UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2002
[ ] 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
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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 [ ]
Number of shares outstanding of each of the issuer's classes of common stock, as
of April 30, 2002:
2,752,231 shares
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
O.I. CORPORATION
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(unaudited)
March 31, December 31,
2001 2001
--------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 2,837 $ 3,140
Short-term investments, available-for-sale 1,884 1,927
Accounts receivable-trade, net of allowance for
doubtful accounts of $200 and $153, respectively 4,230 4,418
Investment in sales-type leases 237 260
Inventories 4,825 4,573
Income tax receivable 334 254
Current deferred tax asset 554 554
Other current assets 128 148
--------- --------
Total current assets 15,029 15,274
Property, plant and equipment, net 3,418 3,394
Investment in sales-type leases, net of current 133 169
Long-term deferred income tax assets 253 237
Other assets 553 570
--------- --------
Total assets $ 19,386 $ 19,644
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 1,515 $ 1,330
Accrued compensation and other related expenses 681 834
Unearned revenues 594 561
Accrued warranties 684 684
Other liabilities and accrued expenses 262 387
---------- ---------
Total current liabilities 3,736 3,796
Commitments and contingencies
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, 2,752 and
2,751 outstanding, respectively 410 410
Additional paid in capital 4,331 4,329
Treasury stock, 1,351 and 1,352 shares,
respectively, at cost (5,891) (5,894)
Retained earnings 16,787 16,961
Accumulated other comprehensive income, net 13 42
---------- ---------
Total stockholders' equity 15,650 15,848
---------- ---------
Total liabilities and stockholders' equity $ 19,386 $ 19,644
========== =========
</Table>
See notes to unaudited condensed consolidated financial statements.
2
O.I. CORPORATION
Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss)
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
---------------------------
2002 2001
--------- ---------
Net revenues $ 5,059 $ 6,585
Cost of revenues 2,889 3,573
--------- ---------
Gross profit 2,170 3,012
Selling, general and administrative expenses 1,922 1,897
Research and development expenses 581 536
--------- ---------
Operating (loss) income (333) 579
Other income, net 69 76
--------- ---------
(Loss) income before income taxes (264) 655
(Benefit) provision for income taxes (90) 245
---------- ---------
Net (loss) income $ (174) $ 410
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on investments available-for-sale (24) 21
---------- ---------
Comprehensive (loss) income $ (198) $ 431
========== =========
(Loss) earnings per share:
Basic $ (0.06) $ 0.15
Diluted $ (0.06) $ 0.15
Shares used in computing (loss) earnings per share:
Basic 2,752 2,677
Diluted 2,752 2,684
</Table>
See notes to unaudited condensed consolidated financial statements.
3
O.I. CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Three Months Ended
March 31,
--------------------------
2002 2001
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (174) $ 410
Depreciation & amortization 137 158
Deferred income taxes (15) (7)
Loss (gain) on disposition of property 10 (20)
Change in working capital (123) 2
--------- --------
Net cash flows (used in) provided by operating
activities (165) 543
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (148) (10)
Proceeds from sale of assets 4 20
Maturity of investments -- 300
Change in other assets -- (8)
--------- --------
Net cash flows (used in) provided by investing
activities (144) 302
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 5 6
Purchase of treasury stock -- (83)
--------- --------
Net cash flows provided by (used in) financing activities 5 (77)
--------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (304) 768
Cash and cash equivalents, at beginning of quarter 3,140 1,444
--------- --------
Cash and cash equivalents, at end of quarter $ 2,837 $ 2,212
========= ========
</Table>
See notes to unaudited condensed consolidated financial statements.
4
O.I. CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except per share data)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
O.I. Corporation (the "Company"), an Oklahoma corporation, 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.
The accompanying unaudited condensed 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
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 intercompany transactions and balances have been
eliminated in the financial statements. These unaudited condensed consolidated
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 2001.
2. INVENTORIES.
Mar. 31, 2002 Dec. 31, 2001
------------- -------------
Raw Materials $ 3,975 $ 3,766
Work in Process 305 567
Finished Goods 545 240
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$ 4,825 $ 4,573
============= =========
3. COMPREHENSIVE INCOME (LOSS).
Comprehensive income (loss) 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 (loss). The Company's
components of comprehensive income (loss) are net income (loss) and unrealized
gains and losses on available-for-sale investments.
4. EARNINGS (LOSS) 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.
Options to purchase 274,506 shares of common stock for the three months ended
March 31, 2002 were outstanding but were not included in the computation of
diluted loss per share as these options would be anti-dilutive. For the three
months ended March 31, 2001, options to acquire 388,900 shares of common stock
at a weighted average exercise price of $4.72 per share was 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
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following are or may contain forward-looking statements within the meaning
of the U.S. federal securities laws: (i) certain statements, including possible
or assumed future results of operations, contained in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," (ii) any
statements contained herein regarding the prospects for the Company's business
or products; (iii) any statements preceded by, followed by or that include the
words "believes," "expects," "anticipates," "intends," "estimates," "plans" or
similar expressions; and (iv) other statements contained herein regarding
matters that are not historical facts.
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. The Company's business and
results of operations are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the Company's ability to control or
predict. Because of these risks and uncertainties, actual results may differ
materially from those expressed or implied by forward-looking statements, and
investors are cautioned not to place undue reliance on such statements, which
are not guarantees of future performance and which speak only as of the date
thereof.
Factors that could cause actual results to differ materially
include, but are not limited to, the Company's ability to attract and retain new
customers, the financial condition and spending practices of the its customers,
the Company's ability to provide products that meet the needs of its customers,
advancements or changes in technology that may render the Company's products
less valuable or obsolete, conditions in the environmental instrument market,
and the Company's ability to obtain financing in the event it is needed.
The cautionary statements contained or referred to herein should be
considered in connection with any written or oral forward-looking statements
that may be issued by the Company or persons acting on the Company's behalf. The
Company does not undertake any obligation to release any revisions to or to
update publicly any forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
The following discussion should be read in conjunction with the consolidated
financial statements and the notes thereto.
CONTRACT WITH PARSONS INFRASTRUCTURE & TECHNOLOGY GROUP, INC. On December 18,
2001, the Company announced that it had been awarded a contract by Parsons
Infrastructure & Technology Group, Inc., amounting to approximately $2,000,000
in total revenues, later amended to approximately $2,537,000, to supply a
chemical-agent air-monitoring system for the Newport Chemical Agent Disposal
Facility ("NECDF") in Newport, Indiana. This system will include MINICAMS(R) air
monitors and the CHROM-NET(TM) networking and data-acquisition system. Parsons
is under contract with the U.S. Department of Defense (U.S. Army) to supply
chemical-agent monitoring equipment for the NECDF. The equipment will be used
for air monitoring during chemical-agent destruction to be completed at the
Newport plant. The first shipment of equipment is scheduled for the second
quarter of 2002, and the final shipment is expected by year-end.
OPERATING RESULTS
Net revenues for the quarter ended March 31, 2002 were $5,059,000, compared to
$6,585,000 for the same period of the prior year. Net revenues decreased due to
the continuation of a weak economy causing a slowdown in capital spending and
due to a decrease in sales of MINICAMS(R) chemical agent monitoring equipment.
In the same period of the prior year, the Company recognized additional revenues
of approximately $1.2 million related to a non-recurring
6
purchase order amounting to approximately $4.6 million with Bechtel National,
Inc. to supply MINICAMS(R).
Increases in domestic revenues from gel permeation chromatography products,
refrigerant air monitors, and customer service were more than offset by
decreases in revenues from flow analyzer products, GC components and systems,
TOC analyzers, microwave digestion products, and beverage analyzers. Revenues
from leasing activities also decreased compared to the same period of the prior
year, which was primarily due to a slowdown in capital spending in the markets
that the Company serves.
First quarter 2002 international revenues increased compared to the same quarter
of 2001. Revenues in Europe increased due to higher sales of flow analyzer
products, TOC analyzers, GC components and systems, microwave digestion
products, and gel permeation chromatography products. Revenues from Asia
decreased due to increased competition in that region. Sales in Latin America
decreased due to adverse economic conditions in that region.
Gross profit for the first quarter of 2002 decreased to $2,170,000, or 43% of
revenues, compared to $3,012,000, or 46% of revenues for the same quarter of
2001. The decrease in gross profit was primarily due to decreased sales and a
decrease in manufacturing productivity, partially offset by a decrease in
warranty expense related to establishing a reserve for products shipped under
the agreement with Bechtel National, Inc., described above.
Research and development (R&D) expenses for the first quarter of 2002 increased
to $581,000, or 11% of revenues, compared to the first quarter of 2001 expenses
of $536,000, or 8% of revenues. 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
2002 increased to $1,922,000, or 38% of revenues, compared to $1,897,000, or 29%
of revenues for the same quarter of 2001. SG&A expenses for the first quarter of
2002 increased due to higher selling expenses, advertising and marketing costs,
and expenses for customer support.
Loss before income taxes for the first quarter of 2002 amounted to ($264,000),
compared to income of $655,000 for the same period of 2001. The loss for 2002
was primarily due to lower revenues and increased R&D expenses. The effective
tax rates were 34% for 2002 and 37% for 2001. Net loss for the first quarter of
2002 was ($174,000), compared to income of $410,000 in the same period of 2001.
Basic and diluted loss per share was $0.06 per share in the first quarter of
2002 compared to earnings of $0.15 per share for the same period of 2001.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $2,837,000 as of March 31, 2002, compared to
$3,140,000 as of December 31, 2001. Working capital, as of March 31, 2002, was
$11,293,000, compared to $11,478,000 as of December 31, 2001. Working capital,
as a percentage of total assets, was 58% as of March 31, 2002 and at December
31, 2001. The current ratio was 4.0 at March 31, 2002 and December 31, 2001.
Total liabilities-to-equity ratio was 24% as of March 31, 2002, compared to 25%
as of December 31, 2001.
Net cash flow provided by (used in) operating activities for the period ending
March 31, 2002, was $(165,000), as compared to $543,000 for the same period of
2001. The decrease in cash flow provided by operating activities for 2002 was
primarily due to a decrease in net income and changes in working capital. Net
cash flow provided by (used in) investing activities was $(144,000) for the
first quarter 2002, compared to $302,000 for the first quarter 2001. The
decrease in cash provided by investing activities was due to an increase in the
purchases of property, plant and equipment. Net cash flow provided by
7
(used in) financing activities for the first quarter 2002 was $5,000, compared
to ($77,000) for the first quarter 2001. The increase in cash flow used in
financing activities was due to fewer repurchases of the Company's Common Stock.
The Company has historically been able to fund working capital and capital
expenditures from operations, and expects to be able to finance its 2002 working
capital requirements from cash on hand and funds generated from operations.
However, demand for the Company's products is influenced by the overall
condition of the economy in which the Company sells its products, by the capital
spending budgets of its customers and by the Company's ability to successfully
meet, through its product offerings, the needs of its customers. The
environmental instrument markets in which the Company competes have been flat or
declining over the past several years, and the current economic downturn has
resulted in reduced purchasing and capital spending in many of the markets that
we serve worldwide. In particular, industrial and government customers are
currently in a downward cycle characterized by diminished product demand, excess
manufacturing capacity and the erosion of average selling prices. We are
uncertain how long the current downturn will last. The terrorist attacks on
September 11, 2001 may exacerbate or extend this downturn. Any further decline
in our customers' markets or in general economic conditions would likely result
in a further reduction in demand for our products and services and could harm
our results of operations and, therefore, harm the primary source of our cash
flows.
Other matters that could affect the extent of funds required within the
short-term and long-term include future acquisitions of other businesses,
extensive investments in product R&D activities, or spending to develop markets
for the Company's products. The Company may engage in discussions with third
parties to acquire new products or businesses or to form strategic alliances and
joint ventures. This type of transaction may create a need for increased cash
flow from sources other than the Company's current operating activities to
complete these transactions. In addition, the Company may engage in significant
R&D spending or market developing activities above current operating levels in
order to respond to perceived market opportunities. These activities may require
the Company to seek additional funds from sources other than its current
operating activities. The Company believes that if the need arises in the future
for funding of acquisitions, R&D or marketing activities, it would attempt to
attain such funding on terms that are favorable to the Company.
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
preferred stock at March 31, 2002 was $1,884,000.
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: None
8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) None (b) No reports on Form 8-K
were filed during the quarter ended March 31, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
O.I. CORPORATION
(Registrant)
Date: May 7, 2002 BY: /s/William W. Botts
--------------------
William W. Botts
President/CEO
Authorized Officer
Date: May 7, 2002 BY: /s/Juan M. Diaz
--------------------
Juan M. Diaz
Corporate Controller
Principal Accounting Officer
9