<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-6511.
O.I. CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-0728053
(State of Incorporation) (IRS Employer Identification No.)
151 GRAHAM ROAD, BOX 9010
COLLEGE STATION, TEXAS 77842-9010
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (979) 690-1711
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH ELECTRONIC SYSTEM ON WHICH QUOTED
Common Stock, par value $0.10 per share National Association of Securities Dealers Automated
Quotation System (NASDAQ)
</TABLE>
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10K. X
---
The aggregate market value, as of March 13, 2000, of the common stock (based on
the average of the high and low trade prices of these shares on NASDAQ) of O. I.
Corporation held by non-affiliates was approximately $9,559,444.
The number of shares outstanding of the common stock as of March 13, 2000 was
3,003,846.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the 2000 Annual Meeting of Shareholders
Part III information is incorporated by reference to the Proxy Statement
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
O.I. Corporation (the "Company") is a corporation organized in 1963, in
accordance with the Business Corporation Act of the State of Oklahoma, as
Clinical Development Corporation, a builder of medical and research
laboratories. In 1969, the Company moved from Oklahoma City, Oklahoma to College
Station, Texas, and the Company's name was changed to Oceanography International
Corporation. The Company's name was changed to O.I. Corporation in July 1980;
and in January 1989, the Company filed to do business as OI Analytical to better
align the company name with the products offered and market served.
The Company designs, manufactures, markets, and services products primarily for
specialized applications in the analytical instruments markets, including sample
preparation, detection, measurement, and monitoring instruments used to analyze
chemical compounds. The Company's principal business strategy is to direct its
product development capabilities, manufacturing processes, and marketing skills
toward market niches, which it believes it can successfully penetrate and
quickly assume a leading position. Management continually emphasizes product
innovation, improvement in quality and product performance, on-time delivery,
cost reductions, and other value added activities. The Company seeks growth
opportunities through technological and product improvement, the development of
new applications for existing products, and by acquiring and developing new
products, new markets, and new competencies.
DEVELOPMENT OF THE COMPANY
The Company historically has expanded both through internal development of new
products and technologies and through the acquisition of technologies, product
lines, market positions, competencies, and businesses. During the past several
years, the Company has completed a number of acquisitions that have provided
additional technologies, specialized manufacturing or product development
expertise, and broader capabilities in marketing and distribution. A summary of
each of the Company's strategic acquisitions is set forth below:
o On February 1, 1999, the Company acquired certain assets of General
Analysis Corporation (GAC), headquartered in South Norwalk,
Connecticut. GAC designs, manufactures, and markets infrared gas and
liquid analytical instruments and accessories used in laboratories,
in-line and on-line liquid analysis and gas analysis in field
monitoring applications.
o On May 1, 1996, the Company acquired certain assets of ALPKEM
Corporation headquartered in Wilsonville, Oregon, formerly a division
of Perstorp Analytical, Inc. ALPKEM designs, manufactures, and markets
flow analyzers for ion analysis using Segmented Flow Analyzers (SFA)
and Flow Injection Analysis (FIA), Cyanide analyzers, and field
portable instruments.
o On February 9, 1995, the Company acquired Laboratory Automation, Inc.,
(LAI) d.b.a. ABC Instruments, headquartered in Columbia, Missouri. LAI
was incorporated on May 17, 1993 in the State of Missouri. LAI's
products include gel permeation chromatography (GPC) systems, Soxtherm
(an automated Soxhlet extractor), Integrity 2000 (a solvent
purification system), and other solvent recovery systems. GPC is a
method of preparing a wide range of samples for analysis and is a
common procedure for sample preparation for various industrial and
governmental laboratories, including the U.S. Food and Drug
Administration (USFDA), U.S. Department of Agriculture (USDA), and
U.S. Environmental Protection Agency (EPA).
o On June 24, 1994, the Company acquired the assets of Floyd Associates,
Inc. headquartered in Lake Wylie, South Carolina. Floyd Associates
Inc., founded in 1986 by Terry S. Floyd, develops,
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manufactures, and markets microwave products used to prepare chemical
compounds for analyses. Markets for the microwave digestion equipment
include environmental, biological, metallurgical, geological, and
industrial. Applications include acid digestion of aqueous inorganic
samples in accordance with proposed EPA and other defined methods.
Organic sample matrices such as oil, sludge, solvents, and hazardous
wastes are also handled by these microwave products.
o On January 4, 1994, the Company acquired CMS Research Corporation,
headquartered in Birmingham, Alabama. CMS, founded in 1986 by Gary D.
Sides, is engaged in research, development, manufacturing, and
marketing of instrumentation for continuous monitoring systems used for
monitoring chemical warfare agents and volatile organic compounds
(VOCs).
PRODUCTS
The Company develops, manufactures, markets, and services analytical,
monitoring, and sample preparation products, components, and systems used to
detect, measure, and analyze chemical compounds.
GAS CHROMATOGRAPHY (GC) INSTRUMENTS The Company designs, manufactures, markets,
and services components with gas chromatographs, including detectors and sample
introduction instruments. Gas chromatography is an analytical technique that
separates organic compounds based on their unique physical and chemical
properties. The use of gas chromatography in a number of diverse applications
has led to the continuous development of a broad range of sample introduction
and detector devices. Advances in the field are based on technology improvements
that provide improved sample introduction, faster analysis, lower level and
selective detection, and ease-of-use. GC instruments currently manufactured by
the Company include the following:
Electrolytic Conductivity Detector (ELCD); Photoionization Detector
(PID); Flame-Ionization Detector (FID); Tandem PID/ELCD; Tandem PID/FID;
Halogen Specific Detector (XSD)(TM); Flame Photometric Detector (FPD);
Pulsed Flame Photometric Detector (PFPD); Injectors and Inlets;
Purge-and-Trap Sample Concentrator (P&T); P&T Autosamplers; Headspace
Sampler; Liquid Autosampler; Preconcentration and Thermo Desorption
Device; Air Tube Concentrators, Volatile Organic Sample Train (VOST);
and Multi-Point Sampling Inlet Module.
GC ANALYZER SYSTEMS The Company integrates GC components with GCs and GC mass
spectrometers (GC/MS) to form customized GC analyzer systems including: VOC
Analyzers, BTEX (Benzene, Toluene, Ethylbenzene, and Xylenes) Analyzers,
Pesticide Analyzers, FBA (Fluorinated By-Products Analyzers), Continuous
Emissions Monitoring (CEM), continuous air monitoring analyzers for air toxins
and VOCs, Permeating Testing, and Ethyleneoxide Analyzers.
The Company configures GC systems in standard and custom configurations to meet
market needs in the laboratory, in the field, and on line. Configured systems
can analyze chemical compounds in gas, liquids, or solids matrixes using the
appropriate components.
The Company manufactures GCs, and purchases GCs and GC/MSs manufactured by
others. The Company procures GC components, GCs, and GC/MSs pursuant to a number
of different arrangements, including a Value Added Reseller (VAR) Agreement and
Original Equipment Manufacturer (OEM) Agreement with Agilent Technologies, Inc.
ORGANIC CARBON ANALYZER SYSTEMS The Company designs, manufactures, markets, and
services Total Organic Carbon (TOC) Analyzers and related accessories that are
used to measure organic and inorganic carbon levels in ultrapure water, drinking
water, groundwater, wastewater, soils, and solids. The Company's TOC Analyzers
are used in testing required by the EPA and testing ultrapure water used in
U.S. pharmaceutical methods; the manufacturing of semiconductors; power
generation; and oceanographic research. TOC products
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produced by the Company include: High Temperature Persulfate TOC Analyzer;
Combustion TOC Analyzer; and TOC Solids Module.
WATER ANALYZERS On-site water measurements of water quality may be performed
with the Company's portable Aqua-Check Water Analyzer, which simultaneously
measures the pH, conductivity, dissolved oxygen, and temperature of water and
aqueous solutions.
FLOW ANALYSIS SYSTEM The Company designs, manufactures, markets, and services
Segmented Flow Analyzers (SFA), Flow Injection Analyzers (FIA), and field
portable instruments such as The Flow Solution(TM) IV; Flow Solution(TM) 3000;
and Cyanide (CN) Analyzer. These instruments perform a wide range of analyses,
including the measurement of nitrate, nitrite, phosphate, ammonia, chloride,
alkaline, and sulfate in liquids. The Company's CN Analyzer can perform total
cyanide analysis in a number of industrial applications including cyanide
testing in gold and silver mining, electroplating, metal finishing, and
semiconductor operations. The SFA, FIA, and CN Analyzer products may be equipped
with autosamplers to enhance productivity.
SAMPLE PREPARATION PRODUCTS AND SYSTEMS The Company designs, manufactures,
markets, and services sample preparation instrumentation used to prepare sample
matrices for analysis. The most time-consuming part of chemical analysis is
sample preparation. Procedures, techniques, and instruments that can reduce
total sample preparation time are highly desirable for analysis of chemical
compounds. The Company's sample preparation products and systems include
Microwave Digestion Systems; Automated Gel Permeation Chromatography (GPC); and
Soxtherm Soxhlet Extraction Systems.
FILTOMETERS The Company designs, manufactures, markets, and services selective
wavelength instruments (non-dispersive infrared instruments) that are sometimes
called Filtometers. The Filtometer employs an interference filter that defines
the band of radiation falling on the detector. The signal is the result of
radiation produced by the source, the energy throughput, and the quality of the
option. Filtometers are quantitative and designed to make repeated measurements
on individual samples or continuously on a process stream or air. The Company
provides two products employing filtometer technology as follows:
CONTINUOUS REFRIGERANT MONITORS, which are used by the
chiller/refrigerant industry for the rapid detection of low-level
refrigerant leaks. These instruments can monitor for all refrigerants
including CFCs (Chlorofluorocarbons), HFCs (Hydrofluorocarbons), HCFCs
(Hydrochlorofluorocarbons) and ammonia and meet ASHRAE (American
Society of Heating, Refrigerating and Air-conditioning Engineers)
15-1994 Safety Code Requirements.
BEVERAGE ANALYZERS, which are used on-line and in the laboratory to
measure dissolved Brix (sugar), diet syrup and carbon dioxide in
beverages. This equipment is currently used in soft-drink bottling
plants, breweries, and wineries.
VALUE ADDED RESELLER
The Company is a value-added reseller (VAR) for analytical instruments
manufactured by Agilent Technologies, Inc. (Agilent). Under the terms of the
agreement with Agilent, the Company purchases Agilent analytical instruments,
including GCs and gas chromatography/mass spectrometers (GC/MSs), integrates
them with Company-manufactured components, and markets these analytical systems
for environmental analysis to comply with EPA 500, 600, and 8000 Series Methods,
and for other chemical analyses. The Company conducts its own marketing to
generate sales leads, obtains customer orders, configures systems, ships,
installs, and provides after-sale support. The VAR agreement is subject to
renewal annually. Should the VAR not be renewed, the Company believes substitute
arrangements for access to GC and GC/MS instruments can be made with little or
no adverse economic consequence.
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SALES BY LOCATION
All of the Company's assets are located in the United States and all sales are
conducted in U.S. dollars. There have been no sales or transfers between
geographic areas during the last five fiscal years. Estimated net revenue
attributable to the United States, export revenue as a group, and the number of
countries in which export revenue was generated are as follows:
<TABLE>
<CAPTION>
$ in thousands 1999 1998 1997 1996 1995
- -------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Revenue:
United States $21,193 $18,732 $16,941 $15,568 $15,110
Export 4,541 4,952 4,689 4,588 2,832
------- ------- ------- ------- -------
Total $25,734 $23,684 $21,630 $20,156 $17,942
======= ======= ======= ======= =======
% Revenue:
United States 82% 79% 78% 77% 84%
Export 18% 21% 22% 23% 16%
------- ------- ------- ------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======= =======
Number of countries-export 59 54 39 35 31
</TABLE>
Sales to any particular international geographic area did not exceed 10% of
revenue for any of the years 1995 to 1999.
MANUFACTURING
The Company manufactures products, using similar techniques and methods, at
three locations in the U.S. The Company's manufacturing capabilities include
electro-mechanical assembly, testing, integration of components and systems, and
calibration and validation of configured systems. The Company believes that its
manufacturing processes are documented in accordance with applicable domestic
and international regulations and standards.
The Company's policy is to have its products certified pursuant to safety
standards by one or more of the following agencies: Underwriters Laboratories
(UL), Canadian Standards Association (CSA) and/or the European Committee for
Electrotechnical Standardization (CE). These agencies and others also certify
that instruments meet certain performance standards and that advertised
specifications are accurate. During 1999, the Company obtained ISO 9001
certification for its College Station, Texas manufacturing operations and is in
the process of obtaining ISO 9001 certification for its Birmingham, Alabama
manufacturing operations.
MARKETING
The Company markets and sells analytical components and systems that it
manufactures and that are purchased for resale, provides on-site installation
and support services, and distributes expendables and accessories required to
support the operation of products sold. The Company sells its products
domestically to end users through a direct sales channel and manufacturers'
representatives, and internationally through independent manufacturers'
representatives and distributors. The Company's marketing program includes
advertising, direct mail, seminars, trade shows, telemarketing, and promotion on
the Company's Internet web site.
TECHNICAL SUPPORT
The Company employs a technical support staff that provides on-site installation
service and after-sale support to ensure customer satisfaction. The Company
offers training courses, publishes technical information, and provides
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application support for customers. Products sold by the Company generally
include a 90-day to one-year warranty. Customers may also purchase extended
warranty contracts that provide coverage after the expiration of the initial
warranty. The Company installs and services its products through its field
service personnel in the United States and Canada and through distributors and
manufacturers' representatives internationally.
RESEARCH AND DEVELOPMENT
The analytical instrumentation industry is subject to rapid changes in
technology. The Company's success is heavily dependent on its ability to
continually improve its existing products and to introduce new products.
Research and development costs, relating to both present and future products,
are expensed as incurred, and such expenses were $1,881,000 in 1999, $1,458,000
in 1998, and $1,697,000 in 1997. The Company actively pursues development of
potential new products, including custom configured GC systems and components,
instrument control and data reporting software systems, dedicated analyzers,
microwave systems and other sample preparation products, on-line beverage
monitors, and continuous air monitoring systems to measure refrigerants.
PATENTS
The Company holds both United States and international patents and has both U.S.
and international patent applications pending. The Company currently holds 32
patents, which expire between the years 2002 and 2015. As a matter of policy,
the Company vigorously pursues and protects its proprietary technology positions
and seeks patent coverage on technology developments that it regards as material
and patentable. While the Company believes that all of its patents and
applications have value, its future success is not dependent on any single
patent or application.
COMPETITION
The Company encounters aggressive competition in all aspects of its business
activity. The Company competes with many firms in the design, manufacture, and
sale of analytical instruments, principally on the basis of product technology
and performance, quality and reliability, sales and marketing ability, product
support, delivery, and price. Most of the Company's competitors have
significantly greater financial and other resources, broader market coverage on
a global basis, and greater breadth of product line in each market segment
served than the Company.
EMPLOYEES
As of December 31, 1999, the Company had a total of 190 full-time employees. The
Company employs scientists and engineers who research and develop potential new
products. To protect the Company's proprietary information, the Company has
confidentiality agreements with its employees who come in contact with such
information. None of the Company's employees are covered by a collective
bargaining agreement. Management believes that relations between the Company and
its employees are good.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages, positions, and offices, as of
March 13, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position Date Elected to Position
- ----------------- --- -------- ------------------------
<S> <C> <C> <C>
William W. Botts 57 President and Chief Executive Officer 1985
Chairman of the Board 1986
Mark G. Whiteman 46 Vice President/General Manager 1997
Jane A. Smith 51 Vice President/Corporate Secretary 1990
Julie A. Wright 33 Corporate Controller 1999
</TABLE>
William W. Botts joined the Company as President and Chief Operating Officer on
February 1, 1985, was named Chief Executive Officer of the Company on July 19,
1985, and Chairman of the Board of Directors of the Company on May 26, 1986.
Prior to joining the Company, he was Vice President and General Manager of
the Brandt Division of TRW Inc.
Mark G. Whiteman was employed by the Company in March 1997 as Vice
President/General Manager. He was employed by Scott Specialty Gases as Eastern
Region Vice President/General Manager from 1994 to 1997. Prior to that, he was
employed with E.I. DuPont for 19 years where he held a variety of management
positions.
Jane A. Smith has been employed with the Company since 1973. She was named
Assistant Corporate Secretary in 1976 and Corporate Secretary in 1986. On May
22, 1990, Mrs. Smith was named Vice President/Corporate Secretary.
Julie A. Wright has been employed with the Company since 1990. She was named
Controller in 1993. On May 10, 1999, she was named Corporate Controller.
ENVIRONMENTAL REGULATIONS
The Company believes it is in compliance with federal, state, and local laws and
regulations involving the protection of the environment. The Company routinely
handles small amounts of materials that may be deemed hazardous. Hazardous
materials are primarily introduced into the Company's products by end users
rather than by the Company. The Company believes there will be no material
effect upon its capital expenditures, earnings, and competitive position caused
by its compliance with federal, state, or local provisions regulating the
discharge of materials into the environment or relating to the protection of the
environment. However, to the extent that analytical instruments designed and
manufactured by the Company for environmental analysis are purchased by its
customers to assist them in complying with environmental regulations, changes to
these regulations could reduce demand for some of the Company's products.
SOURCES OF RAW MATERIALS
The Company produces its products from raw materials, component parts, and other
supplies that are generally available from a number of different sources. The
Company has few long-term contracts with suppliers. For certain purchased
materials, the Company has developed preferred sources on the basis of quality
and service. There are several purchased components that are supplied by single
source suppliers. There can be no assurance that these preferred or single
sources will continue to make materials available in sufficient quantities, at
prices, and on other terms and conditions that are adequate for the Company's
needs. However, there is no indication that any of these preferred or single
sources will cease to do business with the Company. The Company believes that in
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the event of any such cessation, adequate alternate sources would be available,
although perhaps at increased costs to the Company. In addition, substitute
components may require reconfiguration of certain products and may cause delays
in filling customer orders. Although the Company occasionally uses
subcontractors, such arrangements are not material to its business.
BACKLOG - OPEN ORDERS
The Company's backlog of orders on December 31, 1999 was approximately
$2,986,000, compared to $2,383,000 as of December 31, 1998, and $3,575,000 as of
December 31, 1997. The Company's policy is to include in its backlog only
purchase orders or production releases that have firm delivery dates within one
year. Recorded backlog may not result in sales because of purchase order
changes, cancellations, or other factors. The Company anticipates that
substantially all of its present backlog of orders will be shipped or completed
during 2000.
CUSTOMERS
The Company's customers include various military agencies of the U.S.
government, industrial businesses, semiconductor manufacturers, engineering and
consulting firms, municipalities, environmental testing laboratories, beverage
bottlers, and chiller-refrigerant companies. No single customer accounted for
more than 10% of revenue in 1999, 1998, or 1997. However, federal, state, and
municipal governments and public and private research institutions accounted for
29% of revenue in 1999, 31% of revenue in 1998, and 35% in 1997. A decrease in
sales to these governmental groups could have a material adverse impact on the
Company's results of operations. Export sales accounted for 18% of revenue in
1999, compared to 21% in 1998, and 22% in 1997.
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ITEM 2. PROPERTIES
The Company owns approximately 68,650 sq. ft. of office, engineering,
laboratory, and production space in College Station, Texas and leases
approximately 17,700 sq. ft. of office, engineering, laboratory, production, and
warehouse space in Alabama, Missouri, Oregon, Connecticut, and Texas. The
facility in Oregon is subleased and is not occupied by the Company. The Company
believes that its facilities are in good condition and are suitable and adequate
for its present operations and that suitable space is readily available if any
of its leases are not extended.
The Company's headquarters, research, and manufacturing operations occupy
approximately 68,650 sq. ft. of space located on 11.29 acres of land in College
Station, Texas. The Company rents and uses for storage a 4,500 sq. ft. facility
on a separate tract of land approximately eight miles from the Company's
headquarters.
The Company leases approximately 10,000 sq. ft., in Pelham, a subdivision of
Birmingham, Alabama under a lease expiring October 2004, approximately 3,200 sq.
ft. in Columbia, Missouri on a month-to-month basis, and approximately 2,000 sq.
ft. in South Norwalk, Connecticut under a lease expiring in May 2000. The
Company also leases approximately 2,500 sq. ft. in Beaverton, Oregon under a
lease expiring in May 2001. This facility is subleased to a third party.
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ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company has received, and in the future may receive,
notice of claims against it, which in some instances have developed, or may
develop, into lawsuits. Management does not expect any pending claim to have a
material adverse effect on the consolidated financial position and results of
operations of the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company,
through solicitation of proxies or otherwise, during the fourth quarter of 1999.
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
COMMON STOCK MARKET INFORMATION The Company's Common Stock trades on the NASDAQ
Stock Market under the symbol: OICO. Information below is contained in a
statistical report obtained from the National Association of Securities Dealers,
Inc. (NASD). The ranges of high and low trade prices for the Company's Common
Stock for 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
HIGH LOW High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter 7 4-3/8 4-5/8 4
Second Quarter 5-1/2 3-5/8 5-1/2 4-1/8
Third Quarter 4-11/16 4-1/4 5-1/4 4-9/32
Fourth Quarter 4-5/8 3-7/8 6-7/16 4
</TABLE>
NOTE: The above quotations represent prices between dealers, do not include
retail markup, markdown, or commission, and may not necessarily
represent actual transactions.
DIVIDENDS The Company has never paid dividends on the Common Stock, and
management does not anticipate paying any dividends in the near future.
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK As of March 13, 2000, there were
approximately 943 holders of record of the Company's Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
($ in thousands except per share amounts) 1999 1998 1997 1996 1995
- ---------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income statement data:
Net revenue $ 25,734 $ 23,684 $ 21,630 $ 20,156 $ 17,942
Income before income taxes 1,587 2,859 2,035 1,469 1,507
Net income 1,051 1,822 1,393 1,003 1,023
Diluted earnings per share $ 0.32 $ 0.50 $ 0.35 $ 0.24 $ 0.24
Balance sheet data:
Total assets $ 19,490 $ 18,828 $ 19,100 $ 19,186 $ 17,700
Working capital 7,964 10,028 12,300 12,391 11,855
Shareholders' equity 14,533 14,744 15,284 14,961 14,212
Common size income statement data:
Net revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue 58.0 53.9 53.4 50.0 51.5
---------- ---------- ---------- ---------- ----------
Gross profit 42.0 46.1 46.6 50.0 48.5
Selling, general, and administrative 29.9 30.0 31.8 31.7 30.7
Research and development 7.3 6.1 7.9 9.0 10.8
Patent litigation expense 0.0 0.0 0.2 4.5 1.6
---------- ---------- ---------- ---------- ----------
Operating income 4.8 10.0 6.7 4.8 5.4
Other income (expense), net 1.4 2.1 2.7 2.5 3.0
---------- ---------- ---------- ---------- ----------
Income before income taxes 6.2 12.1 9.4 7.3 8.4
Provision for income taxes 2.1 4.4 3.0 2.3 2.7
---------- ---------- ---------- ---------- ----------
Net income 4.1% 7.7% 6.4% 5.0% 5.7%
========== ========== ========== ========== ==========
</TABLE>
The 1999 results include the acquisition of GAC, which was completed on February
1, 1999. See Note 2 to the financial statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-K includes certain statements that are 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 10-K 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.
SUMMARY Net revenue increased 9% in 1999, compared to 1998, while net income was
down 42% for the same period. The Company's financial position as of December
31, 1999 reflects a decrease in working capital to $7,964,000, compared to
$10,028,000 at December 31, 1998. Diluted earnings per share were $0.32 in 1999,
$0.50 in 1998, and $0.35 in 1997.
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REVENUE Net revenue was $25,734,000 in 1999, compared to $23,684,000 in 1998,
and $21,630,000 in 1997. Export revenue decreased 8% to $4,541,000 in 1999,
while domestic revenue increased 13% to $21,193,000. In 1998, export revenue
increased 6% to $4,952,000 and domestic revenue increased 11% to $18,732,000.
Sales of TOC analyzers decreased in 1999 compared to 1998 due to a decline in
demand in the U.S. pharmaceutical industry. This decline was due to most
pharmaceutical companies having purchased during 1998 TOC analyzers to comply
with the U.S. Pharmacopoeia (USP) guidelines. These guidelines required that
cleaning validation using TOC be implemented during 1998. Sales of TOC analyzers
had increased in 1998 compared to 1997 due to improved demand in the
pharmaceutical market and the enhancement of the Company's Combustion TOC
Analyzer to serve the wastewater market. During 1998, U.S. pharmaceutical
companies increased their purchases of TOC analyzers to comply with USP
guidelines for cleaning validation.
Microwave product sales decreased in 1999 due to lower demand in international
markets. The Company believes it has continued to improve the performance,
reliability, and value to the customer of its closed-vessel microwave system.
Microwave product sales increased from 1997 to 1998 due to a few large
international sales.
Sales of GC components and systems increased in 1999 primarily due to increases
in the sale and lease of GC/MS systems configured with the Company's sample
inlet systems. Previously, the GC/MS system sold by certain of the Company's
competitors displaced GC systems offered by the Company that included selective
detectors manufactured by the Company. By offering GC/MS systems, the Company
believes it has recognized and addressed the trend in environmental testing of
performing tests using MS detectors, rather than selective detectors. GC/MS
systems sales have less value added by the Company than GC systems configured
with the Company's selective detector. Accordingly, gross profit margins are
reduced to the extent that GC/MS systems sales increase and sales of GC systems
with Company-manufactured, selective detectors decrease. Sales of GC components
and systems increased from 1997 to 1998 for the reasons stated above and an
increase in the sale of continuous emissions monitoring (CEM) systems due
primarily to U.S. government purchases of chemical warfare agent monitoring
systems. The Company believes that ratification of the Chemical Weapons
Convention Treaty by the U.S. in mid-1997 provided the impetus for a number of
government agencies to commence programs requiring chemical warfare agent
monitoring systems.
Sales of flow analyzer products decreased in 1999 and 1998 as compared to 1997
due to a decline in sales of aftermarket parts, offset in part by an increase in
equipment sales.
During 1999, overall sales increased due to sales of beverage and refrigerant
monitoring products resulting from the acquisition of GAC on February 1, 1999.
There were no beverage and refrigerant monitoring sales in 1998 or 1997. Sales
of the beverage monitors have been hurt by delays in the introduction of a new
product, competitive actions, and lower market demand due to restructuring in
the soft drink industry.
Capital leasing revenues decreased in 1999 compared to 1998, which decreased
slightly from 1997. Capital leases are generally three to four years and allow
customers to manage their cash outflow against the income generated by their
instruments. The Company files public notice documents under the Uniform
Commercial Code in conjunction with each lease to protect its interest in the
equipment. The Company maintained a portfolio of investments in such sales-type
leases amounting to $908,000 as of December 31, 1999, $1,035,000 as of December
31, 1998, and $890,000 as of December 31, 1997. The average effective interest
rate of the leases was 9.7% for the portfolio as of December 31, 1999.
International revenues decreased 8% to $4,541,000 in 1999 compared to $4,952,000
in 1998, and $4,688,000 in 1997. International revenues as a percent of total
revenue were 18% for 1999, compared to 21% in 1998 and 22% in 1997.
International revenues decreased from 1998 to 1999 due to the general economic
conditions in Asia and aggressive competitor actions in certain product lines in
Europe. Additionally, the 1998 international revenues included a few large,
nonrecurring sales of the microwave product line. The Company had 94
distributors and representatives in 48 countries at December 31, 1999, compared
to 66 distributors and representatives in 39
11
<PAGE> 12
countries at December 31, 1998, and 77 distributors and representatives in 39
countries at December 31, 1997. The increase in the number of distributors is
the result of adding representatives due to the acquisition of new product lines
and initiatives to enter new markets.
Neither inflation nor changing prices have had a material impact on the
Company's net revenues over the past three fiscal years.
GROSS PROFIT Gross profit was 42% in 1999, compared to 46% in 1998, and 47% in
1997. During 1999 gross profit decreased due to an increase in sales of GC/MS
systems, which are lower margin products, an increase in the cost of service
revenue, and increased manufacturing variance. The increased manufacturing
variance was primarily due to lower sales volume and accordingly lower
production of beverage and refrigerant monitoring products obtained in the
acquisition of GAC. To reduce costs, the manufacturing of the beverage and
refrigerant monitoring products was relocated to the Company's headquarters in
College Station, Texas during November 1999. During 1998 gross profit decreased
due to an increase in sales of GC/MS systems and an increase in the cost of
service revenue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general, and
administrative (SG&A) expenses were $7,692,000 in 1999, or 30% of revenue,
compared to $7,093,000, or 30% of revenue in 1998, and $6,929,000, or 32% of
revenue in 1997. The increase in SG&A expenses from 1998 to 1999 resulted from
higher commissions due to the increase in sales, increased staffing in the
domestic and international sales and service organizations, cost related to
sales of the beverage and refrigerant monitoring products obtained in the
acquisition of GAC, and the settlement during 1998 of certain post-closing
matters associated with an asset acquisition completed in 1997. These increases
were offset in part by a decrease in the accrual for certain discretionary
employee benefits. The terms of the asset acquisition settlement agreement in
1998 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 was accounted
for as a recovery of legal fees and other excess operating costs incurred in
connection with the acquisitions, reducing SG&A expense during 1998. Such
settlement has not resulted in and is not expected to result in a reduction of
SG&A cost in any future periods. The increase in SG&A expenses from 1997 to 1998
resulted from higher commissions and royalties due to the increase in sales,
increased costs of recruitment of new employees, an increase in the accrual for
certain discretionary employee benefits and expenses associated with the
consolidation of certain operations. The increases were offset in part by the
settlement of the aforementioned post-closing matters associated with a prior
year asset acquisition.
RESEARCH AND DEVELOPMENT EXPENSES Research and development (R&D) expenditures
amounted to $1,881,000, or 7% of revenue in 1999, compared to $1,458,000, or 6%
of revenue in 1998, and $1,697,000, or 8% of revenue in 1997. R&D expenses
increased from 1998 to 1999 due to product development costs at GAC and an
increased number of personnel, offset in part by a decrease in consulting
expense and a decrease in the purchase of supplies for R&D projects. R&D
expenses decreased from 1997 to 1998 due to fewer personnel and a decrease in
the purchase of supplies used in the design of products.
INTEREST INCOME Interest income decreased 31% to $302,000 in 1999 from $436,000
in 1998, which decreased 7% from $468,000 in 1997. The decrease in interest
income from 1998 to 1999 was due to a decrease in cash, cash equivalents, and
investments during 1999. This decrease in cash was due to the purchase of
treasury stock, the acquisition of GAC, and the purchase of manufacturing rights
for a headspace product. The decrease in interest income from 1997 to 1998 was
due to a decrease in cash and cash equivalents and investments during 1998 due
to the purchase of treasury stock and payment for a facility expansion of the
College Station location.
INCOME BEFORE INCOME TAXES Income before income taxes decreased 45% to
$1,587,000, or 6% of revenue in 1999 from $2,859,000, or 12% of revenue in 1998,
which increased 40% from $2,035,000, or 9% of revenue in 1997. Income before tax
decreased in 1999 compared to 1998 due to the increase in SG&A and R&D expense
and the decrease in interest income, offset in part by the increase in sales.
Income before tax increased in 1998
12
<PAGE> 13
compared to 1997 due to the increase in sales and a decrease in R&D expense,
offset in part by an increase in SG&A expense and a decrease in interest income.
PROVISION FOR INCOME TAXES The Company's effective income tax rate was 34% in
1999 and 36% in 1998 and 32% in 1997. The income tax rate decreased from 1998 to
1999 due to increased tax benefit from the Company's Foreign Sales Corporation.
The income tax rate increased from 1997 to 1998 due to the mix of sales by
state.
NET INCOME Net income decreased 42% to $1,051,000, or 4% of revenue for 1999,
compared to $1,822,000, or 8% of revenue for 1998, which increased 31% from
$1,393,000, or 6% of revenue for 1997. Several factors contributed to the
decline in net income during 1999, including lower sales in most products,
delays in completing development and introduction of a potential new product,
expenses relating to relocation and integration of the beverage and refrigerant
air monitoring products, field service expenses to rebuild customer relations
with soft drink bottlers, and staffing and travel expenses relating to
international marketing.
BASIC AND DILUTED EARNINGS PER SHARE Basic earnings per share were $0.33 for
1999, compared to $0.51 for 1998 and $0.36 for 1997 computed based on 3,223,601
shares outstanding for 1999, 3,560,818 for 1998, and 3,924,128 for 1997. Diluted
earnings per share were $0.32 for 1999, compared to $0.50 for 1998 and $0.35 for
1997 computed based on 3,278,816 shares outstanding for 1999, 3,641,434, in
1998, and 3,991,911 in 1997. The declining number of shares outstanding is
attributable to the Company's stock repurchase program, on which it expended
$1,364,000, $2,446,000, and $950,000, for 1999, 1998, and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES The Company considers a number of liquidity
measures that aid in measuring the Company's ability to meet its financial
obligations. Such ratios, working capital, and changes in cash and cash
equivalents as of the end of the Company's last three years are as follows:
<TABLE>
<CAPTION>
($ in thousands) 1999 1998 1997
- ---------------- -------- -------- --------
<S> <C> <C> <C>
LIQUIDITY MEASURES
Ratio of current assets to current liabilities 2.7 3.6 4.5
Total liabilities to equity 34% 28% 25%
Days sales in accounts receivable 56 52 60
Average annual inventory turnover 3.0 2.9 3.1
Working capital $ 7,964 $ 10,028 $ 12,300
CHANGES IN CASH AND CASH EQUIVALENTS
Net cash provided by (used in)
Operating activities $ 1,339 $ 1,551 $ 1,721
Investing activities (726) 918 (1,343)
Financing activities (1,263) (2,362) (911)
Net increase (decrease) in:
Cash and cash equivalents $ (650) $ 107 $ (533)
Cash and cash equivalents:
Beginning of year 1,537 1,430 1,963
End of year 887 1,537 1,430
</TABLE>
Working capital decreased 21%, or $2,064,000, to $7,964,000 in 1999, compared to
$10,028,000 in 1998 and $12,300,000 in 1997. The current ratio of 2.7 for 1999
was down from 3.6 for 1998, primarily due to an increase
13
<PAGE> 14
in accounts payable and a decrease in cash and investments caused by the
acquisition of GAC, the purchase of the manufacturing rights for a headspace
product, and the repurchase of 317,685 shares of the Company's Common Stock now
held in treasury. Since 1995, the Company has repurchased an aggregate 1,311,315
shares at an average purchase price of $4.12 per share. As of December 31, 1999,
the Company held 1,046,736 shares in treasury. The 1998 current ratio of 3.6 was
down from 4.5 in 1997 primarily due to an increase in accrued liabilities and a
decrease in cash and investments caused by payments for a facility expansion in
College Station and the repurchase of common stock. The Company's cash position
decreased to $887,000 in 1999 from $1,537,000 in 1998, primarily due to the
acquisition of GAC, payment for the above-mentioned manufacturing rights, and
the repurchase of common stock. Average annual inventory turnover was slightly
higher at 3.0 in 1999, compared to 2.9 in 1998 and 3.1 in 1996. The number of
days of sales in accounts receivable increased to 56 days in 1999, from 52 days
in 1998, which decreased from 60 days in 1997. Current liabilities increased to
$4,755,000 in 1999 from $3,857,000 in 1998 due primarily to an increase in
accounts payable and unearned revenue, offset in part by a decrease in accrued
compensation related to certain discretionary employee benefits. Total
liabilities represented 34% of equity in 1999, compared to 28% in 1998 and 25%
in 1997.
Net cash flow provided by operating activities for 1999 was $1,339,000, compared
to $1,551,000 in 1998 and $1,721,000 in 1997. The decrease in cash flow from
operations in 1999 was primarily due to the decrease in net income, an increase
in accounts receivable, and a decrease in accrued liabilities, offset in part by
a decrease in inventory and an increase in accounts payable. All working capital
account changes for 1999 are net of the effect of the purchase of GAC. The
decrease in cash flow from operations in 1998 compared to 1997 was primarily due
to an increase in inventory, offset in part by a decrease in accounts
receivable, an increase in accrued liabilities, and an increase in net income.
Net cash flow provided by (used in) investing activities for 1999 was
($726,000), compared to $918,000 in 1998, and ($1,343,000) in 1997. The decrease
in cash flow provided by investing activities during 1999 was primarily due to
the acquisition of GAC, the purchase of the manufacturing rights to a headspace
product, and the decrease in the maturity of investments, offset in part by the
decrease in payment for the facility expansion in College Station due to the
project's completion. The increase in cash flow provided by investing activities
during 1998 was due to the maturity of investments, offset in part by the
purchase of fixed assets and payment for the facility expansion in College
Station. Net cash flow used in financing activities was $1,262,000 in 1999,
compared to $2,362,000 in 1998, and $911,000 in 1997. The decrease in cash flow
used in financing activities in 1999 was due to decreased purchases of treasury
stock. The increase in cash flow used in financing activities from 1997 to 1998
was due to increased purchases of treasury stock.
The Company has historically been able to fund working capital and capital
expenditures from operations, and expects to be able to finance its 2000 working
capital requirements from cash on hand and funds generated from operations.
SEGMENT INFORMATION The Company manages its businesses primarily on a product
and services basis. The Company's reportable segments are analytical instruments
and beverage monitors. See Note 14 for additional segment data.
YEAR 2000
To coordinate the phases of the Company's Year 2000 project, the Company
established an executive steering committee and a project team. The phases of
the project were: (i) awareness; (ii) assessment; (iii) remediation; (iv)
testing; (v) implementation of the necessary modifications and (vi) contingency
planning. The goal of the Year 2000 project was to ensure that all of the
critical systems and processes under the Company's direct control remained
functional. As of December 31, 1999, the Company had substantially completed the
above phases for all critical domestic and international systems. While the Year
2000 rollover date has passed with no apparent disruptions experienced by the
Company's systems and processes, it remains possible that third parties may have
experienced disruptions which have not yet manifested any impact on the Company,
but could in the future. Accordingly, the Company is prepared to implement its
contingency plans should a disruption occur. While the total cost of the
Company's Year 2000 project has yet to be determined, the Company does not
expect to incur any remaining material costs in 2000.
14
<PAGE> 15
Other than the items discussed above, management is not aware of other
commitments or contingent liabilities, which would have a materially adverse
effect on the Company's financial condition, results of operations, or cash
flows.
RISK FACTORS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company wishes to caution readers that the
following important factors, among others, in some cases have affected, and in
the future could affect, the Company's actual results and could cause its actual
results in 2000 and beyond to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.
CHANGING PRICES AND THE EFFECT OF INFLATION The Company believes that
competition based on price is the most significant factor affecting its
customers' buying decisions. There is no assurance that the Company can pass
along cost increases in the form of price increases or sustain profit margins
that have been achieved in prior years. Although inflation has not had a
material impact on the Company's operations, there is no assurance that
inflation will not adversely affect its operations in the future. The prices of
some components purchased by the Company have increased in the past several
years due in part to decreased volume. Certain other material and labor costs
have also increased, but the Company believes that these increases are
approximately consistent with overall inflation rates.
UNCERTAINTY OF BUSINESS GROWTH The environmental instrument markets in which the
Company competes have been flat or declining over the past several years. The
Company has identified a number of strategies it believes will allow it to grow
its business despite this decline, including acquiring complementary businesses,
developing new applications for its technologies, and strengthening its presence
in selected geographic markets. No assurance can be given that the Company will
be able to successfully implement these strategies, or that these strategies
will result in the growth of the Company's business.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY One of the Company's growth
strategies is to supplement internal growth with the acquisition of
complementary businesses and technologies that augment its existing product
lines. Certain businesses acquired by the Company within the past five years
have produced net operating losses or low levels of profitability. Businesses
the Company may seek to acquire in the future may also be marginally profitable
or unprofitable. In order for any acquired business to achieve the level of
profitability desired by the Company, the Company must successfully change the
acquired companies' operations and improve their market penetration. No
assurance can be given that the Company will be successful in this regard. In
addition, promising acquisitions are difficult to identify and complete for a
number of reasons, including competition among prospective buyers and the need
for regulatory approvals, including antitrust approvals. There can be no
assurance that the Company will be able to complete pending or future
acquisitions. In order to finance such acquisitions, it may be necessary for the
Company to raise additional funds either through public or private financing.
Debt financing, if available, may be on terms that are unfavorable to the
Company and equity financing may result in significant dilution to the Company's
shareholders.
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE, OBSOLESCENCE, AND THE DEVELOPMENT
AND ACCEPTANCE OF NEW PRODUCTS The market for the Company's products and
services is characterized by rapid and significant technological change and
evolving industry standards. New product introductions responsive to these
factors require significant planning, design, development and testing at the
technological, product, and manufacturing process levels, and may render
existing products and technologies uncompetitive or obsolete. There can be no
assurance that the Company's products will not become uncompetitive or obsolete.
In addition, industry acceptance of new technologies developed by the Company
may be slow to develop due to, among other things, existing regulations applying
specifically to older technologies and the general unfamiliarity of users with
new technologies.
15
<PAGE> 16
POSSIBLE ADVERSE EFFECT FROM CONSOLIDATION IN THE ENVIRONMENTAL INSTRUMENT
MARKET AND CHANGES IN ENVIRONMENTAL REGULATIONS One of the important markets for
the Company's products is environmental analysis. During the past four years,
there has been a contraction in the market for analytical instruments used for
environmental analysis. This contraction has caused consolidation in the
businesses serving this market. Such consolidation may have an adverse impact on
certain businesses of the Company. In addition, most air, water, and soil
analyses are conducted to comply with federal, state, local, and foreign
environmental regulations. These regulations are frequently specific as to the
type of technology required for a particular analysis and the level of detection
required for that analysis. The Company develops, configures, and markets its
products to meet customer needs created by existing and anticipated
environmental regulations. These regulations may be amended or eliminated in
response to new scientific evidence or political or economic considerations. Any
significant change in environmental regulations could result in a reduction in
demand for the Company's products.
POSSIBLE ADVERSE EFFECT FROM DEPENDENCE ON SALES TO THE U.S. GOVERNMENT The
Company's customers include various government agencies and public and private
research institutions, which accounted for 29% of the Company's sales in 2000.
The capital spending of these entities can have a significant effect on the
demand for the Company's products. Such spending is based on a wide variety of
factors, including the resources available to make purchases, the spending
priorities among various types of equipment, public policy, political trends,
and the effects of different economic cycles. Any decrease in capital spending
by any of the customer groups that account for a significant portion of the
Company's sales could have a material adverse effect on the Company's business
and results of operations.
DEPENDENCE ON CAPITAL SPENDING PATTERNS OF CUSTOMERS AND GOVERNMENT FUNDING The
Company's customers include pharmaceutical and chemical companies, laboratories,
government agencies, and public and private research institutions. The capital
spending patterns of these entities, and fluctuation in the funding of
government agencies who are major customers, can have a significant effect on
the demand for the Company's products. Any decrease in capital spending by any
of the customer groups that account for a significant portion of the Company's
sales, or a decline in the funding of government customers, could have a
material adverse effect on the Company's business and results of operations.
POSSIBLE ADVERSE IMPACT OF SIGNIFICANT INTERNATIONAL SALES Sales outside the
United States accounted for approximately 18% of the Company's revenues in 1999.
The Company expects that international sales will continue to account for a
significant portion of the Company's revenues in the future. Sales to customers
in foreign countries are subject to a number of risks, including the following:
agreements may be difficult to enforce and receivables difficult to collect
through a foreign country's legal system; foreign customers may have longer
payment cycles; foreign countries could impose withholding taxes or otherwise
tax the Company's foreign income, impose tariffs, or adopt other restrictions on
foreign trade; fluctuations in exchange rates may affect product demand; export
licenses, if required, may be difficult to obtain and the protection of
intellectual property in foreign countries may be more difficult to enforce.
There can be no assurance that any of these factors will not have a material
adverse effect on the Company's business and results of operations.
COMPETITION The Company encounters and expects to continue to encounter intense
competition in the sale of its products. The Company believes that the principal
competitive factors affecting the market for its products include product
performance, price, reliability, and customer service. The Company's competitors
include large multinational corporations and their operating units. Most of the
Company's competitors have substantially greater financial, marketing, and other
resources than those of the Company. As a result, they may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements, or
to devote greater resources to the promotion and sale of their products than the
Company. In addition, competition could increase if new companies enter the
market or if existing competitors expand their product lines or intensify
efforts within existing product lines. There can be no assurance that the
Company's current products, products under development or ability to discover
new technologies will be sufficient to enable it to compete effectively with its
competitors.
16
<PAGE> 17
PROTECTION, DEFENSE, AND USE OF INTELLECTUAL PROPERTY The Company holds patents
relating to various aspects of its products and believes that proprietary
technical know-how is critical to many of its products. Proprietary rights
relating to the Company's products are protected from unauthorized use by third
parties only to the extent that they are covered by valid and enforceable
patents or are maintained in confidence as trade secrets. There can be no
assurance that patents will issue from any pending or future patent applications
owned by or licensed to the Company or that the claims allowed under any issued
patents will be sufficiently broad to protect the Company's technology. In the
absence of patent protection, the Company may be vulnerable to competitors who
attempt to copy the Company's products or gain access to its trade secrets and
technical know-how. Proceedings initiated by the Company to protect its
proprietary rights could result in substantial costs to the Company. There can
be no assurance that competitors of the Company will not initiate litigation to
challenge the validity of the Company's patents, or that they will not use their
resources to design comparable products that do not infringe upon the Company's
patents. There may also be pending or issued patents held by parties not
affiliated with the Company that relate to the Company's products or
technologies. The Company may need to acquire licenses to, or contest the
validity of, any such patents. There can be no assurance that any license
required under any such patent would be made available on acceptable terms or
that the Company would prevail in any such contest. The Company could incur
substantial costs in defending itself in suits brought against it or in suits in
which the Company may assert its patent rights against others. If the outcome of
any such litigation is unfavorable to the Company, the Company's business and
results of operations could be materially adversely affected. In addition, the
Company relies on trade secrets and proprietary technical know-how that it seeks
to protect, in part, by confidentiality agreements with its collaborators,
employees, and consultants. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach,
or that the Company's trade secrets will not otherwise become known or be
independently developed by competitors.
MARKET RISK The Company is exposed to a variety of market 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 investments. To date,
the Company has not experienced any material effects to its financial position
or results of operations due to market risks or its efforts to manage market
risks.
The fair value of the Company's investments in debt securities at December 31,
1999 and 1998 was $2,299,645 and $2,776,814, respectively. See Note 3 for
further information regarding these instruments. The Company's investment policy
is to manage its investment portfolio to preserve principal and liquidity while
maximizing the return on the investment portfolio by investing in multiple types
of investment grade securities. The Company's investment portfolio is primarily
invested in short-term securities with at least an investment grade rating to
minimize interest rate and credit risk. Although changes in interest rates may
affect the fair value of the investment portfolio and cause unrealized gains or
losses, such gains or losses would not be realized unless the investments were
sold prior to maturity. The Company intends to hold all investments to maturity.
- --------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING Management is responsible for
the integrity and objectivity of the data included in this report. We believe we
have provided financial information (both audited and unaudited) that is
representative of the Company's operations, reliable on a consistent basis
throughout the periods presented, and relevant for a meaningful appraisal of the
Company. The financial statements have been prepared in accordance with
generally accepted accounting principles. Where necessary, they reflect
estimates based on management's judgment.
Established accounting procedures and related systems of internal control
provide reasonable assurance that assets are safeguarded, that the books and
records properly reflect all transactions, and that policies and procedures are
implemented by qualified personnel. Management periodically reviews the
Company's accounting and control systems.
17
<PAGE> 18
The Company's Audit Committee, composed of at least three members of the Board
of Directors who are not employees of the Company, meets regularly with
representatives of management and the independent accountants to monitor the
functioning of the accounting and control systems and to review the results of
the audit performed by the independent accountants. The independent accountants
and Company employees have full and free access to the Audit Committee without
the presence of management.
The Audit Committee recommends independent accountants for appointment by the
Board.
The independent accountants conduct an objective, independent examination of the
financial statements. Their report appears as a part of the Company's Annual
Report on Form 10-K.
/s/ Julie A. Wright
- ----------------------------------------
Julie A. Wright, Corporate Controller
/s/ William W. Botts
- ----------------------------------------
William W. Botts, President/CEO
Date: March 15, 2000
-----------------------------------
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<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF O. I. CORPORATION
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of O. I. Corporation
and its subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
January 21, 2000
19
<PAGE> 20
O. I. CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31
----------------------------
1999 1998
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 887,043 $ 1,536,548
Investments 1,760,299 2,771,565
Accounts receivable-trade, net of allowance for doubtful accounts of
$254,038 and $215,917, respectively 3,927,999 3,361,305
Investment in sales-type leases 485,699 459,184
Inventories 4,922,748 4,917,268
Deferred income tax assets 601,958 537,401
Other current assets 133,857 302,333
------------ ------------
Total current assets 12,719,603 13,885,604
Property, plant and equipment, net 3,895,235 3,620,389
Investment in sales-type leases, net of current 422,002 575,600
Long-term investments 553,155 0
Other assets, net 1,899,886 747,154
------------ ------------
Total assets $ 19,489,881 $ 18,828,747
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 2,299,055 $ 1,198,271
Accrued liabilities 2,456,122 2,659,023
------------ ------------
Total current liabilities 4,755,177 3,857,294
------------ ------------
Deferred income taxes 201,785 227,612
------------ ------------
Commitments and contingencies
------------ ------------
Shareholders' equity:
Preferred stock, $0.10 par value, 3,000,000 shares authorized, no shares
issued and outstanding
Common stock, $0.10 par value, 10,000,000 shares authorized,
4,103,377 shares issued 410,338 410,338
Additional paid-in capital 4,381,089 4,373,896
Treasury stock, 1,046,736 and 754,334 shares, respectively, at cost (4,597,732) (3,328,173)
Retained earnings 14,339,224 13,287,780
------------ ------------
14,532,919 14,743,841
------------ ------------
Total liabilities and stockholders' equity $ 19,489,881 $ 18,828,747
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 21
O. I. CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net revenue $ 25,734,267 $ 23,683,685 $ 21,630,245
Cost of revenue 14,933,362 12,764,748 11,554,442
------------ ------------ ------------
Gross profit 10,800,905 10,918,937 10,075,803
Selling, general and administrative expenses 7,692,379 7,093,192 6,928,679
Research and development expenses 1,880,976 1,458,326 1,696,688
------------ ------------ ------------
Operating income 1,227,550 2,367,419 1,450,436
Other income (expense):
Interest income, net 302,483 436,147 467,782
Other income 56,705 55,505 116,626
------------ ------------ ------------
Income before income taxes 1,586,738 2,859,071 2,034,844
Provision for income taxes (535,294) (1,036,637) (642,252)
------------ ------------ ------------
Net income $ 1,051,444 $ 1,822,434 $ 1,392,592
============ ------------ ------------
Basic earnings per share $ 0.33 $ 0.51 $ 0.36
============ ============ ============
Diluted earnings per share $ 0.32 $ 0.50 $ 0.35
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
O. I. CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,051,444 $ 1,822,434 $ 1,392,592
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 626,418 410,617 570,010
Deferred income taxes (90,384) 65,711 48,086
Gain on disposition of property (19,410) (10,219) (45,589)
Changes in assets and liabilities, net of the effect of the
purchase of General Analysis Corporation (GAC)(1999):
Accounts receivable (292,648) 209,185 357,660
Inventories 313,243 (1,139,491) 2,175
Other assets 221,277 (135,526) (289,674)
Accounts payable 540,837 (31,809) (83,395)
Accrued liabilities (1,012,002) 359,855 (230,943)
------------ ------------ ------------
Net cash provided by operating activities 1,338,775 1,550,757 1,720,922
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property plant, and equipment (634,542) (504,148) (320,986)
Construction in progress (119,808) (2,023,006) (83,998)
Proceeds from sale of assets 48,983 43,882 124,076
Purchase of GAC, net of cash acquired (259,459) 0 0
Purchase of manufacturing rights (213,405) 0 0
Purchase of investments (2,322,257) (2,355,129) (7,757,298)
Maturity of investments 2,762,000 5,703,000 6,682,000
Change in other assets 12,574 53,787 12,776
------------ ------------ ------------
Net cash provided by (used in) investing activities (725,914) 918,386 (1,343,430)
------------ ------------ ------------
Cash flows from financing activities:
Purchase of treasury stock (1,364,042) (2,446,240) (949,713)
Proceeds from issuance of common stock 101,676 83,865 38,827
------------ ------------ ------------
Net cash used in financing activities (1,262,366) (2,362,375) (910,886)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (649,505) 106,768 (533,394)
Cash and cash equivalents:
Beginning of year 1,536,548 1,429,780 1,963,174
------------ ------------ ------------
End of year $ 887,043 $ 1,536,548 $ 1,429,780
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during year for:
Interest $ 836 $ 307 $ 12,241
Income taxes 615,830 832,200 883,519
Business acquisition, net of cash acquired:
Working capital, other than cash acquired (855,560) 0 0
Property, plant and equipment 25,006 0 0
Purchase price in excess of net assets acquired 1,077,645 0 0
Other assets 12,368 0 0
------------ ------------ ------------
Net cash used to acquire GAC 259,459 0 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 23
O. I. CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-In Treasury Retained
Shares Amount Capital Stock Earnings
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 4,143,046 $ 414,305 $ 4,586,661 $ (112,968) $10,072,754
Purchase of 243,233 shares of
treasury stock (949,713)
Shares cancelled (39,669) (3,967) (154,709)
Issuance of 2,256,shares from treasury for
directors' compensation 245 7,755
Issuance of 21,001 shares from treasury for
exercise of stock options (54,218) 72,972
Issuance of 2,965 shares from treasury to
Employee Stock Purchase Plan 1,883 10,191
Net Income 1,392,592
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 4,103,377 410,338 4,379,862 (971,763) 11,465,346
Purchase of 529,768 shares of
treasury stock (2,446,240)
Issuance of 21,034 shares from treasury for
exercise of stock options (11,040) 75,718
Issuance of 3,893 shares from treasury to
Employee Stock Purchase Plan 3,353 14,112
Tax benefit associated with exercised options 1,721
Net income 1,822,434
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 4,103,377 410,338 4,373,896 (3,328,173) 13,287,780
Purchase of 317,685 shares of
treasury stock (1,364,042)
Issuance of 20,666 shares from treasury for
exercise of stock options 2,235 77,373
Issuance of 4,617 shares from treasury to
Employee Stock Purchase Plan 4,958 17,110
Net income 1,051,444
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 4,103,377 $ 410,338 $ 4,381,089 $(4,597,732) $14,339,224
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 24
O. I. CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
O. I. Corporation (the Company) was organized in 1969. The Company designs,
manufactures, markets, and services analytical, monitoring, and sample
preparation products, components, and systems used to detect, measure, and
analyze chemical compounds.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
REVENUE RECOGNITION Revenue and the related cost of sales are generally
recognized upon shipment of goods or provision of service with no substantial
right of return.
CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with an original maturity
of three months or less to be cash equivalents.
INVESTMENTS The Company's investments in debt securities are classified as held
to maturity as the Company has the positive intent and ability to hold the
investments until maturity. These investments are reported at amortized cost.
LEASES The Company's leasing operations consist of the leasing of analytical
instruments. The majority of the Company's leases are classified as sales-type
leases. These leases expire over the next four years.
INVENTORIES Inventories consist of electronic equipment and various components
and are stated at the lower of cost or market. Cost is determined on a first-in,
first-out basis. The Company maintains a reserve for inventory obsolescence and
regularly evaluates its inventory. Items with no movement in six months or more
are reserved or written off. The Company also provides an obsolescence reserve
for items that have impairments in their realizable value below cost as a result
of new product introductions.
DEMONSTRATION EQUIPMENT The demonstration of the Company's products is often
required prior to a customer's purchase. The Company makes available certain
equipment for use in demonstration, believing that a successful demonstration
will promote the customer's purchase of the equipment. Equipment used in
demonstration is classified as inventory and is depreciated to a zero value in a
six-month period from the date of being used in a customer demonstration.
PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment is recorded at
cost and depreciated over the estimated useful lives using the straight-line
method.
OTHER ASSETS Other assets primarily include acquired patents, licenses, customer
lists, non-compete agreements, goodwill, and trademarks that are amortized on a
straight-line basis over 5 to 17 years. Amortization charged to operations
amounted to $166,000, $56,000, and $86,000 for the years ended December 31,
1999, 1998, and 1997, respectively. The Company has classified as goodwill the
cost in excess of fair value of the net assets of companies acquired in purchase
transactions. At each balance sheet date, the Company evaluates the
realizability of goodwill based on expectations of non-discounted cash flows and
operating income for each product line having a material goodwill balance. Based
on its most recent analysis, the Company believes that no material impairment of
goodwill exists at December 31, 1999.
24
<PAGE> 25
LONG-LIVED ASSETS The Company reviews for the impairment of long-lived assets
and certain identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss would be recognized when estimated future cash flows expected to
result from the use of the asset and its eventual disposition is less than its
carrying amount. No such impairment losses have been identified by the Company.
PRODUCT WARRANTIES Products are sold with warranties ranging from 90 days to one
year. Estimated expenses associated with these warranties are accrued in the
accompanying financial statements. The Company also sells extended product
warranties typically covering an additional period of one year. Revenue from
extended warranties is recorded ratably over the period.
RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as
incurred.
INCOME TAXES The Company uses the asset and liability approach to account for
income taxes. This approach requires the recognition of deferred income tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities.
CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the
Company to concentrations of credit risk consist principally of investments and
trade receivables. The Company places its available cash in money market funds
and investment grade domestic corporate bonds. The Company's investments are
subject to fluctuations based on interest rates prevailing in the market place.
The Company sells its products primarily to large corporations, environmental
testing laboratories, and governmental agencies. The majority of its customers
are located in the United States and all sales are denominated in U.S. dollars.
Concentrations of credit risk with respect to trade receivables are limited due
to the financial stability of the customers comprising the Company's customer
base. The Company performs ongoing credit evaluations of its customers to
minimize credit risk. As of December 31, 1999 and 1998, the Company had no
significant concentrations of credit risk related to accounts receivable.
However, agencies of the U.S. government constitute a significant percent of the
Company's revenue (Note 14). Any federal budget cuts or changes in regulations
affecting the U.S. chemical warfare programs or the EPA may have a negative
impact on the Company's future revenue.
EARNINGS PER SHARE 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
shares outstanding and all dilutive potential common shares outstanding. Stock
options are the only dilutive potential shares the Company has outstanding. The
weighted average of shares used in the basic earnings per share calculation was
3,223,601 in 1999, 3,560,818 in 1998, and 3,924,128 in 1997. The weighted
average number of shares used in the diluted earnings per share computation was
3,278,816 in 1999, 3,641,434 in 1998, and 3,991,911 in 1997. At December 31,
1999, 1998, and 1997 options to acquire 102,800, 31,000, and 152,200 shares at
weighted average exercise prices of $7.37, $11.68, and $5.98 respectively, were
not included in the computations of dilutive earnings per share as the options'
exercise price was greater than the average market price of the common shares.
COMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 (FAS 130), Reporting Comprehensive
Income. This statement established standards for reporting and display of
comprehensive income and its components. Net income is the Company's only
component of comprehensive income.
SEGMENT REPORTING The Company adopted Statement of Financial Accounting
Standards No. 131 (FAS 131), Disclosures about Segments of an Enterprise and
Related Information. FAS 131 supersedes FAS 14, Financial Reporting for Segments
of a Business Enterprise; replacing the "industry segment" approach with the
"management approach." The management approach designates the internal reporting
that is used by management for making operating decisions and assessing
performance as the source of the Company's reportable segments.
25
<PAGE> 26
FAS 131 also requires disclosure about products and sources, geographic areas
and major customers.
The Company believes it operated in one reportable segment as defined by FAS 131
for the year ended December 31, 1998. As a result of the acquisition of GAC (see
Note 2), the Company believes it operates in two reportable segments as defined
by FAS 131 for the year ended December 31, 1999. The adoption of FAS 131 did not
affect results of operations or financial position, but did affect the
disclosure of segment information for the year ended December 31, 1999 (Note
14).
USE OF ESTIMATES The preparation of financial statements in accordance with
generally accepted accounting principles requires the use of management
estimates and judgments. Actual results may differ from these estimates.
RECENT PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133 (FAS 133) Accounting
for Derivative Instruments and Hedging Activities. The pronouncement establishes
accounting and reporting standards for derivative instruments. The pronouncement
was to become effective for fiscal years beginning after June 15, 1999. During
June 1999, the Financial Accounting Standards Board issued Financial Accounting
Standards No. 137 (FAS 137) Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement 133 which delayed the effective date of FAS 133 to
fiscal years beginning after June 15, 2000. The Company has historically not
engaged in significant derivative instrument activity. Adoption of FAS 133 is
not expected to have a material effect on the Company's financial position or
operational results.
- --------------------------------------------------------------------------------
NOTE 2: ACQUISITIONS
On February 1, 1999, the Company acquired substantially all of the assets of
General Analysis Corporation (GAC). GAC is a supplier of beverage monitors used
to measure dissolved Brix (sugar), diet syrup and carbon dioxide in beverage
streams. GAC also sells air and gas monitors that are used by the
chiller/refrigerant industry for the rapid detection of low-level refrigerant
leaks.
The Company acquired GAC for $259,459 in cash and the assumption of
approximately $1,100,000 in liabilities. In addition, the Company may be
obligated to make earn-out payments to the former owner of GAC based upon the
achievement of potential future revenue targets. The earn-out provision is based
upon a percentage of equipment sales, as defined in the purchase agreement, in
excess of certain thresholds through 2003. The sales thresholds approximate
$1,000,000 for 1999 and increase ratably each year to total a sales threshold of
at least $5,000,000 in 2003. No earn-out payments were earned for the year ended
December 31, 1999. Any earn-out payments will be recorded as an adjustment to
the purchase price of the acquisition because the earn-out payments are based
upon the future performance of the Company and not upon continued employment of
the former owners. As of December 31, 1999, the maximum aggregate amount of the
potential earn-out payments is approximately $3,500,000. The excess of the
purchase price over fair market value of the underlying assets acquired of
$1,078,000 was allocated to intangibles, including patents, non-compete
agreements, trademarks, and goodwill based upon estimates of relative fair
values. The intangible assets are being amortized over a 5-15 year period,
dependent upon the nature of the assets and are included within the other assets
caption of the balance sheet.
The acquisition was accounted for using the purchase method of accounting, with
the results of the acquired operations being included from the date of
acquisition. The unaudited pro forma results of operations, as if GAC had been
acquired by the Company from January 1, 1998, have been prepared for
illustrative purposes only and include certain adjustments, such as additional
amortization expense as a result of goodwill and other intangible assets and
decreased interest expense on retired debt. The pro forma results are not
necessarily indicative of the combined results of operations of future periods
or the results that would have actually occurred had the companies been combined
during the specified periods and are as follows:
26
<PAGE> 27
<TABLE>
<CAPTION>
(unaudited)
December 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Total revenues $ 25,875 $ 27,312
Income before income tax 1,329 2,267
Pro forma net income 811 1,233
Earnings per common share:
Basic $ 0.25 $ 0.35
Diluted 0.25 0.35
Shares used in computing earnings per share
Basis $ 3,224 $ 3,561
Diluted 3,279 3,641
</TABLE>
- --------------------------------------------------------------------------------
NOTE 3: INVESTMENTS
Investments considered held to maturity at December 31, 1999, consisted of the
following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Market Unrealized Unrealized
Cost Value Holding Gains Holding Losses
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Short-term corporate bonds $ 1,760,299 $ 1,752,053 $ 0 $ (8,246)
Long-term corporate bonds 553,155 547,592 0 (5,563)
------------ ------------ ------------- ------------
Total corporate bonds $ 2,313,454 $ 2,299,645 $ 0 $ (13,809)
</TABLE>
All of the investments at December 31, 1999 are scheduled to mature in 2000 and
2001. Market value is based upon quoted market prices for the investments.
Investments considered held to maturity at December 31, 1998, consisted of the
following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Market Unrealized Unrealized
Cost Value Holding Gains Holding Losses
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Short-term corporate bonds $ 2,771,565 $ 2,776,814 $ 5,249 $ 0
</TABLE>
- --------------------------------------------------------------------------------
NOTE 4: NET INVESTMENT IN SALES-TYPE LEASES
The following sets forth the components of the net investment in sales-type
leases as of December 31, 1999:
Future minimum lease payments to be received are:
<TABLE>
<S> <C>
2000 $ 485,699
2001 292,933
2002 99,028
2003 30,041
------------
907,701
Less: amount relating to interest 94,927
------------
Present value of minimum lease
payments to be received $ 812,774
============
</TABLE>
27
<PAGE> 28
- --------------------------------------------------------------------------------
NOTE 5: INVENTORIES
Inventories, which include material, labor, and overhead, on December 31, 1999
and 1998, consisted of the following:
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
Raw materials $ 2,341,596 $ 2,041,218
Work-in-process 472,297 809,917
Finished goods 2,108,855 2,066,133
-------------- -------------
$ 4,922,748 $ 4,917,268
============== =============
</TABLE>
- --------------------------------------------------------------------------------
NOTE 6: PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment on December 31, 1999 and 1998, consisted of the
following:
<TABLE>
<CAPTION>
Estimated
useful lives 1999 1998
------------ -------------- -------------
<S> <C> <C> <C>
Land $ 41,221 $ 41,221
Buildings 33 to 40 years 3,635,051 1,476,046
Construction in progress 119,808 2,107,004
Furniture and equipment 3 to 10 years 2,289,861 2,111,469
-------------- -------------
6,085,941 5,735,740
Less accumulated depreciation (2,190,706) (2,115,351)
-------------- -------------
$ 3,895,235 $ 3,620,389
============== =============
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7: ACCRUED LIABILITIES
Accrued liabilities on December 31, 1999 and 1998, consisted of the following:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Accrued compensation $ 642,825 $ 751,666
Accrued warranties 582,818 502,818
Unearned revenue-service contracts 400,260 251,912
Unearned interest-investment in
sales-type leases 265,063 223,865
Other liabilities and accrued expenses 565,156 928,762
--------------- ---------------
$ 2,456,122 $ 2,659,023
=============== ===============
</TABLE>
28
<PAGE> 29
- --------------------------------------------------------------------------------
NOTE 8: LINE OF CREDIT
The Company has a line of credit agreement expiring March 25, 2000, which
provides for secured borrowings up to $1,300,000 at an interest rate of the
bank's base rate plus 1%, which was 9.50% at December 31, 1999. The Company did
not draw on the line during 1999. The terms of the line of credit agreement
contain, among other provisions, requirements for maintaining defined levels of
working capital and net worth. The agreement also requires an annual fee of one
point at the maturity of the line on the total funds advanced against the line.
- --------------------------------------------------------------------------------
NOTE 9: STOCK OPTION AND STOCK PURCHASE PLAN
In 1987, the Company established a stock option and stock appreciation rights
plan (1987 Plan) qualified under Section 422 of the Internal Revenue Code of
1986. The 1987 Plan provided for the granting of options for the purchase of up
to 500,000 shares of common stock of the Company with the options having an
exercise price of not less than the par value of such stock. The options
generally expire 10 years from the date of grant and generally vest over three
years from the date of grant. During 1991, the stockholders approved an
amendment to the 1987 Plan allowing restricted stock grants. As a result of such
amendment, the 1987 Plan allows for stock grants subject to vesting requirements
that may be determined at the time of such grant. The 1987 Plan expired in
accordance with its terms on December 31, 1997. At such time, options to
purchase 483,837 of the 500,000 shares reserved for issuance had been granted.
The Company does not currently intend to adopt a plan to replace the 1987 Plan.
During 1992, the Company's Board of Directors, and during 1993, the Company's
stockholders, approved the O. I. Corporation 1993 Incentive Compensation Plan
(1993 Plan). The 1993 Plan provides for the granting of options to purchase up
to 500,000 shares of the Company's common stock with the options having an
exercise price of not less than the par value of such stock. Employees and
nonemployee directors of the Company are eligible for such grants. The options
generally expire ten years from the date of grant and generally vest over three
or four years. During 1999, the Company granted 72,800 share options under the
1993 Plan, with a weighted average exercise price based on the stock price of
$5.46 at the date of grant. As of December 31, 1999, 266,166 options were
available for grant under the 1993 Plan. The 1993 Plan also allows for the
granting of stock appreciation rights (SARs) and stock awards, although none
have been granted.
Options outstanding under the 1987 Plan and the 1993 Plan have exercise prices
equal to the market value on the date of grant.
The Company applies APB Opinion 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for its fixed
stock option plans. Had compensation cost for the Company's two stock-based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans consistent with the method of Statement of
Financial Accounting Standards No. 123, Accounting for Awards of Stock-Based
Compensation (FAS 123), the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
Net income As reported $ 1,051 $ 1,822 $ 1,393
Pro forma 989 1,749 1,347
Basic earnings per share As reported $ 0.33 $ 0.51 $ 0.36
Pro forma 0.31 0.49 0.34
Diluted earnings per share As reported $ 0.32 $ 0.50 $ 0.35
Pro forma 0.30 0.48 0.34
</TABLE>
29
<PAGE> 30
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1999, 1998, and 1997 respectively: dividend yield
of zero for each year; expected volatility of 32, 33, and 34 percent; risk-free
interest rates of 4.79, 5.56, and 6.04 percent; and expected lives of seven
years. The weighted average fair value at the date of grant for options granted
during 1999, 1998, and 1997 was $2.68, $2.06, and $1.90, respectively.
Activity under the 1987 Plan and the 1993 Plan for each of the three years in
the period ended December 31, 1999 was as follows:
<TABLE>
<CAPTION>
Weighted
Average
Shares Price per Share Price per Share
------------ ---------------- ---------------
<S> <C> <C> <C>
Options outstanding, December 31, 1996 348,000 $0.8125 - $14.00 $ 4.12
Options granted 93,700 3.50 - 4.25 3.92
Options exercised (21,001) 0.8125 - 2.50 0.89
Options forfeited or cancelled (21,466) 2.50 - 3.94 3.25
-----------
Options outstanding, December 31, 1997 399,233 2.50 - 14.00 4.29
Options granted 16,000 4.25 - 4.75 4.38
Options exercised (21,034) 2.50 - 4.12 3.08
Options forfeited or cancelled (42,733) 2.50 - 6.06 4.29
-----------
Options outstanding, December 31, 1998 351,466 2.50 - 14.00 4.37
Options granted 72,800 4.28 - 5.625 5.46
Options exercised (20,666) 2.50 - 4.00 3.85
Options forfeited or cancelled (15,900) 3.50 - 5.625 4.42
-----------
Options outstanding, December 31, 1999 387,700 2.50 - 14.00 4.60
</TABLE>
There were 263,800, 248,568, and 223,477, share options exercisable at December
31, 1999, 1998, and 1997, respectively.
The following table summarizes significant ranges of outstanding and exercisable
options at December 31, 1999.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ---------------------
Weighted Weighted Weighted
average average average
Ranges of remaining exercise exercise
Exercise prices Shares life in years price Shares price
--------------- ----------- --------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
$2.50 - 3.74 169,700 6.0 $ 3.15 133,500 $ 3.05
3.75 - 5.62 188,000 7.5 4.75 100,300 4.36
5.63 - 8.45 8,000 3.1 6.01 8,000 6.01
14.00 22,000 3.0 14.00 22,000 14.00
</TABLE>
In 1989, the Company established an Employee Stock Purchase Plan. Under the plan
provisions, employees may purchase shares of the Company's common stock on a
regular basis through payroll deductions. Any person who is a full-time employee
of the Company is eligible to participate in the plan, with each participant's
purchases limited to 10% of annual gross compensation. The plan is administered
by the Compensation Committee of the Board of Directors. Shares of common stock
are purchased in the open market or issued from shares held in treasury. The
Company pays all commissions and contributes an additional 15% for the purchase
of shares that are distributed to eligible participating employees. The
Company's contribution to the plan was not significant in any of the years
reported. The aggregate number of shares of common stock available for purchase
under this plan is 200,000. As of December 31, 1999, 41,146 shares had been
purchased under the plan.
30
<PAGE> 31
- --------------------------------------------------------------------------------
NOTE 10. STOCKHOLDERS' EQUITY
The Company's Articles of Incorporation authorize the issuance of up to
3,000,000 shares of preferred stock with $0.10 par value per share. The voting
rights, dividend rate, redemption price, rights of conversion, rights upon
liquidation, and other preferences are subject to determination by the Board of
Directors. As of December 31, 1999, no preferred stock had been issued.
The Company's Board of Directors has authorized the Company to repurchase shares
of its common stock through open market purchases or privately negotiated
transactions. Since 1995, the Company has repurchased an aggregate 1,311,315
shares related to these authorizations. The shares are held by the Company and
accounted for using the cost method. The Company is authorized to purchase up to
163,685 additional shares.
- --------------------------------------------------------------------------------
NOTE 11. INCOME TAXES
The Company's operations are only taxed under domestic jurisdictions.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------------------------
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Current provision:
Federal $ 570,386 $ 816,552 $ 480,653
State 55,291 154,375 113,513
Deferred provision (90,383) 65,710 48,086
------------ ----------- -----------
$ 535,294 $ 1,036,637 $ 642,252
============ =========== ===========
</TABLE>
The provision for income taxes differs from the amount computed by applying the
federal statutory rates for the following reasons:
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------
1999 1998 1997
------ ------- ------
<S> <C> <C> <C>
Tax at statutory rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 5.8 5.8 5.4
Other, net (6.1) (3.5) (7.9)
------ ------- ------
33.7% 36.3% 31.5%
====== ======= ======
</TABLE>
31
<PAGE> 32
Deferred tax assets (liabilities) are comprised of the following at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Current:
Warranty reserve $ 201,127 $ 201,127
Bad debt allowance 83,843 84,596
Inventory reserve 37,692 35,662
Uniform capitalization 211,165 160,541
Accrued vacation 50,992 38,336
Other 17,139 17,139
---------- ----------
Total current $ 601,958 $ 537,401
---------- ----------
Noncurrent:
Depreciation $ 21,459 $ (30,643)
Deferred compensation 17,975 20,000
Intangibles (114,493) (112,871)
Other (75,209) (52,581)
---------- ----------
Total noncurrent $ (150,268) $ (176,095)
========== ==========
Net tax asset before valuation allowance 451,690 361,306
Valuation allowance (51,517) (51,517)
---------- ----------
Net deferred tax asset $ 400,173 $ 309,789
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
NOTE 12: EMPLOYEE BENEFIT PLANS
The Company maintains a Retirement Savings Plan (the Plan) for its employees
that allows participants to make contributions by salary reduction pursuant to
Section 401(k) of the Internal Revenue Code. The Company's contributions to the
Plan are discretionary. Employees vest immediately in their contributions and
vest in the Company's contributions ratably over five years. The Company accrued
contributions of $100,000, $150,000 and $120,000 to the Plan for the years ended
December 31, 1999, 1998, and 1997, respectively.
- --------------------------------------------------------------------------------
NOTE 13: COMMITMENTS AND CONTINGENCIES
The Company has agreed to pay the former owner of Floyd Associates, Inc. a
royalty equal to 5% of the net revenue earned from certain microwave-based
products up to a maximum amount of $1,182,500. The contingent liability arose as
a result of the acquisition of Floyd. No minimum payments are required in the
agreement. The Company recognized royalty expense related to this agreement of
$34,503, $62,551, and $50,954, in 1999, 1998, and 1997, respectively.
The Company has entered operating leases for certain facilities. These operating
leases expire in the years 2000 and 2004. Rental expense recognized in 1999,
1998, and 1997 was $262,000, $260,000, and $324,000, respectively. Future
minimum rental payments under these leases for 2000, 2001, 2002, 2003, and 2004
are $118,250, $105,000, $105,000, $105,000 and $87,500, respectively.
32
<PAGE> 33
- --------------------------------------------------------------------------------
NOTE 14: SEGMENT DATA
In 1998, the Company adopted FAS 131. 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 Note 1. The accounting policies of the segments are the
same as those described in the "Summary of Significant Accounting Policies" in
Note 1. The Company evaluates the performance of its segments and allocates
resources to them based on segment profit. The Company does not segregate assets
by reportable segment. There is no prior year segment information as the
beverage monitor segment was acquired in the GAC acquisition, which was
completed during the year ended December 31, 1999. The table below presents
information about revenue from unaffiliated customers, income from continuing
operations before tax as of and for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Analytical Beverage Reconciling
Instruments Monitors Items Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue from unaffiliated customers $24,733,000 $ 1,001,000 $ 0 $25,734,000
Interest Income 0 0 302,000 (1) 302,000
Depreciation and amortization 556,000 44,000 26,000 (2) 626,000
Income (loss) from continuing operations before tax 2,745,000 (272,000) (886,000)(3) 1,587,000
Income tax expense (benefit) 925,000 (92,000) (298,000)(4) 535,000
</TABLE>
Reconciling items for 1999:
(1) Corporate interest income.
(2) Corporate depreciation and amortization.
(3) Corporate interest income plus corporate general and administrative
expenses.
(4) Corporate income tax expense.
Analytical instruments was the only reportable segment for the years ended
December 31, 1998 and December 31, 1997.
Revenue related to operations in the United States and foreign countries for the
years ended December 31, 1999, 1998, and 1997 are presented below. The basis for
attributing revenues from external customers to individual countries is based
upon locations to which the product is shipped. Long-lived assets related to
continuing operations in the United States and foreign countries as of the years
ended December 31, 1999, 1998, and 1997 are as follows:
<TABLE>
<CAPTION>
Years Ended
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue from unaffiliated customers:
United States $21,193,604 $18,731,459 $16,941,229
Foreign 4,540,663 4,952,226 4,689,016
Long-lived assets at end of year:
United States $ 3,895,235 $ 3,620,389 $ 1,459,049
</TABLE>
No single customer accounted for more than 10% of revenue in 1999, 1998, or
1997. Sales to federal, state and municipal governments occur in the analytical
instrument segment accounted for 29% of total revenue in 1999, 31% of total
revenue in 1998, and 35% of total revenue in 1997.
33
<PAGE> 34
- --------------------------------------------------------------------------------
NOTE 15: QUARTERLY INFORMATION (UNAUDITED)
Quarterly financial information for 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
($ in thousands, except per share amounts) First Second Third Fourth
1999 Qtr. Qtr. Qtr. Qtr.
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue $ 6,105 $ 6,798 $ 6,922 $ 5,909
Gross profit 2,625 2,963 2,894 2,319
Net income 323 384 286 58
Basic earnings per share $ 0.10 $ 0.12 $ 0.09 $ 0.02
Diluted earnings per share $ 0.09 $ 0.12 $ 0.09 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
($ in thousands, except per share amounts) First Second Third Fourth
1998 Qtr. Qtr. Qtr. Qtr.
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue $ 5,825 $ 5,752 $ 6,077 $ 6,030
Gross profit 3,104 2,460 2,756 2,599
Net income 433 460 462 467
Basic earnings per share $ 0.11 $ 0.13 $ 0.13 $ 0.14
Diluted earnings per share $ 0.11 $ 0.12 $ 0.13 $ 0.14
</TABLE>
- --------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the identification, business experience, and
directorships of each director and nominee for director of the Company, required
by Item 401 of Regulation S-K and presented in the section entitled "Election of
Directors-Nominees for Board of Directors" of the Company's Proxy Statement for
the annual meeting of shareholders on May 10, 2000 (the "Proxy Statement"), is
hereby incorporated by reference. See Item 1 for information relating to the
identification and business experience of the Company's executive officers. The
information relating to persons subject to Section 16 of the Securities Exchange
Act of 1934 and the timeliness with which they have filed Forms 3, 4, and 5,
required by Item 405 of Regulation S-K and presented in the section titled
"Section 16(a) Beneficial Ownership Reporting Compliance" of the Proxy
Statement, is incorporated herein by reference.
- --------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION
The information relating to the cash compensation of directors and officers,
required by Item 402 of Regulation S-K and presented in the section entitled
"Election of Directors-Compensation of Directors" and "Election of
Directors-Compensation of Executive Officers" of the Company's Proxy Statement
for the annual meeting of shareholders on May 10, 2000, is incorporated herein
by reference.
34
<PAGE> 35
- --------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information relating to security ownership required by Item 403 of
Regulation S-K, which is presented in the section entitled "Security Ownership
of Certain Beneficial Owners and Management" of the Company's Proxy Statement
for the annual meeting of shareholders on May 10, 2000, is incorporated herein
by reference.
- --------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to relationships and transactions required by Item 404
of Regulation S-K, which is presented in the section, "Election of Directors -
Executive Compensation - Certain Transactions, Employment Contracts, Termination
of Employment and Change-in-Control Arrangements" of the Company's Proxy
Statement for the annual meeting of shareholders on May 10, 2000, is
incorporated herein by reference.
35
<PAGE> 36
PART IV
- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements of O. I. Corporation and its
subsidiary that are included in Part II, Item 8: Page
<TABLE>
<S> <C>
Report of Independent Accountants......................................................................19
Consolidated Balance Sheet at December 31, 1999 and 1998...............................................20
Consolidated Statement of Income for the years ended December 31, 1999, 1998, and 1997.................21
Consolidated Statement of Cash Flows for the years ended December 31, 1999, 1998, and 1997.............22
Consolidated Statement of Stockholders' Equity for the years ended December 31, 1999, 1998,
and 1997............................................................................................23
Notes to Consolidated Financial Statements.............................................................24
</TABLE>
(a) 2. Financial Statement Schedules required to be filed by Item 8 of this
Form:
All schedules are omitted as they are not required, or are not
applicable, or the required information is included in the financial
statements or notes thereto.
(a) 3. Exhibits
3.1 Articles of Incorporation of the Company, as amended (filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-8
(No. 33-24505) and incorporated herein by reference).
3.2 Bylaws of the Company (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (No. 33-24505) and incorporated
herein by reference).
*10.1 Amended and Restated 1987 Stock Option and SAR Plan (filed as
Exhibit 4.3 to the Company's Registration Statement on Form S-8
(No. 33-24505) and incorporated herein by reference).
*10.2 Employee Stock Purchase Plan (filed as Exhibit 4.3 to the
Company's Registration Statement on Form S-8 (No. 33-62209) and
incorporated herein by reference).
*10.3 Employment Agreement between the Company and William W. Botts
(filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 and incorporated herein by
reference).
10.4 Value-Added Reseller Agreement between the Company and
Hewlett-Packard Company (filed as Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1989
and incorporated herein by reference).
*10.5 1993 Incentive Compensation Plan (filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference).
36
<PAGE> 37
10.6 Registration Rights Agreement among O. I. Corporation and the
former shareholders of CMS Research Corporation dated January 4,
1994 (filed as Exhibit 10.8 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
*10.7 Employment Agreement between the Company and Mark G. Whiteman
(filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 and incorporated herein by
reference).
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule (for SEC purposes only).
99.1 The O. I. Corporation definitive Proxy Statement, dated April 10,
2000, is incorporated by reference as an Exhibit hereto for the
information required by the Securities and Exchange Commission,
and, except for those portions of such definitive proxy statement
specifically incorporated by reference elsewhere herein, such
definitive proxy statement is deemed not to be filed as a part of
this report.
(b) Reports on Form 8-K.
No Form 8-K was filed for the quarter ended December 31, 1999.
- ----
* Management contract or compensatory plan or arrangement.
37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
O. I. CORPORATION
/s/ William W. Botts
--------------------------------------
Date: February 28, 2000 By: William W. Botts
---------------------------- President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William W. Botts President, Chief Executive Officer, February 28, 2000
- -------------------------------- Director and Principal Financial Officer -----------------
William W. Botts
/s/ Julie A. Wright Corporate Controller, February 28, 2000
- --------------------------------- Principal Accounting Officer -----------------
Julie A. Wright
/s/ Jack S. Anderson Director February 28, 2000
- -------------------------------- -----------------
Jack S. Anderson
/s/ Edwin B. King Director February 28, 2000
- -------------------------------- -----------------
Edwin B. King
/s/ Craig R. Whited Director February 28, 2000
- -------------------------------- -----------------
Craig R. Whited
</TABLE>
38
<PAGE> 39
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Articles of Incorporation of the Company, as amended (filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-8
(No. 33-24505) and incorporated herein by reference).
3.2 Bylaws of the Company (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (No. 33-24505) and
incorporated herein by reference).
*10.1 Amended and Restated 1987 Stock Option and SAR Plan (filed as
Exhibit 4.3 to the Company's Registration Statement on Form S-8
(No. 33-24505) and incorporated herein by reference).
*10.2 Employee Stock Purchase Plan (filed as Exhibit 4.3 to the
Company's Registration Statement on Form S-8 (No. 33-62209) and
incorporated herein by reference).
*10.3 Employment Agreement between the Company and William W. Botts
(filed as Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 and incorporated herein
by reference).
10.4 Value-Added Reseller Agreement between the Company and
Hewlett-Packard Company (filed as Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1989
and incorporated herein by reference).
*10.5 1993 Incentive Compensation Plan (filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference).
10.6 Registration Rights Agreement among O. I. Corporation and the
former shareholders of CMS Research Corporation dated January 4,
1994 (filed as Exhibit 10.8 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference).
*10.7 Employment Agreement between the Company and Mark G. Whiteman
(filed as Exhibit 10.7 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 and incorporated herein
by reference).
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule (for SEC purposes only).
99.1 The O. I. Corporation definitive Proxy Statement, dated April 10,
2000, is incorporated by reference as an Exhibit hereto for the
information required by the Securities and Exchange Commission,
and, except for those portions of such definitive proxy statement
specifically incorporated by reference elsewhere herein, such
definitive proxy statement is deemed not to be filed as a part of
this report.
</TABLE>
- ----
* Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-24505, 33-62209 and 33-66822) of O.I. Corporation
our report dated January 21, 2000 relating to the financial statements, which
appears in this Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
March 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 887
<SECURITIES> 2,313
<RECEIVABLES> 4,182
<ALLOWANCES> 254
<INVENTORY> 4,923
<CURRENT-ASSETS> 12,720
<PP&E> 6,086
<DEPRECIATION> 2,191
<TOTAL-ASSETS> 19,490
<CURRENT-LIABILITIES> 4,755
<BONDS> 0
0
0
<COMMON> 410
<OTHER-SE> 14,123
<TOTAL-LIABILITY-AND-EQUITY> 19,490
<SALES> 25,734
<TOTAL-REVENUES> 25,734
<CGS> 14,933
<TOTAL-COSTS> 5,791
<OTHER-EXPENSES> 3,782
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,586
<INCOME-TAX> 535
<INCOME-CONTINUING> 1,051
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,051
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.32
</TABLE>
