UNITED STATES
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 March 31, 1998
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.
151 Graham Road
P.O. Box 9010
College Station, Texas 77842-9010
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (409) 690-1711
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 March 31, 1998: 3,738,588 shares
<PAGE>
O.I. CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(unaudited)
MARCH 31, DECEMBER 31,
1998 1997
__________ ___________
ASSETS
Current assets:
Cash and cash equivalents $ 1,352 $ 1,430
Short-term investments 3,884 5,710
Accounts receivable, net 3,921 3,570
Investment in sales-type lease 388 358
Inventories 3,726 3,778
Current deferred tax asset 667 667
Other current assets 203 312
__________ __________
Total current assets 14,141 15,825
Property, plant and equipment, net 1,423 1,459
Long-term investments 2,011 435
Investment in sales-type lease,
net of current 696 531
Other assets 832 850
__________ __________
Total assets $ 19,103 $ 19,100
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,092 $ 1,225
Accrued compensation 534 770
Accrued expenses 1,991 1,529
__________ __________
Total current liabilities 3,617 3,524
Deferred income taxes 273 292
__________ __________
Total liabilities 3,890 3,816
Stockholders' equity:
Common stock ($.10 par value) 410 410
Additional paid in capital 4,381 4,380
Treasury stock at cost (1,477) (972)
Retained earnings 11,899 11,466
__________ __________
Total stockholders' equity 15,213 15,284
__________ __________
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 19,103 $ 19,100
========== ==========
O.I. CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except share and per share data)
(unaudited)
THREE MONTHS ENDED
MARCH 31,
________________________
1998 1997
__________ _________
Net sales $ 5,825 $ 5,321
Cost of goods sold 3,104 2,737
__________ ________
Gross profit 2,721 2,584
Research and development expenses 384 520
Selling, general & administrative expenses 1,777 1,703
__________ ________
Operating income 560 361
Interest income/other income 130 139
Interest expense 0 0
__________ ________
Income before income taxes 690 500
Provision for taxes on earnings (257) (178)
___________ _________
Net income $ 433 $ 322
=========== =========
Weighted average number of shares
outstanding, basic 3,822,306 4,029,540
Basic earnings per share $ 0.11 $ 0.08
Weighted average number of shares
outstanding, assuming dilution 3,882,431 4,076,365
Diluted earnings per share $ 0.11 $ 0.08
Dividends per share -0- -0-
<PAGE>
O.I. CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)
THREE MONTHS ENDED
MARCH 31,
________________________
1998 1997
___________ __________
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 433 $ 322
Depreciation & amortization 104 131
Deferred income taxes (19) 2
Change in working capital (302) 85
__________ __________
Net cash flows provided by 216 540
operating activities
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock 5 0
Purchase of treasury stock (510) (568)
__________ __________
Net cash flows used in (505) (568)
financing activities
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (57) (136)
Sale of property, plant & equipment 6 30
Purchase of investments (2,338) (3,264)
Maturity of investments 2,595 2,985
Change in other assets 5 (12)
_________ __________
Net cash flows provided by 211 (397)
(used in) investing activities _________ __________
Increase (decrease) in cash (78) (425)
Cash and cash equivalents at beginning
of quarter 1,430 1,963
_________ _________
Cash and cash equivalents at end
of quarter $ 1,352 $ 1,538
========= =========<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 months ended March
31, 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 with no
substantial right of return.
2. Inventories.
Mar. 31, 1998 Dec. 31, 1997
_____________ _____________
Raw Materials $ 1,944,000 $ 2,138,000
Work in Process 764,000 625,000
Finished Goods 1,018,000 1,015,000
_____________ _____________
$ 3,726,000 $ 3,778,000
3. Earnings per Share.
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.
4. Reclassification.
Certain amounts in the prior period 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 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 or developments may differ
materially from those projected in the forward-looking statements.
Operating Results
Net sales for the quarter ended March 31, 1998 increased 9% to
$5,825,000, compared to $5,321,000 for the same period of the prior
year, primarily due to volume increases. Sales of the Company's
gas chromatography (GC) systems and components, total organic
carbon (TOC) analyzers, and sample preparation products increased,
which more than offset lower sales of continuous monitoring
products, flow analyzers, and revenue derived from service.
First quarter 1998 international sales were up strongly compared to
the same quarter of 1997 due to increased sales in Mexico and
Europe. First quarter 1998 domestic sales increased slightly
compared to the same quarter of 1997.
Gross profit was $2,721,000, or 47% of sales, for the first quarter
of 1998, compared to $2,584,000, or 49% of sales, for the same
quarter of 1997. The increase in gross profit amount was due to
the increase in sales, and the decrease in gross profit percentage
was due to product mix and an increase in product warranty expense.
Research and development (R&D) expenses for the first quarter of
1998 decreased 26% to $384,000, or 6.6% of sales, compared to 1997
first quarter expenses of $520,000, or 9.8% of sales. The
Company's product development effort consists of improving existing
products and developing possible new products and applications.
The decreased amount of R&D expense for 1998 was the result of a
decrease in the number of R&D personnel and consulting fees and the
realization of cost reductions associated with the consolidation of
certain R&D and engineering expenses generated by acquired
businesses.
Selling, general, and administrative (SG&A) expenses for the first
quarter of 1998 increased 4% to $1,777,000, or 31% of sales,
compared to $1,703,000, or 32% of sales for 1997. SG&A expenses
for the first quarter of 1998 were higher than 1997 due to
increased staffing and advertising, timing of the accrual for
certain discretionary employee benefits and expenses associated
with the consolidation of certain operations. These increases were
offset in part by a decrease in travel, supply, and legal expenses.
Income before tax for the first quarter of 1998 amounted to
$690,000, an increase of 38% over 1997 first quarter income of
$500,000. The higher profit for 1998 was a result of increased
sales and decreased R&D expenses, offset in part by a slight
increase in SG&A expenses. The effective tax rates were 37% for
1998 and 36% for 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 first quarter of 1998 was up 34% to $433,000, or $0.11 per
share, compared to $322,000, or $0.08 per share, in the same period
of 1997.
Liquidity and Capital Resources
Cash and cash equivalents totaled $1,352,000 as of March 31, 1998,
compared to $1,430,000 as of December 31, 1997. Working capital,
as of March 31, 1998, was $10,524,000 compared to $12,301,000 as of
December 31, 1997. Working capital decreased due to the investment
of approximately $1,600,000 in long-term corporate bonds and the
use of cash to acquire treasury stock. Such bonds mature in the
second, third, and fourth quarter of 1999 and were purchased to
increase the Company's yield on investments. Working capital, as
a percentage of total assets, was 55% as of March 31, 1998,
compared to 64% at December 31, 1997. The current ratio was 3.90
to 1 at March 31, 1998, as compared to 4.49 to 1 at December 31,
1997. Total liabilities to equity was 26% as of March 31, 1998,
compared to 25% as of December 31, 1997.
Net cash flow provided from operating activities for the period
ending March 31, 1998, was $216,000, as compared to $540,000 for
the same period of 1997. The decrease in cash flow from operating
activities for 1998 was primarily due to an increase in accounts
receivable and investment in sales-type leases, offset in part by
the increase in net income. Net cash flow used in financing
activities for the first quarter 1998 was $505,000 compared to
$568,000 for the first quarter 1997. The decrease in cash flow
used in financing activities was due to slightly lower purchases of
treasury stock. On February 17, 1997, the Company's Board of
Directors authorized the purchase of up to 400,000 common shares,
in addition to the purchase of 400,000 shares previously authorized
in December 1995. The Company has purchased 580,403 common shares
for treasury stock and holds 364,789 shares in treasury as of March
31, 1998. Net cash flow provided by (used in) investing activities
was $211,000 for the first quarter 1998 compared to $(397,000) for
the first quarter 1997. The increase in cash provided by investing
activities was due to the maturity of certain investments. The
Company has financed its growth from funds generated from
operations and expects to continue to do so for the foreseeable
future.
The Company began construction of a new facility that will more
than double the size of its current facilities in College Station.
The new facility, approximately 40,000-sq. ft., will be located
immediately adjacent to the Company's existing 28,750-sq. ft.
facility, which was constructed in 1981 on approximately 11 acres
of land. The Company has no debt obligations on its current
facilities. The expansion is needed to increase manufacturing
capacity for the Company's growing product lines, expand training
and applications services, and support product development and
engineering initiatives. It is estimated that the expansion will
cost approximately $2.1 million, and completion is expected in the
fourth quarter of 1998. The Company has arranged standby financing
with Norwest Bank; however, it plans to pay for the expansion from
operating cash flow and cash on hand.
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, that 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: None
Item 5. Other Information: Gary D. Sides, Ph.D., resigned from
his position as Vice President of the Company effective
March 31, 1998. Dr. Sides stated that he has accepted
a position with Southern Research Institute, a
not-for-profit organization in Birmingham, Alabama.
Item 6. Exhibits and Reports on Form 8-K: None
<PAGE>
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: May 7, 1998 William W. Botts
William W. Botts
President/CEO
Date: May 7, 1998 Julie A. Wright
Julie A. Wright
Controller
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0
0
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