UNITED
STATES
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, 2010
OR
|
¨
|
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
|
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
þ
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes
¨
No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
See definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated
filer
¨
Accelerated
filer
¨
Non-accelerated
filer
¨
Smaller
reporting company
þ
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
¨
No
þ
As of
August 12, 2010, there were 2,361,628 shares of the issuer’s common stock, $.10
par value, outstanding.
Caution
Regarding Forward-Looking Information; Risk Factors
This
quarterly report on Form 10-Q contains forward-looking statements within the
meaning of United States securities laws, including the United States Private
Securities Litigation Reform Act of 1995. From time to time, our public filings,
press releases and other communications will contain forward-looking statements.
Forward-looking information is often, but not always, identified by the use of
words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast”,
“target”, “project”, “may”, “will”, “should”, “could”, “estimate”, “predict” or
similar words suggesting future outcomes or language suggesting an outlook.
Forward-looking statements in this quarterly report on Form 10-Q include, but
are not limited to, statements with respect to expectations of our prospects,
future revenues, earnings, activities and technical results.
Forward-looking
statements and information are based on current beliefs as well as assumptions
made by, and information currently available to, us concerning anticipated
financial performance, business prospects, strategies and regulatory
developments. Although management considers these assumptions to be reasonable
based on information currently available to it, they may prove to be incorrect.
The forward-looking statements in this quarterly report on Form 10-Q are made as
of the date it was issued and we do not undertake any obligation to update
publicly or to revise any of the included forward-looking statements, whether as
a result of new information, future events or otherwise, except as required by
applicable law.
By their
very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and risks that outcomes implied by
forward-looking statements will not be achieved. We caution readers not to place
undue reliance on these statements as a number of important factors could cause
the actual results to differ materially from the beliefs, plans, objectives,
expectations and anticipations, estimates and intentions expressed in such
forward-looking statements. These risks and uncertainties may cause our actual
results, levels of activity, performance or achievements to be materially
different from those expressed or implied by any forward-looking statements.
When relying on our forward-looking statements to make decisions, investors and
others should carefully consider the foregoing factors and other uncertainties
and potential events.
Our
public filings are available at www.oico.com and on EDGAR at
www.sec.gov.
Please
see “Part I, Item 1A—Risk Factors” of our annual report on Form 10-K for
the year ended December 31, 2009, as well as Part II, Item IA—“Risk
Factors” of this quarterly report on Form 10-Q, for further discussion regarding
our exposure to risks. Additionally, new risk factors emerge from time to time
and it is not possible for us to predict all such factors nor to assess the
impact such factors might have on our business or the extent to which any factor
or combination of factors may cause actual results to differ materially from
those contained in any forward looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
O.I.
Corporation
and
Subsidiary
Condensed
Consolidated Balance Sheets
(In
Thousands, Except Par Value)
|
|
|
June 30,
|
|
|
|
|
|
|
|
2010
|
|
|
December 31,
|
|
|
|
|
(Unaudited)
|
|
|
2009
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
4,582
|
|
|
$
|
4,614
|
|
|
Accounts
receivable, trade, net of allowance for doubtful accounts of $175 and
$206, respectively
|
|
|
5,782
|
|
|
|
4,371
|
|
|
Investments
available for sale,at market
|
|
|
489
|
|
|
|
-
|
|
|
Inventories,
net
|
|
|
5,404
|
|
|
|
5,657
|
|
|
Current
deferred income tax assets
|
|
|
651
|
|
|
|
651
|
|
|
Other
current assets
|
|
|
660
|
|
|
|
1,177
|
|
|
Total
current assets
|
|
|
17,568
|
|
|
|
16,470
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant, and equipment ,net
|
|
|
2,688
|
|
|
|
2,787
|
|
|
Long-term
deferred income tax assets
|
|
|
567
|
|
|
|
566
|
|
|
Intangible
assets, net
|
|
|
530
|
|
|
|
507
|
|
|
Other
assets
|
|
|
194
|
|
|
|
257
|
|
|
Total
assets
|
|
$
|
21,547
|
|
|
$
|
20,587
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable, trade
|
|
$
|
1,068
|
|
|
$
|
1,077
|
|
|
Accrued
compensation and other related expenses
|
|
|
1,086
|
|
|
|
761
|
|
|
Accrued
liabilities
|
|
|
1,117
|
|
|
|
1,030
|
|
|
Total
current liabilities
|
|
|
3,271
|
|
|
|
2,868
|
|
|
|
|
|
|
|
|
|
|
|
|
Uncertain
tax positions-Long term liabilities
|
|
|
27
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Common
stock, $.10 par value, 10,000 shares authorized, 4,103 shares issued,
2,362 and 2,363 outstanding, respectively
|
|
|
410
|
|
|
|
410
|
|
|
Additional
paid-in capital
|
|
|
5,572
|
|
|
|
5,515
|
|
|
Treasury
stock, 1,741 and 1,740 shares, respectively, at cost
|
|
|
(13,155
|
)
|
|
|
(13,134
|
)
|
|
Retained
earnings
|
|
|
25,425
|
|
|
|
24,901
|
|
|
Accumulated
other comprehensive loss, net
|
|
|
(3
|
)
|
|
|
-
|
|
|
Total
stockholders' equity
|
|
|
18,249
|
|
|
|
17,692
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
21,547
|
|
|
$
|
20,587
|
|
See Notes
to Unaudited Condensed Consoldiated Financial Statements.
and
Subsidiary
Condensed
Consolidated Statements of Operations and Comprehensive Income
(Loss)
(In
Thousands, Except Per $ Share Amounts)
(Unaudited)
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
5,515
|
|
|
$
|
4,070
|
|
|
$
|
10,245
|
|
|
$
|
7,901
|
|
|
Services
|
|
|
929
|
|
|
|
806
|
|
|
|
1,731
|
|
|
|
1,596
|
|
|
|
|
|
6,444
|
|
|
|
4,876
|
|
|
|
11,976
|
|
|
|
9,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
2,826
|
|
|
|
2,211
|
|
|
|
5,182
|
|
|
|
4,280
|
|
|
Services
|
|
|
367
|
|
|
|
293
|
|
|
|
611
|
|
|
|
674
|
|
|
|
|
|
3,193
|
|
|
|
2,504
|
|
|
|
5,793
|
|
|
|
4,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
3,251
|
|
|
|
2,372
|
|
|
|
6,183
|
|
|
|
4,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
1,868
|
|
|
|
1,629
|
|
|
|
3,695
|
|
|
|
3,605
|
|
|
Research
and development expenses
|
|
|
617
|
|
|
|
746
|
|
|
|
1,291
|
|
|
|
1,692
|
|
|
Operating
income (loss)
|
|
|
766
|
|
|
|
(3
|
)
|
|
|
1,197
|
|
|
|
(754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income, net
|
|
|
6
|
|
|
|
16
|
|
|
|
20
|
|
|
|
27
|
|
|
Income
(loss) before income taxes
|
|
|
772
|
|
|
|
13
|
|
|
|
1,217
|
|
|
|
(727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
(benefit) for income taxes
|
|
|
316
|
|
|
|
-
|
|
|
|
456
|
|
|
|
(244
|
)
|
|
Net
income (loss)
|
|
$
|
456
|
|
|
$
|
13
|
|
|
$
|
761
|
|
|
$
|
(483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income, net of tax,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
losses on investments
|
|
$
|
(3
|
)
|
|
$
|
-
|
|
|
$
|
(3
|
)
|
|
$
|
-
|
|
|
Comprehensive
income (loss)
|
|
$
|
453
|
|
|
$
|
13
|
|
|
$
|
758
|
|
|
$
|
(483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.19
|
|
|
$
|
0.01
|
|
|
$
|
0.32
|
|
|
$
|
(0.21
|
)
|
|
Diluted
|
|
$
|
0.19
|
|
|
$
|
0.01
|
|
|
$
|
0.32
|
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computing earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,366
|
|
|
|
2,354
|
|
|
|
2,365
|
|
|
|
2,353
|
|
|
Diluted
|
|
|
2,381
|
|
|
|
2,369
|
|
|
|
2,380
|
|
|
|
2,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared per share of common stock
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
See Notes
to Unaudited Condensed Consolidated Financial Statements.
and
Subsidiary
Condensed
Consolidated Statements of Cash Flows
(In
thousands)
(Unaudited)
|
|
|
Six
Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
Net
income / (loss)
|
|
$
|
761
|
|
|
$
|
(483
|
)
|
|
Depreciation
and amortization
|
|
|
240
|
|
|
|
271
|
|
|
Stock
based compensation
|
|
|
46
|
|
|
|
60
|
|
|
Change
in working capital
|
|
|
(176
|
)
|
|
|
755
|
|
|
Net
cash flows provided by operating activities
|
|
|
871
|
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Purchase
of investments
|
|
|
(494
|
)
|
|
|
-
|
|
|
Sales
and maturity of investments
|
|
|
-
|
|
|
|
197
|
|
|
Purchase
of property, plant and equipment
|
|
|
(130
|
)
|
|
|
(37
|
)
|
|
Proceeds
from sale of property, plant and equipment
|
|
|
2
|
|
|
|
4
|
|
|
Change
in other assets
|
|
|
(35
|
)
|
|
|
(55
|
)
|
|
Net
cash flows (used in) provided by investing activities
|
|
|
(657
|
)
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock pursuant to exercise of employee stock
options and employee stock purchase plan
|
|
|
28
|
|
|
|
43
|
|
|
Purchase
of Treasury stock
|
|
|
(37
|
)
|
|
|
-
|
|
|
Payment
of cash dividends on common stock
|
|
|
(237
|
)
|
|
|
(235
|
)
|
|
Net
cash flows used in financing activities
|
|
|
(246
|
)
|
|
|
(192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(32
|
)
|
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
|
Beginning
of period
|
|
|
4,614
|
|
|
|
3,134
|
|
|
End
of period
|
|
$
|
4,582
|
|
|
$
|
3,654
|
|
See Notes
to Unaudited Condensed Consolidated Financial Statements.
O.I.
CORPORATION and SUBSIDIARY
Notes to
Unaudited Condensed Consolidated Financial Statements
|
1.
|
Basis
of Presentation.
|
O.I.
Corporation (the “Company”, “we”, or “our”), an Oklahoma corporation, was
organized in 1963. 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
consolidated financial statements included in this report have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim reporting and include all normal and recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation. These financial statements have not been audited by an independent
accountant. The consolidated financial statements include the accounts of the
Company and its subsidiary. All inter-company transactions and balances
have been eliminated in the financial statements. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations
for interim reporting.
The
Company believes that the disclosures are adequate to prevent the information
from being misleading. However, these financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K, for the year ended December 31,
2009. The financial data for the interim periods presented may not
necessarily reflect the results to be anticipated for the complete
year.
Inventories,
net, which include material, labor, and manufacturing overhead, are stated at
the lower of first-in, first-out cost or market (in thousands):
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
4,560
|
|
|
$
|
4,763
|
|
|
Work-in-process
|
|
|
251
|
|
|
|
415
|
|
|
Finished
goods
|
|
|
1,191
|
|
|
|
1,073
|
|
|
Reserves
|
|
|
(598
|
)
|
|
|
(594
|
)
|
|
|
|
$
|
5,404
|
|
|
$
|
5,657
|
|
|
3.
|
Comprehensive
Income/(Loss).
|
Other
comprehensive income (loss) refers to revenues, expenses, gains and losses that
under generally accepted accounting principles are recorded as an element of
stockholders' equity. 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
following table sets forth the computation of basic and diluted earnings per
share (in thousands except per share data):
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Numerator,
earnings (loss) attributable to common stockholders
|
|
$
|
456
|
|
|
$
|
13
|
|
|
$
|
761
|
|
|
$
|
(483
|
)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic-weighted
average common shares outstanding
|
|
|
2,366
|
|
|
|
2,354
|
|
|
|
2,365
|
|
|
|
2,353
|
|
|
Dilutive
effect of employee stock options
|
|
|
15
|
|
|
|
15
|
|
|
|
15
|
|
|
|
-
|
|
|
Diluted
outstanding shares
|
|
|
2,381
|
|
|
|
2,369
|
|
|
|
2,380
|
|
|
|
2,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per common share
|
|
$
|
0.19
|
|
|
$
|
0.01
|
|
|
$
|
0.32
|
|
|
$
|
(0.21
|
)
|
|
Diluted
earnings (loss) per common share
|
|
$
|
0.19
|
|
|
$
|
0.01
|
|
|
$
|
0.32
|
|
|
$
|
(0.21
|
)
|
For the
three and six months ended June 30, 2010, 81,000 shares were not in-the-money
and were thus anti-dilutive. These shares were not used in the calculation
of diluted earnings per share for 2010. For the three and six months ended
June 30, 2009, there were 107,550 anti-dilutive shares.
|
5.
|
Stock-Based
Compensation.
|
On
January 1, 2006, we adopted the provisions of ASC 718 Compensation-Stock
Compensation. In accordance with ASC 718, our financial statements
recognize expense related to our stock-based compensation awards that were
granted after January 1, 2006, or that were unvested as of January 1, 2006,
based on their grant-date fair value.
Our
compensation cost for stock-based compensation for the three months ended June
30, 2010 and 2009 was $23,000 and $29,000, respectively. Our compensation
cost for stock-based compensation was $46,000 and $60,000, respectively for the
six months ended June 30, 2010 and 2009.
ASC 718
requires that cash flows from the exercise of stock options resulting from tax
benefits in excess of recognized cumulative compensation cost (excess tax
benefits) be classified as financing cash flows. There was no excess tax
benefit for the six months ended June 30, 2010 or 2009.
No
options were granted during the six months ended June 30, 2010 or
2009.
Other
information
As of
June 30, 2010, we had $81,000 of total unrecognized compensation cost related to
non-vested awards granted under our various share-based plans, which we expect
to recognize over a 0.8 year period.
We
received cash from options exercised during the first six months of fiscal years
2010 and 2009 of $1,000 and $14,000, respectively. The impact of these
cash receipts is included in financing activities in the accompanying
consolidated statements of cash flows.
The
Company’s practice has been to issue shares for option exercises out of treasury
stock as provided under the terms of the 2003 Incentive Compensation Plan. We
believe that our treasury stock holdings are sufficient to satisfy any exercises
in 2010.
The
Company categorizes its operations into two business segments: Laboratory
Products and Air-Monitoring Systems. Operations in these segments include
designing, manufacturing, marketing and selling analytical instruments. In
the Laboratory Products segment, the Company provides products generally used to
ensure regulatory compliance with environmental requirements for water.
Analytical instruments sold in the Air-Monitoring Systems segment are used for
trace-level detection of airborne gaseous chemical-warfare agents.
Following
is the Company’s business segment information for June 30, 2010 and
2009:
|
|
|
Laboratory
|
|
|
Air-Monitoring
|
|
|
|
|
|
|
|
Products
|
|
|
Systems
|
|
|
Total
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
2nd
Quarter Revenue
|
|
$
|
4,539
|
|
|
$
|
1,905
|
|
|
$
|
6,444
|
|
|
Year
to Date Revenue
|
|
|
8,378
|
|
|
|
3,598
|
|
|
|
11,976
|
|
|
2nd
Quarter Operating income
|
|
|
392
|
|
|
|
374
|
|
|
|
766
|
|
|
Year
to Date Operating income
|
|
|
569
|
|
|
|
628
|
|
|
|
1,197
|
|
|
Total
Assets
|
|
|
17,360
|
|
|
|
4,187
|
|
|
|
21,547
|
|
|
Capital
Expenditures
|
|
|
121
|
|
|
|
9
|
|
|
|
130
|
|
|
Depreciation
and amortization
|
|
|
223
|
|
|
|
17
|
|
|
|
240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2nd
Quarter Revenue
|
|
$
|
3,684
|
|
|
$
|
1,192
|
|
|
$
|
4,876
|
|
|
Year
to Date Revenue
|
|
|
6,911
|
|
|
|
2,586
|
|
|
|
9,497
|
|
|
2nd
Quarter Operating income (loss)
|
|
|
21
|
|
|
|
(24
|
)
|
|
|
(3
|
)
|
|
Year
to Date Operating income (loss)
|
|
|
(555
|
)
|
|
|
(199
|
)
|
|
|
(754
|
)
|
|
Total
Assets
|
|
|
16,093
|
|
|
|
3,551
|
|
|
|
19,644
|
|
|
Capital
Expenditures
|
|
|
36
|
|
|
|
1
|
|
|
|
37
|
|
|
Depreciation
and amortization
|
|
|
236
|
|
|
|
35
|
|
|
|
271
|
|
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The
following discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and the notes thereto. In addition, reference
should be made to our audited consolidated financial statements and notes
thereto and related “Management’s Discussion and Analysis of Financial Condition
and Results of Operations included in our annual report on Form 10-K for the
year ended December 31, 2009. This discussion also contains
forward-looking statements. Please see the “Caution Regarding
Forward-Looking Information; Risk Factors” above.
COMPANY
OVERVIEW
O. I.
Corporation, referred to as “the Company,” “OI,” “we,” “our” or “us”, was
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, we moved from Oklahoma City, Oklahoma to
College Station, Texas and changed our name to Oceanography International
Corporation. To better reflect current business operations, we again
changed our name to O.I. Corporation in July 1980, and in January 1989 we began
doing business as OI Analytical.
At OI, we
provide innovative products for chemical monitoring and analysis. Our
products perform chemical detection, analysis, measurement and monitoring
applications in a wide variety of industries including food, beverage,
pharmaceutical, semiconductor, power generation, chemical, petrochemical and
security. Headquartered in College Station, Texas, we sell our products
throughout the world utilizing a direct sales force as well as a network of
independent sales representatives and distributors.
RECENT
DEVELOPMENTS
During
the second quarter of 2010, we continued to experience improved performance with
sales up significantly in both operating segments. Increased sales
combined with our lower cost structure after last year’s cost savings measures
enabled us to generate operating earnings of $766,000 for the quarter and net
income of $456,000, or $0.19 per share.
This
represents our fifth sequential quarter of steadily improving operating
results.
After a
decline in cash during the first quarter due to increased working capital
requirements, our cash and short-term investments were up $457,000 as of June
30, 2010 compared to the previous year-end. We continue to anticipate
positive cash flow over the balance of the year. Cash and short-term
investments totaled $5,071,000 at the end of the second quarter with no bank
debt outstanding.
Results of
Operations
Revenues
|
|
|
Three
Months Ended
|
|
|
|
|
|
Six
Months Ended
|
|
|
|
|
|
|
|
June
30,
|
|
|
Increase
|
|
|
June
30,
|
|
|
Increase
|
|
|
(dollars
in 000’s)
|
|
2010
|
|
|
% of Rev.
|
|
|
2009
|
|
|
% of Rev.
|
|
|
(Decrease)
|
|
|
2010
|
|
|
% of Rev.
|
|
|
2009
|
|
|
% of Rev.
|
|
|
(Decrease)
|
|
|
Sales by Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laboratory
Products
|
|
$
|
4,539
|
|
|
|
70.4
|
%
|
|
$
|
3,684
|
|
|
|
75.6
|
%
|
|
$
|
855
|
|
|
$
|
8,378
|
|
|
|
70.0
|
%
|
|
$
|
6,911
|
|
|
|
72.8
|
%
|
|
$
|
1,467
|
|
|
Air-Monitoring
Systems
|
|
|
1,905
|
|
|
|
29.6
|
%
|
|
|
1,192
|
|
|
|
24.4
|
%
|
|
|
713
|
|
|
|
3,598
|
|
|
|
30.0
|
%
|
|
|
2,586
|
|
|
|
27.2
|
%
|
|
|
1,012
|
|
|
Total
|
|
$
|
6,444
|
|
|
|
100.0
|
%
|
|
$
|
4,876
|
|
|
|
100.0
|
%
|
|
$
|
1,568
|
|
|
$
|
11,976
|
|
|
|
100.0
|
%
|
|
$
|
9,497
|
|
|
|
100.0
|
%
|
|
$
|
2,479
|
|
Total
revenue increased $1,568,000, or 32.2%, for the three months ended June 30, 2010
compared to the same period in 2009, with sales substantially higher in both of
our operating segments.
In the
Laboratory Products segment, the bulk of our revenue increase was attributable
to improved domestic product sales, which were up 77% compared to the second
quarter of 2009. Last year’s second quarter results were substantially
impacted by the global economic downturn that also impacted most capital
equipment providers. Our domestic sales growth resulted from the continued
trend of slowly improving domestic demand, with roughly half our domestic sales
increase resulting from shipments of water testing products to the Gulf of
Mexico region due to the oil spill in that area. International product
sales increased 5% during the second quarter, due primarily to higher shipments
to China, Taiwan and the Asia Pacific region. Service revenues were
largely unchanged from last year.
In the
Air-Monitoring Systems segment our sales increased 60% during the second quarter
of 2010 compared to the same period of 2009 primarily due to the second of six
quarterly shipments under our previously announced contract with Bechtel
National, Inc. for the purchase of MINICAMS®. We expect quarterly
shipments to Bechtel to continue through the second quarter of
2011.
On a year
to date basis, our overall revenue increased $2,479,000, or 26.1%, compared to
the six months ended June 30, 2009. Our Laboratory Products segment sales
increased 21.2% and the Air-Monitoring Systems segment sales increased 39.1%
during this period. Domestic product sales provided the majority of growth in
the Laboratory Products segment, up 50% compared to the first six months of
2009, while international sales increased 10% during that same period.
International sales increased in all geographic regions except Latin
America. Air-Monitoring sales growth was attributable to shipments to
Bechtel National as noted above.
Gross
Profit
|
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
(dollars
in 000’s)
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit by Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laboratory
Products
|
|
$
|
2,124
|
|
|
|
46.8
|
%
|
|
$
|
1,614
|
|
|
|
43.8
|
%
|
|
$
|
4,006
|
|
|
|
47.8
|
%
|
|
$
|
3,039
|
|
|
|
44.0
|
%
|
|
Air-Monitoring
Systems
|
|
|
1,127
|
|
|
|
59.2
|
%
|
|
|
758
|
|
|
|
63.6
|
%
|
|
|
2,177
|
|
|
|
60.5
|
%
|
|
|
1,504
|
|
|
|
58.2
|
%
|
|
Total
|
|
$
|
3,251
|
|
|
|
50.5
|
%
|
|
$
|
2,372
|
|
|
|
48.6
|
%
|
|
$
|
6,183
|
|
|
|
51.6
|
%
|
|
$
|
4,543
|
|
|
|
47.8
|
%
|
Overall
gross profit for the three months ended June 30, 2010 increased $879,000, or
37.1%, compared to the second quarter of 2009 because of higher sales
volume. Margins in our Laboratory Products segment were up 3% on a
percentage of sales basis
because
of improved manufacturing variances associated with our increased production
levels. Margins in our Air-Monitoring Systems segment decreased 4.4% in
2010 due in large part to last year’s above average margin which resulted from a
favorable mix of service revenues.
On a year
to date basis, gross profit increased $1,640,000, or 36.1%, in 2010 compared to
last year because of higher sales volume. As a percentage of sales,
gross profit margins increased 3.8% from last year with margins up in both
segments.
Operating
Expenses
|
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
(dollars
in 000’s)
|
|
$
|
|
|
% of
Rev.
|
|
|
$
|
|
|
% of
Rev.
|
|
|
$
|
|
|
% of
Rev.
|
|
|
$
|
|
|
% of
Rev.
|
|
|
SG&A
Expenses by Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laboratory
Products
|
|
$
|
1,372
|
|
|
|
30.2
|
%
|
|
$
|
1,204
|
|
|
|
32.7
|
%
|
|
$
|
2,702
|
|
|
|
32.3
|
%
|
|
$
|
2,670
|
|
|
|
38.6
|
%
|
|
Air-Monitoring
Systems
|
|
|
496
|
|
|
|
26.0
|
%
|
|
|
425
|
|
|
|
35.7
|
%
|
|
|
993
|
|
|
|
27.6
|
%
|
|
|
935
|
|
|
|
36.2
|
%
|
|
Total
|
|
$
|
1,868
|
|
|
|
29.0
|
%
|
|
$
|
1,629
|
|
|
|
33.4
|
%
|
|
$
|
3,695
|
|
|
|
30.9
|
%
|
|
$
|
3,605
|
|
|
|
38.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R&D
Expenses by Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laboratory
Products
|
|
$
|
360
|
|
|
|
7.9
|
%
|
|
$
|
389
|
|
|
|
10.6
|
%
|
|
$
|
735
|
|
|
|
8.8
|
%
|
|
$
|
924
|
|
|
|
13.4
|
%
|
|
Air-Monitoring
Systems
|
|
|
257
|
|
|
|
13.5
|
%
|
|
|
357
|
|
|
|
29.9
|
%
|
|
|
556
|
|
|
|
15.5
|
%
|
|
|
768
|
|
|
|
29.7
|
%
|
|
Total
|
|
$
|
617
|
|
|
|
9.6
|
%
|
|
$
|
746
|
|
|
|
15.3
|
%
|
|
$
|
1,291
|
|
|
|
10.8
|
%
|
|
$
|
1,692
|
|
|
|
17.8
|
%
|
Total
selling, general and administrative ("SG&A") expenses for the three months
ended June 30, 2010 increased $239,000, or 14.7%, compared to the same period of
the prior year. In the Laboratory Products segment, SG&A expenses
increased primarily due to increased commissions and selling expenses related to
higher sales.
For the
six months ended June 30, 2010, SG&A expenses increased $90,000, or 2.5%,
compared to the same period of the prior year. SG&A expenses in the
Laboratory Products segment increased 1.2% due to increased sales commissions
and product support expenses. SG&A expenses in the Air-Monitoring
Systems segment increased because of higher service and product support
expenses.
During
the second quarter of 2010, research and development ("R&D") expenses
decreased by $129,000, or 17.3%, compared to the same period of last year.
The decline in Laboratory Products related R&D expenses during the second
quarter was attributable to lower expenses related to compensation, contract
labor, consulting and supplies. R&D expenses in the
Air-Monitoring Systems segment were down because of lower wage-related and
supplies expenses attributable to certain R&D related resources being
allocated to the Bechtel contract and the implementation of cost control
measures last year.
R&D
expenses for the six months ended June 30, 2010 decreased by $401,000, or 23.7%,
compared to the same period of the prior year. The decline in Laboratory
Products related R&D expenses during the first half of 2010 was due
primarily to decreased wage related expenses, consulting, travel and project
materials. R&D expenses in the Air-Monitoring Systems segment for the
year to date declined due to reduced wages and wage-related expenses, as well as
a reduction in consulting, travel and project materials expenses.
Operating Income
(Loss)
|
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
(dollars
in 000’s)
|
|
$
|
|
|
% of
Rev.
|
|
|
$
|
|
|
% of
Rev.
|
|
|
$
|
|
|
% of
Rev.
|
|
|
$
|
|
|
% of
Rev.
|
|
|
Operating
(Loss) Income by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laboratory
Products
|
|
$
|
392
|
|
|
|
8.6
|
%
|
|
$
|
21
|
|
|
|
0.6
|
%
|
|
$
|
569
|
|
|
|
6.8
|
%
|
|
$
|
(555
|
)
|
|
|
-8.0
|
%
|
|
Air-Monitoring
Systems
|
|
|
374
|
|
|
|
19.6
|
%
|
|
|
(24
|
)
|
|
|
-2.0
|
%
|
|
|
628
|
|
|
|
17.5
|
%
|
|
|
(199
|
)
|
|
|
-7.7
|
%
|
|
Total
|
|
$
|
766
|
|
|
|
11.9
|
%
|
|
$
|
(3
|
)
|
|
|
-0.1
|
%
|
|
$
|
1,197
|
|
|
|
10.0
|
%
|
|
$
|
(754
|
)
|
|
|
-7.9
|
%
|
For the
three months ended June 30, 2010, we generated total operating income of
$766,000, or 11.9% compared to an operating loss of $3,000, or (0.1%) in the
same period of the prior year.
On a year to date basis,
we generated total operating income of $1,197,000, or 10.0% compared to an
operating loss of $754,000, or (7.9%) during the first six months of 2009.
This increase in earnings was primarily attributable to increased sales in both
segments and decreased R&D expense.
Provision
(Benefit) for Income Taxes
Our provision for income taxes totaled
$316,000 and $456,000 for the three and six months ended June 30, 2010,
respectively, which resulted in an effective tax rate of 40.9% and 37.5%,
respectively based on our estimated tax rate. For the three months ended
June 30, 2009, no provision for income taxes was recognized. For the six
months ended June 30, 2009, we recorded a tax benefit of $244,000 due to the net
operating loss incurred in the first six months of last year. Our
effective tax rate increased from prior periods primarily due to the current
period's lack of research tax credit. The research tax credit expired on
December 31, 2009. This benefit will not be incorporated into our 2010
results unless it is extended by Congress.
Liquidity and Capital
Resources
Net cash
flow provided by operating activities for the six months ended June 30, 2010
totaled $871,000 compared to $603,000 during the comparable period of
2009. Our 2010 operating cash flow was favorably impacted by an increase
in net income to $761,000 compared to a loss of $483,000 in 2009. The
favorable impact of our improved profitability was partially offset by increased
working capital attributable to higher accounts receivable resulting from
increased sales in 2010.
Net cash
flow used in investing activities totaled $657,000 through the first six months
of 2010, compared to cash provided by investing activities of $109,000 for the
same period in 2009. The primary use of cash was the purchase of $494,000
of 3
rd
party
preferred stock acquired in an effort to improve the return on our funds.
Purchases of property, plant and equipment increased to $130,000 in 2010, up
$93,000 from last year due in large part to the purchase of a specialized
instrument that will be used for application support related to the combined TOC
and WS-CRDS technology we recently developed in conjunction with Picarro,
Inc. We have no material commitments for capital expenditures as of June
30, 2010.
Net cash
flow used in financing activities for the six months ended June 30, 2010,
totaled $246,000, compared to $192,000 for the same period of the prior
year. Dividend payments constituted the primary component of cash used in
financing activities during both periods presented. During 2010, we began
repurchasing shares of our common stock and have authority to purchase
approximately 131,000 additional shares under our current plan.
Cash,
cash equivalents and short-term investments totaled $5,071,000 as of June
30, 2010, compared to $4,614,000 as of December 31, 2009. We continue to
believe that our liquid assets are sufficient to fund working capital, R&D,
and capital expenditures for the near term. As the economy continues to
improve, we anticipate that cash flows from operations will generate sufficient
cash flow to meet our long-term liquidity needs.
Pursuant
to a resolution of our Board of Directors, all investment and other capital
allocation decisions are made for the Company by an investment committee
consisting of two independent directors and our CEO/CFO. We may pursue
investments in the form of acquisitions (including product lines) where we
believe attractive returns can be obtained. Further, we may determine under
certain market conditions that available capital is best utilized to fund
investments we believe offer the Company attractive return opportunities
whether or not related to our ongoing business activities. These
investments may include significant and highly concentrated direct investments
with respect to the equity securities of public companies. Any such investments
will involve risk, and stockholders should recognize that our balance sheet may
change depending on the performance of investments. Furthermore, such
investments could be subject to volatility that may affect both the recorded
value of the investments as well as our periodic earnings.
Our Board
of Directors declared a cash dividend on April 28, 2010 of $0.05 per common
share payable on June 1, 2010 to shareholders of record at the close of business
on May 14, 2010. The quarterly dividend was declared in connection with
the Board's decision in 2006 to establish an annual cash dividend of $0.20 per
share, payable at $0.05 per quarter. The payment of future cash dividends under
the policy is subject to the approval of our Board of
Directors.
Off-Balance Sheet
Arrangements
As of
June 30, 2010 we had no off-balance sheet arrangements.
Critical Accounting
Policies
Please
reference Part II-Item 7, Management’s Discussion and Analysis of Financial
Condition and Results of Operations, of our Annual Report on Form 10-K for the
year ended December 31, 2009.
Item 3. Quantitative
and Qualitative Disclosures About Market Risk
Not
Applicable
Item 4. Controls and
Procedures
We
maintain a set of disclosure controls and procedures designed to ensure that the
information we are required to disclose in reports filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. During the period from April 1, 2010 to June 30, 2010, an
evaluation under the supervision and with the participation of management,
including the Chief Executive Officer/CFO (our principal executive officer and
principal financial officer), of the effectiveness of our disclosure controls
and procedures was conducted. Based on that evaluation, the Chief
Executive Officer/CFO has concluded that, as of June 30, 2010, our disclosure
controls and procedures are effective.
Subsequent
to the date of his evaluation, there have been no changes in our internal
controls that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.
Our
management, including the Chief Executive Officer/CFO, does not expect that our
disclosure controls and procedures or our internal controls will prevent all
error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Part
II- Other Information
Item 1. Legal
Proceedings
In the normal course of our business, we are subject to legal
proceedings brought against us. There have been no material developments
to the legal proceedings described in Part I, Item 3, "Legal
Proceedings" in our Annual Report on Form 10-K for the year-ended December
31, 2009, and there are no new reportable legal proceedings for the
quarter ended June 30, 2010.
Item 1A. Risk
Factors
There
have been no material changes in the risk factors described in Part I, Item 1A,
“Risk Factors”, of our Annual Report on Form 10-K for the year ended December
31, 2009.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon
Senior Securities
None.
Item 4. Removed and
Reserved
Item 5. Other
Information
In the
Company’s 2010 Proxy Statement, it was stated that all proposals of
shareholders, including the nomination of persons to stand for election to the
Company’s Board of Directors, intended for inclusion in the Company’s 2011 Proxy
Statement shall be presented no later than one hundred and twenty (120) days
prior to the one year anniversary of the mailing of the preceding year’s proxy
statement, or December 17, 2010.
In
accordance with Section 11(a)(ii) of Article II of the Company’s Bylaws, the
Proxy Statement should have stated that all proposals of shareholders, including
the nomination of persons to stand for election to the Company’s Board of
Directors, intended for inclusion in the Company’s 2011 Proxy Statement shall be
presented no more than ninety nor less than sixty days prior to the first
anniversary of the preceding year’s annual meeting, or between February 17, 2011
and March 19, 2011. All proposals submitted for inclusion in the Proxy
Statement must comply with all requirements of the Securities and Exchange
Commission as well as the Company’s Bylaws.
Item 6.
Exhibits
|
10.1*
|
Amendment
No. 4 to the Value Added Reseller Program Agreement AHA47 By and Between
Agilent Technologies, Inc. and O.I. Corporation dated July 1, 2010.
(Portions of this Exhibit have been redacted and filed separately with the
Securities and Exchange Commission pursuant to a Confidential Treatment
Request).
|
|
|
|
|
31*
|
Principal
Executive Officer and Principal Financial Officer certification pursuant
to 18. U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
32*
|
Principal
Executive Officer and Principal Financial Officer certification pursuant
to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
* Filed
herewith
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 16, 2010
|
BY: /s/ J. Bruce
Lancaster
|
|
|
Chief
Executive Officer and Chief Financial Officer
|
|
|
(Principal
Executive and Principal Financial
Officer)
|
EXHIBIT
INDEX
|
EXHIBIT
|
|
|
|
NUMBER
|
|
EXHIBIT
TITLE
|
|
|
|
|
|
10.1*
|
|
Amendment
No. 4 to the Value Added Reseller Program Agreement AHA47 By and Between
Agilent Technologies, Inc. and O.I. Corporation dated July 1, 2010.
(Portions of this Exhibit have been redacted and filed separately with the
Securities and Exchange Commission pursuant to a Confidential Treatment
Request).
|
|
|
|
|
|
31*
|
|
Principal
Executive Officer and Principal Financial Officer certification pursuant
to 18. U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
32*
|
|
Principal
Executive Officer and Principal Financial Officer certification pursuant
to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|
* Filed
herewith
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