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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2001
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number: 0-6511
O. I. CORPORATION
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(Exact name of registrant as specified in its charter)
OKLAHOMA 73-0728053
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State of Incorporation I.R.S. Employer
Identification No.
P.O. Box 9010
151 Graham Road
College Station, Texas 77842-9010
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (979) 690-1711
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Former Name, Former Address and
Former Fiscal Year, if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Number of shares outstanding of each of the issuer's classes of common stock, as
of March 31, 2001:
2,659,650 shares
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands, except par value)
(unaudited)
March 31, Dec. 31,
2001 2000
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ASSETS
Current assets:
Cash and cash equivalents $ 2,212 $ 1,444
Short-term investments, held to maturity 250 551
Short-term investments, available for sale 914 887
Accounts receivable-trade, net of allowance for
doubtful accounts of $211 and $211, respectively 4,531 3,066
Investment in sales-type leases 347 477
Inventories 5,458 5,898
Current deferred tax asset 656 656
Other current assets 92 112
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Total current assets 14,460 13,091
Property, plant and equipment, net 3,490 3,606
Investment in sales-type lease, net of current 219 339
Long-term deferred income tax assets 177 177
Other assets 667 692
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Total assets $ 19,013 $ 17,905
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 916 $ 1,689
Accrued compensation 665 636
Unearned revenue 2,014 687
Accrued liabilities 1,269 1,097
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Total current liabilities 4,864 4,109
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, 2,659 and
2,686 outstanding, respectively 410 410
Additional paid in capital 4,379 4,379
Accumulated other comprehensive income and (loss) 11 (10)
Treasury stock, 1,444 and 1,417 shares,
respectively, at cost (6,016) (5,939)
Retained earnings 15,365 14,956
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Total stockholders' equity 14,149 13,796
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Total liabilities & stockholders' equity $ 19,013 $ 17,905
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See notes to unaudited condensed consolidated financial statements
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O.I. CORPORATION
Condensed Consolidated Statement of Earnings and Comprehensive Income
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
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2001 2000
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Net sales $ 6,585 $ 6,590
Cost of goods sold 3,573 3,686
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Gross profit 3,012 2,904
Research and development expenses 536 503
Selling, general & administrative expenses 1,897 1,948
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Operating income 579 453
Interest income/other income 76 86
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Income before income taxes 655 539
Provision for taxes on earnings (245) (199)
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Net income $ 410 $ 340
Other comprehensive income and (loss), net of tax:
Unrealized gains (losses) on investments available
for sale 21 (10)
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Comprehensive income $ 431 $ 330
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Earnings per share:
Basic $ 0.15 $ 0.11
Diluted $ 0.15 $ 0.11
Shares used in computing earnings per share:
Basic 2,677 3,037
Diluted 2,684 3,057
Dividends per share -0- -0-
See notes to unaudited condensed consolidated financial statements
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O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Three Months Ended
March 31,
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2001 2000
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CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 410 $ 340
Depreciation & amortization 158 182
Deferred income taxes (7) (20)
Gain on disposition of property (20) (11)
Change in working capital 2 (837)
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Net cash flows provided by (used in) operating
activities 543 (346)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (10) (143)
Proceeds from sale of property, plant & equipment 20 30
Purchase of investments 0 (399)
Maturity of investments 300 403
Change in other assets (8) (16)
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Net cash flows provided by (used in) investing
activities 302 (125)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 6 17
Purchase of treasury stock (83) (246)
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Net cash flows used in financing activities (77) (229)
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INCREASE (DECREASE) IN CASH 768 (700)
Cash and cash equivalents at beginning of quarter 1,444 887
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Cash and cash equivalents at end of quarter $ 2,212 $ 187
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See notes to unaudited condensed consolidated financial statements
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O.I. CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The accompanying unaudited consolidated financial statements have been prepared
by O.I. Corporation and include all adjustments that are, in the opinion of
management, necessary for a fair presentation of financial results for the three
months ended March 31, 2001 and 2000, 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, 2000.
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 with no substantial right of return.
2. INVENTORIES.
Mar. 31, 2001 Dec. 31, 2000
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Raw Materials $ 3,972 $ 4,038
Work in Process 580 763
Finished Goods 906 1,097
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$ 5,458 $ 5,898
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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. For
the three months ended March 31, 2001 and 2000, options to acquire 388,900
shares and 272,000 shares of common stock at weighted average exercise prices of
$ 4.72 and $5.36 per share respectively were not included in the computation of
dilutive earnings per share as the options' exercise price was 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, 2000. The accounting policies of the
segments are the same as those 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
ended March 31, 2001 and 2000:
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Analytical Beverage
Quarter ended March 31, 2001 Instruments Monitors Total
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Revenue from unaffiliated customers $ 6,527 $ 58 $ 6,585
Income (loss) from continuing 788 (133) 655
operations before tax
Quarter ended March 31, 2000
Revenue from unaffiliated customers $ 6,518 $ 72 $ 6,590
Income (loss) from continuing 683 (144) 539
operations before tax
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q 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 10-Q that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the future, are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, many of which are
beyond the control of the Company. Investors are cautioned that any such
statements are not guarantees of future performance and that actual results or
developments may differ materially from those projected in the forward-looking
statements.
OPERATING RESULTS
Net sales for the quarter ended March 31, 2001 remained flat at $6,585,000,
compared to $6,590,000 for the same period of the prior year. Sales of gas
chromatography systems and components increased, primarily due to an increase in
sales of MINICAMS(R) systems. Sales of TOC analyzers increased as well, while
sales of sample preparation products, ion analysis equipment, refrigerant
monitors, beverage analyzers, and revenue derived from service decreased.
On May 9, 2000, the Company announced that its subsidiary, CMS Field Products
Group, received a purchase order amounting to approximately $4.1 million with
Bechtel National, Inc., who is under contract with the U.S. Department of
Defense (Army), to supply its MINICAMS(R) chemical agent monitoring equipment.
The Company recognized revenue of approximately $1.2 million related to this
purchase order in the first quarter of 2001 as the title to the goods passed to
Bechtel by March 31, 2001. The Company also met the conditions to qualify for a
third progress payment for the MINICAMS(R), and such amounts have been
classified as unearned revenue in the accompanying consolidated balance sheet.
Completion of contract requirements for the third shipment is expected in the
second quarter 2001. Without shipments under the Bechtel agreement, sales of gas
chromatography (GC) products would have declined primarily due to the expiration
of the value added reseller agreement with Agilent Technologies Inc., which was
replaced with an original equipment manufacturers agreement in November 2000.
First quarter 2001 international sales decreased compared to the same quarter of
2000. Sales in Europe decreased in part due to lower sales of ion analysis
products, while sales to Canada and Latin America increased due to concentrated
sales efforts in those regions.
Gross profit for the first quarter of 2001 increased 4% to $3,012,000, or 46% of
sales, compared to $2,904,000, or 44% of sales, for the same quarter of 2000.
The increase in gross profit was due to increased sales of higher margin
products and an increase in the manufacturing productivity, partially
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offset by an increased warranty expense related to establishing a reserve for
products shipped under the Bechtel agreement.
Research and development (R&D) expenses for the first quarter of 2001 increased
7% to $536,000, or 8% of sales, compared to the first quarter of 2000 expenses
of $503,000, or 8% of sales. The increase in R&D expenses for the first quarter
of 2001 was due to increased expenses related to the development of potential
new products.
Selling, general, and administrative (SG&A) expenses for the first quarter of
2001 decreased 3% to $1,897,000, or 29% of sales, compared to $1,948,000, or 30%
of sales for 2000. SG&A expenses for the first quarter of 2001 were lower than
2001 due to decreased staffing in sales and customer support due to
consolidation of activities resulting from relocation of Laboratory Automation,
Inc. (LAI) and General Analysis Corporation (GAC) business units to College
Station. Amortization expenses for the intangibles related to the acquisition of
GAC were lower due to the partial write-off of those intangibles in the fourth
quarter of 2000. The decrease was partially offset by an increase in
amortization expenses for the intangibles related to the acquisition of LAI due
to changes in estimated useful life of those intangibles.
Income before tax for the first quarter of 2001 amounted to $655,000, compared
to $539,000 for the same period of 2000. The higher profit for 2001 was
primarily a result of increased gross margin and decreased SG&A expenses, offset
in part by an increase in R&D expenses. The effective tax rates were 37% for
2001 and 2000. Net income after tax for the first quarter of 2001 increased 21%
to $410,000, compared to $340,000 in the same period of 2000. Basic earnings per
share were $0.15 per share in the first quarter of 2001 compared to $0.11 per
share for the same period of 2000. Diluted earnings per share increased to $0.15
per share in the first quarter of 2001, compared to $0.11 per share in the first
quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $2,212,000 as of March 31, 2001, compared to
$1,444,000 as of December 31, 2000. Working capital, as of March 31, 2001, was
$9,596,000, compared to $8,982,000 as of December 31, 2000. Working capital, as
a percentage of total assets, was 50% as of March 31, 2001, compared to 50% at
December 31, 2000. The current ratio was 3.0 to 1 at March 31, 2001, as compared
to 3.2 to 1 at December 31, 2000. Total liabilities to equity ratio was 34% as
of March 31, 2001, compared to 30% as of December 31, 2000.
Net cash flow provided by (used in) operating activities for the period ending
March 31, 2001, was $543,000, as compared to ($346,000) for the same period of
2000. The increase in cash flow provided by operating activities for 2001 was
primarily due to reduction in working capital experienced in the three months
ended March 31, 2001. Net cash flow provided by (used in) investing activities
was $302,000 for the first quarter 2001, compared to ($125,000) for the first
quarter 2000. The increase in cash provided by investing activities was due to a
decrease in the purchase of investments and property, plant and equipment. Net
cash flow used in financing activities for the first quarter 2001 was ($77,000),
compared to ($229,000) for the first quarter 2000. The decrease in cash flow
used in financing activities was due to the decreased repurchases of the
Company's Common Stock.
During the first quarter 2001 the Company repurchased 27,964 shares of the
Company's Common Stock as compared to 61,900 during the first quarter 2000. As
of March 31, 2001, the Company held 1,443,727 shares in treasury and is
authorized to purchase up to 39,486 additional shares.
The Company has financed its growth from funds generated from operations and
expects to continue to do so for the foreseeable future. The Company maintained
a line of credit, which expired in March 2001. The Company anticipates that it
will meet its financial needs from internally generated operating funds, and
therefore did not renew the line of credit.
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ITEM 3. QUANTITATIVE AND INITIATIVE DISCLOSURES ABOUT 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 polices 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 March 31, 2001 was $251,032 and $913,900,
respectively.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS: None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS: None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES: None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None
ITEM 5. OTHER INFORMATION: Elena Bespalova, Corporate Controller, has given
notice to the Company that she will resign, effective June 1, 2001. The Company
does not believe that Ms. Bespalova's resignation will be detrimental to the
Company's position in the marketplace.
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: May 11, 2001 BY: /s/ William W. Botts
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William W. Botts
President/CEO
Date: May 11, 2001 BY: /s/ Elena Bespalova
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Elena Bespalova
Corporate Controller