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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, 2000
[ ] 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
O. I. CORPORATION
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(Exact name of registrant as specified in its charter)
OKLAHOMA 73-0728053
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State of Incorporation I.R.S. Employer Identification No.
151 Graham Road
P. O. Box 9010
College Station, Texas 77842-9010
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (979) 690-1711
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Not Applicable
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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
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Number of shares outstanding of each of the issuer's classes of common stock, as
of September 30, 2000:
2,800,346 shares
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O.I. CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUE)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPT. 30, 2000 Dec. 31, 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,088 $ 887
Short-term investments, held to maturity 1,252 1,760
Short-term investments, available for sale 388 0
Accounts receivable-trade, net of allowance for doubtful accounts
of $241 and $254, respectively 4,309 3,928
Investment in sales-type leases 496 486
Inventories 5,080 4,923
Current deferred tax asset 602 602
Other current assets 164 134
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TOTAL CURRENT ASSETS 13,379 12,720
Property, plant and equipment, net 3,743 3,895
Investment in sales-type lease, net of current 386 422
Long-term investments 0 553
Other assets 1,777 1,900
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TOTAL ASSETS $ 19,285 $ 19,490
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,584 $ 2,299
Accrued compensation 673 643
Unearned revenue 1,770 419
Accrued expenses 882 1,394
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TOTAL CURRENT LIABILITIES 4,909 4,755
Deferred income taxes 184 202
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TOTAL LIABILITIES 5,093 4,957
Stockholders' equity:
Preferred stock, $0.10 par value, 3,000 shares authorized, no shares
issued and outstanding
Common stock, $0.10 par value, 10,000 shares authorized
4,103 shares issued, 2,800 and 3,056 outstanding, respectively 410 410
Additional paid in capital 4,382 4,381
Accumulated other comprehensive income and (loss) (11) 0
Treasury stock, 1,303 and 1,047 shares, respectively, at cost (5,542) (4,597)
Retained earnings 14,953 14,339
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TOTAL STOCKHOLDERS' EQUITY 14,192 14,533
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 19,285 $ 19,490
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</TABLE>
See notes to unaudited condensed consolidated financial statements
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O.I. CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT 30 SEPT 30
------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 5,534 $ 6,922 $ 18,092 $ 19,825
Cost of goods sold 3,174 4,028 10,364 11,344
-------- -------- -------- --------
Gross profit 2,360 2,894 7,728 8,481
Research and development expenses 422 551 1,485 1,369
Selling, general & administrative expenses 1,778 1,975 5,535 5,802
-------- -------- -------- --------
Operating income 160 368 708 1,310
Interest income/other income 94 82 268 269
Interest expense 0 0 2 0
-------- -------- -------- --------
Income before income taxes 254 450 974 1,579
Provision for taxes on earnings 94 164 360 586
-------- -------- -------- --------
Net income $ 160 $ 286 $ 614 $ 993
======== ======== ======== ========
Other comprehensive income and (loss), net of tax:
Unrealized losses on investments available for sale (10) 0 (11) 0
-------- -------- -------- --------
Comprehensive income $ 150 $ 286 $ 603 $ 993
Earnings per share:
Basic $ 0.06 $ 0.09 $ 0.21 $ 0.30
Diluted $ 0.06 $ 0.09 $ 0.21 $ 0.30
Shares used in computing earnings per share:
Basic 2,865 3,187 2,939 3,266
Diluted 2,877 3,226 2,956 3,329
Dividends per share -0- -0- -0- -0-
</TABLE>
See notes to unaudited condensed consolidated financial statements
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O.I. CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
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2000 1999
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 614 $ 993
Depreciation & amortization 549 470
Deferred income taxes (17) (25)
Gain on disposition of property (39) (9)
Change in working capital, net of effect of purchase of GAC in 1999 (423) (564)
---------- ----------
Net cash provided by operating activities 684 865
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (259) (531)
Sale of property, plant & equipment 86 24
Purchase of GAC 0 (260)
Purchase of manufacturing rights 0 (190)
Purchase of investments (399) (2,322)
Maturity of investments 1,053 2,626
Change in other assets (19) (32)
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Net cash provided by (used in) investing activities 462 (685)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 28 28
Purchase of treasury stock (973) (894)
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Net cash used in financing activities (945) (866)
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NET INCREASE IN CASH 201 (686)
Cash and cash equivalents at beginning of period 887 1,537
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Cash and cash equivalents at end of period $ 1,088 $ 851
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</TABLE>
See notes to unaudited condensed consolidated financial statements
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O.I. CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The accompanying unaudited condensed 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 nine months ended
September 30, 2000 and 1999, 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 inter-company balances and transactions 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,
1999.
The Company designs, manufactures, markets, and services analytical,
monitoring and sample preparation products, components and systems used 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.
<TABLE>
<CAPTION>
Sept. 30, 2000 Dec. 31, 1999
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<S> <C> <C>
Raw Materials $ 2,527 $ 2,342
Work in Process 843 472
Finished Goods 1,710 2,109
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$ 5,080 $ 4,923
========= =========
</TABLE>
3. UNEARNED REVENUE.
The Company entered into an approximate $4.1 million contract in May, 2000
to provide standard manufactured products. The Company is entitled to
receive progress payments under certain conditions defined within the
contract. Unearned revenue is composed of amounts billed under the $4.1
million contract but not recognized as revenue, unearned interest related
to the net investment in sales-type leases and amounts billed but not
recognized as revenue under service contracts. Such contracts are
typically a one-year contract with revenue recognized ratably over the
period.
4. COMPREHENSIVE INCOME.
The Company's components of comprehensive income are net income and
unrealized gains and losses on available-for-sale investments.
5. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES.
The Company reports 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 share
outstanding and all dilutive potential common shares outstanding. Stock
options are the only dilutive potential common shares the Company has
outstanding. At September 30, 2000, options to acquire 286 shares of
common stock at weighted average exercise price of $5.25 per share were
not included in the computation of earnings per share as the options'
exercise price is greater than the average market price of the common
shares.
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6. SEGMENT DATA.
The Company manages its businesses primarily on a product and services
basis. The Company's reportable segments are analytical instruments and
beverage monitors. The reportable segments provide products as described
in the Company's Form 10-K for the year ended December 31, 1999. The
accounting policies of the segments are the same as described in the
"Summary of Significant Accounting Policies" in Note 1 to the Notes to the
Consolidated Financial Statements included in that Form 10-K. The Company
evaluates the performance of its segments and allocates resources to them
based on segment profit and management's judgment of future business
opportunities. The Company does not segregate assets by reportable
segment. The table below presents certain information regarding the
reportable segments for the quarter and for the nine months ended
September 30, 2000 and 1999:
<TABLE>
<CAPTION>
ANALYTICAL BEVERAGE RECONCILING
INSTRUMENTS MONITORS ITEMS TOTAL
----------- -------- ----------- -------
<S> <C> <C> <C> <C>
QUARTER ENDED SEPTEMBER 30, 2000
Revenue from unaffiliated customers $ 5,379 $ 155 $ 0 $ 5,534
Income (loss) from continuing operations before tax 602 (49) (299)(1) 254
QUARTER ENDED SEPTEMBER 30, 1999
Revenue from unaffiliated customers $ 6,795 $ 127 $ 0 $ 6,922
Income (loss) from continuing operations before tax 851 (172) (229)(1) 450
NINE MONTHS ENDED SEPTEMBER 30, 2000
Revenue from unaffiliated customers $ 17,759 $ 333 $ 0 $18,092
Income (loss) from continuing operations before tax 2,188 (314) (900)(1) 974
NINE MONTHS ENDED SEPTEMBER 30, 1999
Revenue from unaffiliated customers $ 19,019 $ 806 $ 0 $19,825
Income (loss) from continuing operations before tax 2,452 (138) (735)(1) 1,579
</TABLE>
Reconciling items for quarter ended and nine months ended September 30, 2000 and
September 30, 1999: (1) Corporate interest income plus corporate general and
administrative expenses.
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.
OPERATING RESULTS
Net sales for the third quarter of 2000 decreased 20% to $5,534,000, compared to
$6,922,000 for 1999, primarily due to a decrease in sales of gas chromatography
(GC) systems and components and total organic carbon (TOC)
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analyzers, offset in part by an increase in the sales of flow analyzers, sample
preparation products and rental revenue. Sales of beverage monitors, refrigerant
air monitors and revenue derived from service were essentially flat. The
decrease in sales of GC systems and components is due to slow market conditions
and increasingly competitive market conditions.
On September 15, 2000, O.I. Corporation announced that the Company was notified
by Agilent Technologies Inc (Agilent) that the Value Added Reseller Agreement
(VAR) between the Company and Agilent would not be renewed upon its expiration
on November 30, 2000. Agilent has offered to sell analytical instruments to the
Company under an original equipment supply (OEM) agreement. As of September 30,
the Company has not begun negotiation with Agilent to enter an OEM agreement and
no assurances can be made that such an agreement will be forthcoming.
Under the terms of the expiring VAR agreement with Agilent, the Company
purchases analytical instruments, including gas chromatographs (GC's) and mass
spectrometers (MS's), integrates them with Company-manufactured components, and
markets these analytical systems for environmental analysis to comply with US
EPA 500, 600, and 8000 Series Methods, and for other chemical analyses. In
addition, the Company sells GC components for a variety of other applications as
stand-alone products that are added to existing GC and GC/MS systems. The
Company has been a VAR for Agilent (formerly Hewlett Packard) since June 1988,
and the Agreement has been subject to renewal annually.
Company sales under the VAR, which include both Agilent and Company components,
are estimated to be approximately 19% of total Company sales for the full year
of 1999. The reason cited by Agilent for not renewing the VAR was "...the
increasing competitive nature of your products versus ours..." The VAR agreement
provides for sales and marketing cooperation; however, due to the Company
broadening its product line, this cooperation has been increasingly difficult in
recent years. The Company believes it will be competing more directly with
Agilent under an OEM agreement, should one be entered, which provides for no
marketing cooperation.
No assurances can be made that previous levels of sales of the Company will be
sustained in the future due to the Company operating under an OEM rather than a
VAR agreement, the mature nature and flat growth of the markets served by the
Company's GC products, changes in market structure of suppliers to the
environmental testing market, and continuing consolidation of US environmental
testing laboratories.
International sales for the third quarter of 2000 were flat while domestic sales
decreased. Sales to Europe and Latin America decreased while sales to
Asia-Pacific, Canada and the Middle East/Africa region increased.
Year-to-date sales through September 30, 2000 decreased 9% to $18,092,000
compared to $19,825,000 for 1999, primarily due to a decrease in sale of GC
systems and components, TOC analyzers, beverage monitors, refrigerant air
monitors and revenue derived from service, offset in part by an increase in
sales of flow analyzers, sample preparation products and rental revenue.
International sales for the nine months ended September 30, 2000 increased 8%
compared to the same period of 1999, while domestic sales decreased. Sales to
Europe, Asia-Pacific, Canada and the Middle East/Africa region increased while
sales to Latin America decreased.
On May 9, 2000, the Company announced that its subsidiary, CMS Field Products
Group, had received an agreement amounting to approximately $4.1 million with
Bechtel National, Inc., who is under contract with the U.S. Department of
Defense (Army), to supply its MINICAMS(R) chemical agent monitoring equipment.
The contract provides for the Company to produce the MINICAMS(R) product to an
agreed upon schedule throughout the contract term until completion by March
2001. The provision requires the Company to make available completely assembled
and tested MINICAMS(R) products for inspection by the customer and upon
approval, store such units in a
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bonded warehouse. The Company has completed and delivered to storage the
MINICAMS(R) products in accordance with the schedule in the agreement.
Upon successful inspection, the Company is entitled to receive progress
payments. The Company has met all conditions to qualify for such progress
payment for the MINICAMS(R) completed as of September 30, 2000 and received such
payment during October. The Company has not recognized revenue relating to the
partial completion and the amount is classified as unearned revenue on the
balance sheet as of September 30, 2000.
Gross profit decreased to $2,360,000 for the third quarter of 2000, compared to
$2,894,000 for the same quarter of 1999. Gross profit, as a percent of sales,
increased to 43% for the third quarter of 2000, compared to 42% for the same
quarter of 1999. The decrease in gross profit dollars was due to the decrease in
sales. The increase in gross profit percent was due to a decrease in the sales
of GC systems, which are lower gross margin products, and a decrease in the
costs related to service revenue, offset in part by increased manufacturing
variance. The increased manufacturing variance was primarily due to the lower
sales volume.
Year-to-date gross profit decreased to $7,728,000 through September 30, 2000,
compared to $8,481,000 for the same period of 1999. Year-to-date gross profit,
as a percent of sales remained constant at 43% for 2000 and 1999. Year-to-date
gross profit dollars decreased due to the decrease in sales. Year-to-date gross
profit as a percent of sales remained constant.
Research and development (R&D) expenses for the third quarter of 2000 decreased
23% to $422,000, or 8% of sales, compared to $551,000, or 8% of sales for the
same period of 1999. Year-to-date R&D expenses through September 30, 2000
increased 8% to $1,485,000, or 8% of sales, compared to $1,369,000, or 7% of
sales, for the same period of 1999. The decreased amount of R&D expense for the
third quarter of 2000, compared to the same period of 1999, was due to fewer
personnel as a result of the closing of the Connecticut office associated with
the asset acquisition of General Analysis Corporation (GAC) in February 1999 and
a decrease in consulting fees. The increased amount of R&D for the nine months
ended September 30, 2000 was due to an increase in the purchase of supplies
related to product development projects, offset in part by a decrease in
consulting fees. The Company continued to incur costs related to the development
of a potential new beverage monitor, but at a lower rate during the third
quarter of 2000.
Selling, general, and administrative (SG&A) expenses for the third quarter of
2000 decreased 10% to $1,778,000, or 32% of sales, compared to $1,975,000, or
29% of sales, for 1999. SG&A expenses for the third quarter of 2000 were lower
than 1999 primarily due to cost savings related to the consolidation of certain
operations to the Company's headquarters in College Station, Texas, the
restructuring of the domestic sales force during the second quarter of 2000 and
a decrease in recruitment expenses, commission expense, supplies and travel
expenses. Year-to-date SG&A expenses through September 30, 2000, decreased 5% to
$5,535,000, or 31% of sales, compared to $5,802,000, or 29% of sales, for the
same period of 1999. SG&A expenses for the nine months ended September 30, 2000
were lower than the same period of 1999 due to the factors discussed above.
Income before tax decreased 44% to $254,000 for the third quarter of 2000,
compared to $450,000 for the same period of 1999. Year-to-date income before tax
decreased 38% to $974,000 through September 30, 2000, compared to $1,579,000 for
the same period of 1999. The lower profit for both the third quarter and
year-to-date 2000 was due to decreased sales, offset in part by lower operating
costs. The third quarter effective tax rates were 37% in 2000 and 36% in 1999.
The year-to-date effective tax rates were 37% in 2000 and 1999.
Net income for the third quarter 2000 decreased 44% to $160,000, or $0.06 per
share diluted, compared to $286,000, or $0.09 per share diluted, in the same
period of 1999. Year-to-date net income after tax decreased 38% to $614,000, or
$0.21 per share diluted, through September 30, 2000, from $993,000, or $0.30 per
share diluted, for the same period of 1999.
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1,088,000 as of September 30, 2000, compared
to $887,000 as of December 31, 1999. Working capital, as of September 30, 2000,
was $8,470,000, an increase of 6%, compared to $7,965,000 as of December 31,
1999. Working capital, as a percentage of total assets, was 44% as of September
30, 2000, compared to 41% as of December 31, 1999. The current ratio was 2.73 to
1 at September 30, 2000, as compared to 2.68 to 1 at December 31, 1999. Total
liabilities-to-equity was 36% as of September 30, 2000, compared to 34% at
December 31, 1999.
Net cash flow provided by operating activities for the nine months ended
September 30, 2000, was $684,000, compared to $865,000 for the same period of
1999. The decrease in cash flow provided by operating activities for the first
nine months of 2000 was primarily due to the decrease in net income. The Company
is incurring costs in advance of when it can bill Bechtel National, Inc. under
the $4.1 million contract. Because of the interim progress payments allowed
under the contract, the Company does not expect the execution of this contract
to have a significant adverse effect on the Company's short-term liquidity. Net
cash flow provided by (used in) investing activities for the nine months ended
September 30, 2000 was $462,000, compared to ($685,000) for the same period of
1999. The increase in cash flow provided by investing activities resulted from a
decrease in the purchase of investments, a decrease in the purchase of plant,
property and equipment and the acquisition of GAC and manufacturing rights to a
headspace product during 1999. Net cash flow used in financing activities for
the nine months ended September 30, 2000 was $945,000, compared to $866,000 for
the same period of 1999. The increase in cash flow used in financing activities
was due to an increase in the purchase of treasury stock. The Company purchased
78,400 of the Company's Common Stock during the third quarter of 2000 and has
purchased 263,684 shares during the first nine months of 2000. As of September
30, 2000, the Company held 1,303,031 shares in treasury and is authorized to
purchase up to 200,001 additional shares.
MARKET RISK
The Company is exposed to a variety of risks, including changes in interest
rates and the market value of its investments. In the normal course of business,
the Company employs established policies and procedures to manage its exposure
to changes in the market value of its investment. To date, the Company has not
experienced any material effects to its financial position or results of
operations due to market risks. The fair value of the Company's investments in
debt securities and preferred stock at September 30, 2000 was $1,247,645 and
$388,250, respectively.
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: Julie A. Wright, Corporate Controller, resigned
from the Company, effective December 15, 2000. The Company does not
believe that Ms. Wright's resignation is to be detrimental to the
Company's position in the marketplace.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit No. 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the third quarter of 2000.
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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: November 7, 2000 BY: /s/ Julie A. Wright
-------------------- ----------------------------------------
Julie A. Wright, Corp. Controller
Date: November 7, 2000 BY: /s/ William W. Botts
-------------------- ----------------------------------------
William W. Botts, President
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Exhibit Index
Exhibit No.
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27 Financial Data Schedule
