________ ________
Income before inc. taxes . 734 560 1,424 1,060
Prov. for taxes on earnings 274 196 531 374
________ ________ ________ ________
Net income . . . . . . . . $ 460 $ 364 $ 893 $ 686
========= ========= ========= =========
Weighted average number of
shares outstanding, basic 3,641,817 3,922,695 3,731,563 3,975,822
Earnings per share . . . . $ 0.13 $ 0.09 $ 0.24 $ 0.17
Weighted average number of
shares outstanding, diluted 3,717,262 3,992,827 3,800,014 4,034,300
Earnings per share . . . . $ 0.12 $ 0.09 $ 0.23 $ 0.17
Dividends per share. . . . -0- -0- -0- -0-
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Six Months Ended
June 30
_______ _______
1998 1997
_______ _______
CASH FLOW FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . $ 893 $ 686
Depreciation and amortization . . . . 197 256
Deferred income taxes . . . . . . . . (23) 13
Change in working capital . . . . . . (84) (864)
_______ ______
Net cash flows provided by (used in)
operating activities 983 91
CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of treasury stock. . . . . . (1,425) (734)
Issuance of common stock. . . . . . . 9 0
_______ ______
Net cash flows provided by (used in)
financing activities (1,416) (734)
CASH FLOW USED IN INVESTING ACTIVITIES:
Proceeds from sale of property, plant
and equipment . . . . . . . . . . . 11 88
Purchase of property, plant
and equipment . . . . . . . . . . . (274) (232)
Payment for construction in progress . (494) (15)
Purchase of investments . . . . . . . (2,338) (4,243)
Maturity of investments . . . . . . . 3,754 4,652
Change in other assets . . . . . . . . 12 (38)
______ ______
Net cash flows provided (used in)
investing activities 671 212
Increase (decrease) in cash and cash
equivalents 238 (431)
Cash and cash equivalents at
beginning of year. . . . . . . . . . 1,430 1,963
_______ _______
Cash and cash equivalents at
end of quarter . . . . . . . . . . . $ 1,668 $ 1,532
======== ========
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 (the "Company") 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, 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. 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, 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.
June 30, 1998 Dec. 31, 1997
_____________ _____________
Raw Materials $ 2,788,000 $ 2,138,000
Work in Process $ 574,000 $ 625,000
Finished Goods $ 1,452,000 $ 1,015,000
_____________ _____________
$ 4,814,000 $ 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 outstand-
ing 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. Investors are
cautioned that any such statements are not guarantees of future
performance and that actual results may differ materially from
those projected in the forward-looking statements.
Results of Operations
Net sales for the second quarter of 1998 were $5,752,000, compared
to $5,735,000 for 1997. Sales of the Company's gas chromotagraphy
(GC) systems and components, flow analyzers, total organic carbon
(TOC) analyzers and revenues derived from service increased, while
sales of the Company's continuous monitoring products and sample
preparation products decreased. Both international and domestic
sales were essentially flat.
Year-to-date sales through June 30, 1998 increased 5% to
$11,577,000, compared to $11,056,000 for 1997. Year-to-date sales
of the Company's gas chromotagraphy (GC) systems and components,
total organic carbon analyzer (TOC) and sample preparation products
increased and were partially offset by a decrease in sales of
continuous monitoring products, flow analyzers and revenue derived
from service.
Gross profit decreased to $2,460,000, or 43% of sales, for the
second quarter of 1998, compared to $2,788,000, or 49% of sales,
for the same quarter of 1997. The decrease in gross profit was due
to product mix.
Year-to-date gross profit decreased to $5,181,000 through June 30,
1998 compared to $5,372,000 for the same period of 1997.
Year-to-date gross profit, as a percent of sales, was 45% for 1998
and 49% for 1997. Year-to-date gross profit was impacted by the
same factors that affected second quarter 1998 gross profit.
Research and development (R&D) expenses for the second quarter of
1998 were $363,000, or 6% of sales, compared to $431,000, or 8% of
sales, for the same period of 1997. Year-to-date R&D expenses
through June 30, 1998 decreased 21% to $747,000, or 6% of sales,
compared to $951,000, or 9% of sales, for the same period of 1997.
The decreased amount of R&D expense for the second quarter of 1998,
compared to the prior period, was due to fewer personnel and a
decrease in the purchase of supplies. Year-to-date R&D expense
decreased due to the above factors, as well as a decrease in
consulting expense. In addition, the Company has realized cost
reductions in R&D associated with the consolidation of certain R&D
and engineering expenses related to previously acquired businesses.
Selling, general, and administrative (SG&A) expenses for the second
quarter of 1998 decreased 23% to $1,499,000, or 26% of sales,
compared to $1,950,000, or 34% of sales, for 1997. SG&A expenses
for the second quarter of 1998 were lower than 1997 due to the
settlement of certain post-closing matters associated with a prior
year asset acquisition and a decrease in the purchase of supplies.
The terms of the asset acquisition settlement agreement resulted in
the Company purchasing 100,000 shares of the Company's common stock
for $2.20 per share from the seller of the assets. At the time of
the settlement, the market value of the Company's common stock was
$5.00 per share. The $280,000 difference between the market value
and the purchase price of the Company's common stock received by
the Company in the settlement has been accounted for as a recovery
of legal fees and other excess operating costs incurred in
connection with the acquisition, reducing SG&A expense during the
three months ended June 30, 1998 and is not expected to result in
a reduction of SG&A expense in any future periods. These decreases
were offset in part by increased staffing and increased sales
commissions. Year-to-date SG&A expenses through June 30, 1998,
decreased 10% to $3,276,000, or 28% of sales, compared to
$3,654,000, or 33% of sales, for the same period of 1997.
Year-to-date SG&A expenses decreased due to the factors discussed
above and were partially offset by expenses associated with the
consolidation of certain operations.
Income before tax increased 31% to $734,000 for the second quarter
of 1998, compared to $560,000 for the same period of 1997.
Year-to-date income before tax increased 34% to $1,424,000 through
June 30, 1998, compared to $1,060,000 for the same period of 1997.
The higher profit for 1998 was due to increased sales volume,
decreased operating costs and lower legal fees, offset in part by
decreased gross profit. The second quarter and year-to-date
effective tax rates were 37% in 1998 and 35% in 1997. The increase
in the effective tax rate for 1998 was due to the mix of sales by
state.
Net income after tax for the second quarter 1998 increased 26% to
$460,000, or $0.12 per share diluted, compared to $364,000, or
$0.09 per share diluted in the same period of 1997. Year-to-date
net income after tax increased 30% to $893,000, or $0.23 per share
diluted through June 30, 1998, from $686,000, or $0.17 per share
diluted for the same period of 1997.
Liquidity
Cash and cash equivalents totaled $1,668,000 as of June 30, 1998,
compared to $1,430,000 as of December 31, 1997. Working capital,
as of June 30, 1998, was $10,635,000, a decrease of 14%, 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 in progress of the facility expansion
at the College Station location. Working capital, as a percentage
of total assets, was 54% as of June 30, 1998, compared to 64% as of
December 31, 1997. The current ratio was 3.35 to 1 at June 30,
1998, as compared to 4.49 to 1 at December 31, 1997. Total
liabilities-to-equity was 33% as of June 30, 1998, compared to 25%
at December 31, 1997.
Net cash flow provided by operating activities for the six months
ended June 30, 1998, was $983,000, compared to $91,000 for the same
period of 1997. The increase in cash flow provided by operating
activities for the first six months in 1998 was primarily due to an
increase in net income and an increase in accounts payable, offset
in part by an increase in inventory. Inventory increased to
$4,814,000 at the end of the second quarter, compared to $3,726,000
for the previous quarter, and $3,778,000 at the end of the prior
year. The increase was due to a buildup of GC/MS systems created
to better position the Company to offer quick delivery for leases,
rentals, and sales and due to an increase of flow analyzer
inventory to allow shipments while manufacturing was transitioned
from Oregon to Texas. Net cash flow used in financing activities
for the six months ended June 30, 1998 was $1,416,000 compared to
$734,000 for the same period of 1997. The increase in cash flow
used in financing activities was due to the purchase of treasury
stock. On July 1, 1998, the Company announced that its Board of
Directors approved a new share repurchase program, which authorizes
the purchase of up to 350,000 shares of common stock of the
Company, or about 10% of the outstanding shares. The Company
previously authorized the purchase of 400,000 shares in December
1995 and 400,000 shares in February 1997. Net cash flow provided
by investing activities for the six months ended June 30, 1998 was
$671,000, compared to $212,000 for the same period of 1997. The
increase in cash flow provided by investing activities resulted
from a decrease in the purchase of investments, offset in part by
payments for the construction in progress of the facility expansion
in College Station.
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: 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: At
the Company's Annual Meeting of Shareholders on May 11,
1998, the following members were elected to the Board of
Directors:
Votes For Withheld
Jack S. Anderson 3,171,167 89,214
William W. Botts 3,172,255 88,116
J. Lester Heath 3,172,832 87,539
Edwin B. King 3,172,832 87,539
Craig R. Whited 3,172,832 87,539
The following proposal was also approved at the
Company's Annual Meeting:
Votes For Against Abstain
Ratification of Price
Waterhouse and the
Company's auditors 3,184,244 72,347 3,780
Item 5. Other Information: Mr. J. Lester Heath, a director of
O.I. Corporation since January 4, 1985, died on August
3, 1998.
Item 6. Exhibits and Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
O.I. CORPORATION
(Registrant)
Date: 8/11/98 BY: /s/ Julie Wright
________________________
Julie Wright, Controller
Date: 8/11/98 BY: /s/ William W. Botts
________________________
William W. Botts, President
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