1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2000
-------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------- -------
Commission File Number: 0-6511
O. I. CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-0728053
---------------------- ----------------------------------
State of Incorporation I.R.S. Employer Identification No.
P.O. Box 9010
151 Graham Road
College Station, Texas 77842-9010
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (979) 690-1711
Not Applicable
---------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ---
Number of shares outstanding of each of the issuer's classes of common stock, as
of June 30, 2000:
2,877,509 shares
2
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands, except par value)
(unaudited)
June 30, 2000 Dec. 31, 1999
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 549 $ 887
Short-term investments, held to maturity 1,202 1,760
Short-term investments, available for sale 398 0
Accounts receivable-trade, net of allowance for doubtful accounts
of $244 and $254, respectively 4,031 3,928
Investment in sales-type leases 580 486
Inventories 4,834 4,923
Current deferred tax asset 602 602
Other current assets 241 134
-------- --------
12,437 12,720
Property, plant and equipment, net 3,824 3,895
Investment in sales-type lease, net of current 408 422
Long-term investments 252 553
Other assets 1,826 1,900
-------- --------
TOTAL ASSETS $ 18,747 $ 19,490
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,057 $ 2,299
Accrued compensation 559 643
Accrued expenses 1,658 1,813
-------- --------
TOTAL CURRENT LIABILITIES 4,274 4,755
Deferred income taxes 173 202
-------- --------
TOTAL LIABILITIES 4,447 4,957
Stockholders' equity:
Preferred stock, $0.10 par value, 3,000 shares authorized, no shares
issued and outstanding
Common stock, $0.10 par value, 10,000 shares authorized
4,103 shares issued, 2,878 and 3,056 outstanding, respectively 410 410
Additional paid in capital 4,381 4,381
Accumulated other comprehensive income and (loss) (1) 0
Treasury stock, 1,226 and 1,047 shares, respectively, at cost (5,284) (4,597)
Retained earnings 14,794 14,339
-------- --------
TOTAL STOCKHOLDERS' EQUITY 14,300 14,533
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 18,747 $ 19,490
======== ========
See notes to unaudited condensed consolidated financial statements
3
O.I. CORPORATION
Condensed Consolidated Statement of Earnings and Comprehensive Income
(In thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
Net sales $ 5,968 $ 6,798 $ 12,558 $ 12,903
Cost of goods sold 3,503 3,835 7,189 7,315
-------- -------- -------- --------
Gross profit 2,465 2,963 5,369 5,588
Research and development expenses 560 430 1,063 819
Selling, general & administrative expenses 1,809 2,004 3,757 3,827
-------- -------- -------- --------
Operating income 96 529 549 942
Interest income/other income 88 84 174 186
Interest expense (2) 0 (2) 0
-------- -------- -------- --------
Income before income taxes 182 613 721 1,128
Provision for taxes on earnings 67 229 266 421
-------- -------- -------- --------
Net income $ 115 $ 384 $ 455 $ 707
-------- -------- -------- --------
Other comprehensive income and (loss), net of tax:
Unrealized losses on investments available for sale 9 0 (1) 0
-------- -------- -------- --------
Comprehensive income $ 124 $ 384 $ 454 $ 707
======== ======== ======== ========
Earnings per share:
Basic $ 0.04 $ 0.12 $ 0.15 $ 0.21
Diluted $ 0.04 $ 0.12 $ 0.15 $ 0.21
Shares used in computing earnings per share:
Basic 2,915 3,260 2,976 3,306
Diluted 2,935 3,300 2,996 3,318
Dividends per share -0- -0- -0- -0-
See notes to unaudited condensed consolidated financial statements
4
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Six Months Ended
June 30,
----------------
2000 1999
---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 455 $ 707
Depreciation & amortization 369 307
Deferred income taxes (29) (14)
Gain on disposition of property (27) 0
Change in working capital, net of effect of purchase of GAC in 1999 (689) (324)
------- -------
Net cash provided by operating activities 79 676
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (226) (334)
Sale of property, plant & equipment 60 20
Purchase of GAC 0 (260)
Purchase of investments (399) (1,462)
Maturity of investments 853 1,872
Change in other assets (19) (31)
------- -------
Net cash provided by (used in) investing activities 269 (195)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 23 25
Purchase of treasury stock (709) (692)
------- -------
Net cash used in financing activities (686) (667)
------- -------
NET DECREASE IN CASH (338) (186)
Cash and cash equivalents at beginning of period 887 1,537
------- -------
Cash and cash equivalents at end of period $ 549 $ 1,351
======= =======
See notes to unaudited condensed consolidated financial statements
5
O.I. CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The accompanying unaudited condensed consolidated financial statements
have been prepared by O.I. Corporation (the Company) and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of financial results for the three and six months ended June
30, 2000 and 1999, pursuant to the rules and regulations of the Securities
and Exchange Commission. All adjustments and provisions included in these
statements are of a normal recurring nature. All significant intercompany
balances and transfers have been eliminated. For further information
regarding the Company's accounting policies, refer to the Consolidated
Financial Statements and related notes included in the Company's Annual
Report and Form 10-K for the year ended December 31, 1999.
The Company designs, manufactures, markets, and services analytical,
monitoring and sample preparation products, components, and systems used
to detect, measure and analyze chemical compounds. Sales of the Company's
products are recorded based on shipments of products and no substantial
right of return exists.
2. INVENTORIES.
June 30, 2000 Dec. 31, 1999
------------- -------------
Raw Materials $2,753 $2,342
Work in Process 474 472
Finished Goods 1,607 2,109
------ ------
$4,834 $4,923
====== ======
3. COMPREHENSIVE INCOME.
Comprehensive income refers to revenues, expenses, gains and losses that
under generally accepted accounting principles are recorded as an element
of stockholders' equity and are excluded from net income. The Company's
components of comprehensive income are net income and unrealized gains and
losses on available-for-sale investments.
4. 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 common shares the Company has
outstanding. At June 30, 2000, options to acquire 269 shares of common
stock at weighted average exercise price of $5.37 per share were not
included in the computation of earnings per share as the options' exercise
price is greater than the average market price of the common shares.
5. SEGMENT DATA
The Company manages its businesses primarily on a product and services
basis. The Company's reportable segments are analytical instruments and
beverage monitors. The reportable segments provide products as described
in the Company's Form 10-K for the year ended December 31, 1999. The
accounting policies of the segments are the same as described in the
"Summary of Significant Accounting Policies" in Note 1 to the Notes to the
Consolidated Financial Statements included in that Form 10-K. The Company
evaluates the performance of its segments and allocates resources to them
based on segment profit. The Company does not segregate assets by
reportable segment. The table below presents certain information regarding
the reportable segments for the quarter and for the six months ended June
30, 2000 and 1999:
6
ANALYTICAL BEVERAGE RECONCILING
INSTRUMENTS MONITORS ITEMS TOTAL
----------- -------- ----------- -----
QUARTER ENDED JUNE 30, 2000
Revenue from unaffiliated customers $ 5,862 $ 106 $ 0 $ 5,968
Income (loss) from continuing operations before tax 572 (124) (266)(1) 182
QUARTER ENDED JUNE 30, 1999
Revenue from unaffiliated customers $ 6,382 $ 416 $ 0 $ 6,798
Income (loss) from continuing operations before tax 798 47 (232)(1) 613
SIX MONTHS ENDED JUNE 30, 2000
Revenue from unaffiliated customers $12,380 $ 178 $ 0 $12,558
Income (loss) from continuing operations before tax 1,587 (265) (601)(1) 721
SIX MONTHS ENDED JUNE 30, 1999
Revenue from unaffiliated customers $12,224 $ 679 $ 0 $12,903
Income (loss) from continuing operations before tax 1,600 34 (506)(1) 1,128
Reconciling items for quarter ended and six months ended June 30, 2000 and June
30, 1999:
(1) Corporate interest income plus corporate general and administrative
expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Form 10Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements, other than statements of historical facts, included
in this Form 10Q that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the future, are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, many of which are
beyond the control of the Company. Investors are cautioned that any such
statements are not guarantees of future performance and that actual results may
differ materially from those projected in the forward-looking statements.
OPERATING RESULTS
Net sales for the second quarter of 2000 decreased 12% to $5,968,000, compared
to $6,798,000 for 1999. The decrease was primarily due to a decrease in the
sales of beverage monitors, refrigerant air monitors, gas chromatography (GC)
systems and components, sample preparation products and revenue derived from
service, offset in part by an increase in sales of flow analyzers. Sales of
total organic carbon (TOC) analyzers were relatively flat. The beverage monitor
and refrigerant air monitor product lines were acquired in the asset acquisition
of General Analysis Corporation (GAC) in February 1999. At the time of the
acquisition, GAC had a large backlog of refrigerant air monitor orders that was
shipped during the second quarter of 1999. Sales of beverage monitors continued
to be hurt by delays in the introduction of a new product, competitor actions
and lower demand due to restructuring in the soft drink bottling industry.
International sales for the second quarter of 2000 increased 9% compared to the
same quarter of 1999, while domestic sales decreased. Second quarter sales to
Asia-Pacific and Europe increased during 2000, while sales to Latin America
declined.
7
Year-to-date sales through June 30, 2000 decreased 3% to $12,558,000 compared to
$12,903,000 for 1999. The decrease in sales was caused primarily by a
substantial decrease in the sales of beverage monitors and refrigerant air
monitors. Year-to-date sales of GC systems and components, TOC analyzers, sample
preparation products and revenue derived from service decreased slightly, while
sales of flow analyzers increased.
International sales for the six months ended June 30, 2000 increased 14%
compared to the same period of 1999, while domestic sales decreased.
Year-to-date sales to Europe and Asia-Pacific increased in 2000, while sales to
Latin America declined.
Gross profit decreased to $2,465,000, or 41% of sales, for the second quarter of
2000, compared to $2,963,000, or 44% of sales, for the same quarter of 1999. The
decrease in gross profit was primarily due to increased sales of GC Mass
Spectrometer systems, which are purchased from Agilent Technologies under the
Company's value added reseller agreement. These systems have a lower gross
margin than products manufactured by the Company.
Year-to-date gross profit decreased to $5,369,000, or 43% of sales, through June
30, 2000, compared to $5,588,000, or 43% of sales, for the same period of 1999.
Year-to-date gross profit dollars decreased due to the decrease in sales.
Year-to-date gross profit, as a percent of sales, remained constant.
Research and development (R&D) expenses for the second quarter of 2000 increased
30% to $560,000, or 9% of sales, compared to $430,000, or 6% of sales for the
same period of 1999. Year-to-date R&D expenses through June 30, 2000 increased
30% to $1,063,000, or 8% of sales, compared to $819,000, or 6% of sales, for the
same period of 1999. The increased amount of R&D expense for the second quarter
of 2000 and for the six months ended June 30, 2000 was due to increased
consulting fees and purchase of supplies related to product development
projects. The Company continued to incur costs related to the development of a
potential new beverage monitor.
The Company intends to evaluate ongoing operations of the beverage monitor and
refrigerant air monitor product lines and review for recoverability the carrying
value of GAC goodwill and intangible assets of approximately $946,000 as of June
30, 2000. Management believes successful completion and introduction of the new
beverage monitor will allow the recovery of such goodwill.
Selling, general, and administrative (SG&A) expenses for the second quarter of
2000 decreased 10% to $1,809,000, or 30% of sales, compared to $2,004,000, or
29% of sales, for 1999. SG&A expenses for the second quarter of 2000 decreased
due to decreased commissions due to lower sales, lower travel expense and
decreased recruiting costs. The Company also realized cost savings due to the
consolidation of certain operations to the Company's headquarters in College
Station, Texas. The Connecticut operations were moved during the fourth quarter
of 1999 and the Missouri operations were moved during the second quarter of
2000. During the second quarter the Company restructured its domestic sales
force as part of a cost-cutting initiative. The Company expects to fully realize
the cost savings related to the restructuring during the third quarter of 2000.
Year-to-date SG&A expenses through June 30, 2000, decreased 2% to $3,757,000, or
30% of sales, compared to $3,827,000, or 30% of sales, for the same period of
1999. Year-to-date SG&A expenses decreased due to the factors discussed above.
Income before tax decreased 70% to $182,000 for the second quarter of 2000,
compared to $613,000 for the same period of 1999. The decrease in income before
tax was due to the decrease in sales and gross margin and the increase in R&D
expenses, offset in part by the decrease in SG&A expenses. Year-to-date income
before tax decreased 36% to $721,000 through June 30, 2000, compared to
$1,128,000 for the same period of 1999. Year-to-date income was affected by the
same factors as second quarter income. The second quarter and year-to-date
effective tax rates were 37% in 2000 and 1999.
Net income for the second quarter 2000 decreased 70% to $115,000, or $0.04 per
share diluted, compared to $384,000, or $0.12 per share diluted in the same
period of 1999. Year-to-date net income after tax decreased 36%
8
to $455,000, or $0.15 per share diluted through June 30, 2000, from $707,000, or
$0.21 per share diluted for the same period of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $549,000 as of June 30, 2000, compared to
$887,000 as of December 31, 1999. Working capital, as of June 30, 2000, was
$8,163,000, an increase of 2%, compared to $7,965,000 as of December 31, 1999.
Working capital, as a percentage of total assets, was 44% as of June 30, 2000,
compared to 41% as of December 31, 1999. The current ratio was 2.91 to 1 at June
30, 2000, as compared to 2.68 to 1 at December 31, 1999. Total
liabilities-to-equity was 31% as of June 30, 2000, compared to 34% at December
31, 1999.
Net cash flow provided by operating activities for the six months ended June 30,
2000, was $79,000, compared to $676,000 for the same period of 1999. The
decrease in cash flow provided by operating activities for the first six months
in 2000 was primarily due to the decrease in net income and a decrease in
accounts payable and accrued liabilities. Net cash flow provided by (used in)
investing activities for the six months ended June 30, 2000 was $269,000,
compared to ($195,000) for the same period of 1999. The increase in cash flow
provided by investing activities resulted from decreased purchases of PP&E and
the acquisition of GAC during 1999. Net cash flow used in financing activities
for the six months ended June 30, 2000 was $686,000, compared to $667,000 for
the same period of 1999. The increase in cash flow used in financing activities
was due to a slight increase in the purchase of treasury stock. The Company
purchased 123,384 shares of the Company's Common Stock during the second quarter
of 2000. During the first six months of 2000, the Company purchased 185,284
shares of the Company's Common Stock. As of June 30, 2000, the Company held
1,225,868 shares in treasury and is authorized to purchase up to 278,401
additional shares.
MARKET RISK
The Company is exposed to a variety of risks, including changes in interest
rates and the market value of its investments. In the normal course of business,
the Company employs established policies and procedures to manage its exposure
to changes in the market value of its investments. To date, the Company has not
experienced any material effects to its financial position or results of
operations due to market risks. The fair value of the Company's investments in
debt securities and preferred stock at June 30, 2000 was $1,443,621 and
$398,250, respectively.
Part II: Other Information
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: At the
Company's Annual Meeting of Shareholders on May 10, 2000, the
following members were elected to the Board of Directors:
Votes For Withheld
--------- --------
Jack S. Anderson 2,590,740 143,211
William W. Botts 2,589,687 144,264
Edwin B. King 2,678,940 55,011
Craig R. Whited 2,678,940 55,011
The following proposal was also approved at the Company's Annual
Meeting:
Votes For Against Abstain
--------- ------- -------
Ratification of PricewaterhouseCoopers LLP 2,628,319 103,085 2,547
as the Company's auditors
9
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
O.I. CORPORATION
---------------------------
(Registrant)
Date: August 7, 2000 BY: /s/ Julie Wright
---------------------------
Julie Wright, Corporate Controller
Date: August 7, 2000 BY: /s/ William W. Botts
----------------------------
William W. Botts, President
10
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule