-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CFrgQW6GcZcHbY8UZDuoC9FNNSfaodmG8hRBXDkXkmOhAj6MZFWpcF6C9S+ulL3d qLhszuL7zIAXtE1cNjWvuQ== 0000950129-97-000982.txt : 19970312 0000950129-97-000982.hdr.sgml : 19970312 ACCESSION NUMBER: 0000950129-97-000982 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970311 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OI CORP CENTRAL INDEX KEY: 0000073773 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 730728053 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-06511 FILM NUMBER: 97554475 BUSINESS ADDRESS: STREET 1: P O BOX 9010 STREET 2: 151 GRAHAM RD CITY: COLLEGE STATION STATE: TX ZIP: 778429010 BUSINESS PHONE: 4096901711 MAIL ADDRESS: STREET 1: 151 GRAHAM RD STREET 2: P O BOX 9010 CITY: COLLEGE STATION STATE: TX ZIP: 778429010 FORMER COMPANY: FORMER CONFORMED NAME: OCEANOGRAPHY INTERNATIONAL CORP DATE OF NAME CHANGE: 19801205 10-K405 1 O.I. CORPORATION - 12/31/96 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K /X/ Annual report pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended December 31, 1996 / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 0-6511. O. I. CORPORATION (Exact name of registrant as specified in its charter) OKLAHOMA 73-0728053 (State of Incorporation) (IRS Employer Identification No.) 151 GRAHAM ROAD, BOX 9010 COLLEGE STATION, TEXAS 77842-9010 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including area code: (409) 690-1711 Securities Registered Pursuant to Section 12(b) of the Act: NONE Securities Registered Pursuant to Section 12(g) of the Act: Common Stock (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10K. X --- The aggregate market value of the voting stock (based upon the February 28, 1997 average of the high and low trade prices of these shares from the National Association of Securities Dealers) of O.I. Corporation held by non-affiliates was approximately $12,247,770. Number of shares outstanding of each of the issuer's classes of common stock, as of February 28, 1997: 4,005,164 shares. Item 9 and Part III information are incorporated by reference to the proxy statement for the annual meeting of shareholders to be held May 12, 1997. 2 PART I ITEM 1. BUSINESS GENERAL O.I. Corporation (the "Company") designs, manufactures, markets, and services products primarily for specialized applications in the analytical instruments markets, including sample preparation, detection, measurement, and monitoring instruments used to analyze chemical compounds. The Company's principal business strategy is to employ its product development capabilities, manufacturing processes and marketing skills in market niches where the Company can achieve a market leadership position. The Company's operations are conducted primarily through subsidiaries and divisions that are relatively autonomous, while its corporate headquarters staff oversees financial controls and assists in developing strategic direction. Management continually emphasizes improvements in quality, product performance and delivery time, cost reductions and other value adding activities. Although many of the markets for the Company's products are mature, the Company seeks growth opportunities through technological and product improvement and by acquiring and developing new products that can be sold through its distribution networks. DEVELOPMENT OF THE COMPANY The Company was organized as a corporation in 1963 as Clinical Development Corporation, a builder of medical and research laboratories. In 1969, the Company headquarters was moved from Oklahoma City, Oklahoma to College Station, Texas, where the Company became involved in commercializing technology developed in the School of Oceanography at Texas A&M University. In July 1969, the Company's name was changed to Oceanography International Corporation. In July 1980, the Company's name was changed to O.I. Corporation, and in January 1989, to better align the company name with the products offered and markets served, the Company began doing business as O-I-Analytical. The Company historically has expanded both through the acquisition of companies and product lines and through internal development of new products and technologies. During the past several years, the Company has completed four complementary acquisitions that have provided additional technologies, specialized manufacturing or product development expertise, and broader capabilities in marketing and distribution. On January 4, 1994, the Company acquired all the stock of CMS Research Corporation (CMS) of Birmingham, Alabama. On June 24, 1994, the Company purchased substantially all of the assets and assumed certain liabilities of Floyd Associates, Incorporated (Floyd) of Lake Wylie, South Carolina and accounted for the transaction as an asset purchase. On February 9, 1995, the Company acquired all the stock of Laboratory Automation, Inc. (LAI) of Columbia, Missouri, and accounted for the transaction as a purchase. On May 1, 1996, the Company acquired certain assets of the Alpkem business located in Wilsonville, Oregon, from Perstorp Analytical, Inc., a Delaware corporation, wholly owned by Perstorp AB of Sweden, and accounted for the transaction as an asset purchase. PRODUCTS The Company develops, manufactures, markets and services analytical, monitoring, and sample preparation products, components, and systems used to detect, measure, and analyze chemical compounds. The Company's analytical instruments and systems are used primarily in testing and research laboratories that are involved in the regulation or, analysis and testing of chemical compounds. GAS CHROMATOGRAPHY INSTRUMENTS The Company designs, manufactures, markets, and services components for gas chromatography, including detectors and sample introduction instruments. Gas chromatography, developed in 1952, is an analytical technique that separates organic compounds based on their unique physical and chemical 2 3 properties. The use of gas chromatography in a number of diverse applications has led to the continuous development of a broad range of sample introduction and detector devices. Advances in the field are based on technology improvements which provide sample introduction, faster analysis, lower level detection, and ease of use. Set forth below are descriptions of certain gas chromatograph (GC) instruments currently manufactured by the Company. - The Electrolytic Conductivity Detector (ELCD) selectively detects trace quantities of organic halogen, sulfur, and nitrogen. It is primarily used for analyzing volatile organic compounds (VOCs), pesticides, and poly-chlorinated biphenyls (PCBs) in drinking water, wastewater, soil, and air as required in U.S. Environmental Protection Agency (EPA) Methods 502.2 and 601. - The Photoionization Detector (PID) selectively detects trace quantities of aromatic and olefinic compounds, which are ionized by an ultra-violet light source. It is primarily used in VOC analysis, as required in U.S. EPA Methods 502.2 and 601, underground storage tank monitoring, and pharmaceutical applications. - The Flame Ionization Detector (FID) selectively detects materials that ionize in an air/hydrogen flame. - The Tandem PID/ELCD Detector combines the PID and ELCD for detection of VOCs in soil, water, and air. The unique tandem design requires only one GC detector port, increasing GC capability. - The Tandem PID/FID Detector combines the PID and FID to detect aromatic hydrocarbons. It is primarily used to analyze water, soil, or waste samples for aromatics associated with fuels and underground storage tank monitoring. - The Halogen Specific Detector (XSD)(TM) selectively detects trace amounts of halogen-containing compounds using GC. The XSD is simple to operate and highly reliable. It is primarily used to detect pesticides and PCBs, and in quality assurance and quality control testing. - The Flame Photometric Detector selectively detects sulfur and phosphorus compounds and up to 28 specific elements using GC. Applications include petrochemicals, organometallic, explosives, and chemical warfare agents. - The Purge-and-Trap Sample Concentrator (P&T) concentrates trace amounts of a liquid, solid, or gaseous sample for introduction into a GC. Autosamplers sequentially transfer samples to the P&T for automated sampling and increased laboratory productivity. - The P&T Autosamplers provided by the Company, automate the process of purging and trapping of water samples, soil samples, or both in a sequence. - The Headspace Sampler concentrates trace amounts from a gaseous sample for introduction into a GC. GC ANALYZER SYSTEMS The Company integrates its gas chromatography instruments with GCs and GC mass spectrometers (MS), obtained under a value added reseller agreement, to form GC analyzer systems. The Company's VOC Analyzer System, BTEX Analyzer System (Benzene, Toluene, Ethylbenzene, and Xylenes), Pesticide Analyzer System, and HF (Hydrogen Fluoride) Analyzer System are available in standard and custom configurations to meet market needs. 3 4 ORGANIC CARBON ANALYZER SYSTEMS The Company designs, manufactures, markets, and services Total Organic Carbon (TOC) Analyzers and related accessories that are used to measure organic and inorganic carbon levels in ultrapure water, drinking water, groundwater, wastewater, soils, and solids. The Company's TOC Analyzers are used in testing required by the U.S. EPA and testing ultrapure water used in U.S. pharmaceutical methods, the manufacture of semiconductors, power generation, and oceanographic research. TOC products produced by the Company include: - The High Temperature Persulfate Total Organic Carbon Analyzer which is primarily designed for ultra pure water analysis. - The Combustion Total Organic Carbon Analyzer which is primarily designed for wastewater and samples with pollutant materials. - The TOC Solids Module which is designed to be used together with a TOC analyzer to analyze solids or sludges. FLOW ANALYSIS SYSTEM The Company designs, manufactures, and markets Segmented Flow Analyzers (SFA), Flow Injection Analyzers (FIA), and field portable instruments. These instruments perform a wide range of analyses, including the measurement of nitrate, nitrite, phosphate, ammonia, chloride, alkalinity and sulfate in liquids. The Company's Cyanide (CN) Analyzer can perform total cyanide analysis in a number of industrial applications including cyanide testing in gold and silver mining, electroplating, metal finishing, and semiconductor operations. On-site water measurements can be performed with Alpkem's portable Aqua-Chek Water Analyzer, which simultaneously measures the pH, conductivity, and temperature of water and aqueous solutions. The SFA, FIA, and CN Analyzer products may be equipped with autosamplers to enhance productivity. CONTINUOUS EMISSIONS MONITORING (CEM) SYSTEMS The Company designs, manufactures, markets, and services a continuous air monitoring analyzer for monitoring VOCs. The U.S. Government has been the largest buyer of the Company's CEM analyzer with the primary application being monitoring of chemical warfare agents. The Company believes the commercial market offers potential applications including VOC monitoring of incineration of hazardous waste, landfill gases, Clean Air Act compliance and industrial hygiene. The CEM analyzer design is based on gas chromatography technology and includes a variety of configurations including a GC mainframe, sample inlets, separation, detectors, and data handling and reporting: - Sample Inlets include injectors, sample loops, concentrators, and autosamplers. - Separation is accomplished using a gas chromatographic column. The Company's modular design includes detector(s), electronics, sampling system, and gas supplies. The quick disconnect design provides for rapid column and detector replacement. - Detection includes flame-ionization, photoionization, flame photometric, and electrolytic conductivity. - Data Handling and Reporting is accomplished with proprietary software that provides for sequencing multiple sample inlet lines, integration of detector signals, alarm parameters, data calculation, and report conditions. SAMPLE PREPARATION PRODUCTS AND SYSTEMS The Company designs, manufactures, markets, and services sample preparation instrumentation used to prepare sample matrices for analysis. The most time-consuming part 4 5 of chemical analysis is sample preparation. Procedures, techniques, and instruments that can reduce total sample preparation time are highly desirable for analysis of chemical compounds. A description of the Company's sample preparation products and systems follows: - Microwave Digestion Systems serve multiple markets, including environmental, biological, metallurgical, geological, and industrial. Applications include acid digestion of aqueous inorganic samples in accordance with proposed U.S. EPA and other defined methods. The Company's microwave product features a modular design, including mainframe oven, both integrated and separate temperature and pressure control systems, and an external exhaust system. Through the use of specially designed digestion vessels, the Company's microwave system can process up to twelve samples simultaneously. The Company's patented digestion vessels' safety features include a disk for pressure relief and double-wall construction. - Automated Gel Permeation Chromatography (GPC) systems are used for preparation of tissue, food, industrial and environmental samples prior to analysis. Systems process up to 23 samples with unattended operation. The GPC system is widely recognized in regulatory methods for sample cleanup, including Federal Drug Administration (FDA), U.S. Department of Agriculture (USDA) and U.S. EPA. - ExCell Liquid/Liquid Extractor Systems provide electronically assisted extractions for up to six, one-liter aqueous samples in less than two hours. Programmable microprocessor controls automate all steps of sample handling, extraction and system rinsing. These ExCell extractors provide for the fastest possible sample preparation with minimal labor and enhanced recoveries. - Soxtherm Soxhlet Extractor Systems automate all traditional soxhlet methods for preparing solid samples. They extract up to six samples simultaneously five times faster than manual techniques. All extraction functions are automated, including solvent evaporation and recovery. The Soxtherm extractor conforms to current EPA methods. VALUE ADDED RESELLER The Company is a value-added reseller (VAR) for analytical instruments manufactured by Hewlett-Packard Company (HP). Under the terms of the agreement with HP, the Company purchases HP analytical instruments, including GCs and gas chromatography/mass spectrometers (GCMSs), and integrates them with Company-manufactured components and markets these analytical systems for environmental analysis to comply with EPA 500, 600, and 8000 Series Methods, and for other chemical analysis. The Company conducts its own marketing to generate sales leads. The Company obtains orders, configures systems, ships, installs, and provides support to products sold pursuant to the VAR agreement. The VAR agreement is subject to renewal annually. 5 6 SALES BY LOCATION All of the Company's assets are located in the United States and all sales are conducted in U.S. dollars. There have been no sales or transfers between industry segments or geographic areas during the last five fiscal years. Estimated net revenue attributable to the United States, export revenue as a group, and the number of countries in which export revenue was generated are as follows:
($ in thousands) 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------- Net Revenue: United States $15,568 $15,110 $16,794 $16,860 $19,239 Export 4,588 2,832 1,562 1,552 1,540 ------- ------- ------- ------- ------- Total $20,156 $17,942 $18,356 $18,412 $20,779 ======= ======= ======= ======= ======= % of Revenue: United States 77% 84% 91% 92% 93% Export 23% 16% 9% 8% 7% ------- ------- ------- ------- ------- Total 100% 100% 100% 100% 100% ======= ======= ======= ======= ======= Number of countries - export 35 31 26 28 28
MANUFACTURING The Company manufactures products at four locations in the U.S. The Company's manufacturing capabilities include electro-mechanical assembly, testing, integration of components and systems and calibration and validation of configured systems. The Company believes that its manufacturing processes are documented in accordance with applicable domestic and international regulations and standards. The Company's policy is to have its products certified pursuant to safety standards by one or more of the following agencies: Underwriters Laboratories (UL), Canadian Standards Association (CSA) and/or the European Committee for Electrotechnical Standardization (CE). These agencies and others also certify that instruments meet certain performance standards and that advertised specifications are accurate. The Company is in the process of obtaining ISO 9001 certification for its College Station, Texas manufacturing operation. As of January 1, 1996, instruments sold in Europe are required to have a CE mark. During 1995 and 1996, the Company incurred expenses relating to product modification and certification testing to ensure that certain of its products typically sold in Europe comply with CE requirements. MARKETING The Company markets and sells analytical components and systems that it produces and purchases for resale, provides on-site support services, and distributes expendables and accessories required to support the operation of products sold. The Company sells its products domestically through a direct sales channel to end users, and internationally through independent manufacturers' representatives and distributors. The Company's marketing program includes advertising, direct mail, seminars, trade shows, and telemarketing. The Company also benefits from marketing assistance received from HP in connection with the VAR agreement. TECHNICAL SUPPORT The Company's technical support staff provides after-sale support to ensure customer satisfaction. The Company offers training courses, publishes technical information, and provides application support for its customers. Products sold by the Company generally include a 90-day to one-year warranty. Customers may also purchase extended warranty contracts that provide coverage after the expiration of the initial warranty. The Company installs and services its products through its field service personnel in the United States and Canada and through distributors and manufacturers' representatives internationally. 6 7 RESEARCH AND DEVELOPMENT The analytical instrumentation industry is subject to rapid changes in technology. The Company's success is heavily dependent on its ability to continually improve its existing products and to introduce new products. Research and development costs, relating to both present and future products, are expensed as incurred, and such expenses were $1,811,000 in 1996, $1,937,000 in 1995, and $1,809,000 in 1994. The Company actively pursues development of potential new products, including custom configured GC systems and components, instrument control and data reporting software systems, dedicated analyzers, microwave systems and other sample preparation products. PATENTS The Company holds both United States and international patents and has both U.S. and international patent applications pending. The Company currently holds 26 patents, 1 of which expires before the year 2000, and 25 of which expire between the years 2002 and 2013. As a matter of policy, the Company vigorously pursues and protects its proprietary technology positions and seeks patent coverage on technology developments that it regards as material and patentable. While the Company believes that all of its patents and applications have value, no single patent or application is in itself essential to the Company's existence. COMPETITION The Company encounters aggressive competition in all aspects of its business activity. The Company competes with many firms in the design, manufacture, and sale of analytical instruments, principally on the basis of product technology and performance, quality and reliability, sales and marketing ability, product support, delivery, and price. Most of the Company's competitors have significantly greater financial resources, broader market coverage on a global basis, and greater breadth of product line and other resources than the Company. EMPLOYEES As of December 31, 1996, the Company had a total of 156 full-time employees. The Company employs scientists and engineers who perform research and development on potential new products. To protect the Company's proprietary information, the Company has employment and confidentiality agreements with its employees who come in contact with such information. None of the Company's employees are covered by a collective bargaining agreement. Management believes that relations between the Company and its employees are excellent. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company, their ages, positions, and offices, as of February 28, 1997, are as follows:
NAME AGE POSITION DATE ELECTED TO POSITION - ------------------ --- -------------------------------------- ------------------------ William W. Botts 54 President, Chief Executive Officer and 1985 Chairman of the Board 1986 Dr. Gary D. Sides 49 Vice President 1994 Jane A. Smith 48 Vice President/Corporate Secretary 1990
Prior to joining the Company, William W. Botts was Executive Vice President and Chief Operating Officer of The Brandt Company, a privately owned oil field service company headquartered in Houston, Texas, which was sold to TRW, Inc. in August 1982. He was named Vice President and General Manager of the Brandt Division of TRW Inc, a position he held until he joined the Company as President and Chief Operating Officer on February 1, 1985. Mr. Botts was named Chief Executive Officer of the Company on July 19, 1985, and Chairman of the Board of Directors of the Company on May 26, 1986. 7 8 Gary D. Sides, Ph.D., was employed with Southern Research Institute, a not-for-profit group in Birmingham, Alabama from 1977 to 1986. He founded CMS in June 1986, and served as the President and Chairman of the Board from 1986 to 1994. On January 4, 1994, he was named Vice President of the Company and continues his role as President of CMS. Jane A. Smith has been employed with the Company since 1973. She was named Assistant Corporate Secretary in 1976 and Corporate Secretary in 1986. On May 22, 1990, Mrs. Smith was named Vice President/Corporate Secretary. ENVIRONMENTAL REGULATIONS The Company believes it is in compliance with federal, state, and local laws and regulations involving the protection of the environment. The Company routinely handles small amounts of materials that may be deemed hazardous. Hazardous materials are primarily introduced into the Company's products by end users rather than by the Company. The Company believes there will be no material effect upon its capital expenditures, earnings, and competitive position caused by its compliance with federal, state, or local provisions regulating the discharge of materials into the environment or relating to the protection of the environment. SOURCES OF RAW MATERIALS The Company produces its products from raw materials, component parts, and other supplies that are generally available from a number of different sources. The Company has few long-term contracts with suppliers. For certain of its purchased materials, the Company has developed preferred sources on the basis of quality and service. There are several purchased components that are supplied by single source suppliers. There can be no assurance that these preferred or single sources will continue to make materials available in sufficient quantities, at prices, and on other terms and conditions that are adequate for the Company's needs. However, there is no indication that any of these preferred or single sources will cease to do business with the Company. The Company believes that in the event of any such cessation, adequate alternate sources would be available, although perhaps at increased costs to the Company. In addition, substitute components may require reconfiguration of certain products and may cause delays in filling customer orders. Although the Company occasionally uses subcontractors, such arrangements are not material to its business. BACKLOG - OPEN ORDERS The Company's backlog of orders on December 31, 1996 was approximately $3,366,285, compared to $1,458,000 as of December 31, 1995, and $1,693,000 as of December 31, 1994. The increase in the backlog at December 31, 1996 as compared to December 31, 1995 was due to a large government contract received in October 1996 and not scheduled to ship until 1997. The Company's policy is to include in its backlog only purchase orders or production releases that have firm delivery dates within one year. Recorded backlog may not result in sales because of purchase order changes, cancellations, or other factors. The Company anticipates that substantially all of its present backlog of orders will be shipped or completed during 1997. MAJOR CUSTOMERS No single customer accounted for more than 10% of revenue in 1996, 1995 or 1994. Federal, state and municipal governments accounted for 27% of revenue in 1996, 26% in 1995, and 33% in 1994. Export sales accounted for 23% of revenue in 1996, an increase from 16% in 1995 and 9% in 1994. - -------------------------------------------------------------------------------- ITEM 2. PROPERTIES The Company's headquarters, research, and manufacturing operations occupy approximately 28,650 square feet of space located on 11.29 acres of land in College Station, Texas. The Company rents and uses for storage a 4,500 square foot facility on a separate tract of land within one quarter mile from the Company's headquarters. CMS' 8 9 headquarters, including research and development, customer service, and manufacturing operations, occupy approximately 9,490 square feet, located in Hoover, a subdivision of Birmingham, Alabama. This space is leased until October 1998. LAI's headquarters, research and development, customer service and manufacturing operations occupy 11,700 square feet located in Columbia, Missouri. This space is leased until July 1997. Alpkem's manufacturing operations occupy 19,200 square feet located in Wilsonville, Oregon. This space is leased through May 1997. The Company is contemplating the construction of additional facilities in College Station to accommodate future growth and consolidation of certain existing operations. - -------------------------------------------------------------------------------- ITEM 3. LEGAL PROCEEDINGS From time to time, the Company has received, and in the future may receive, notice of claims against it, which in some instances have developed, or may develop, into lawsuits. In the opinion of the Company's management, based in part on advice of counsel, none of the claims currently pending will have a material adverse effect on the consolidated financial position and results of operations of the Company. On March 3, 1995, the Company filed a patent infringement complaint against a competitor in the Galveston Division of the U.S. District Court. The Company alleges that a product manufactured and sold by the competitor infringes on U.S. Patent No. 5,358,557 and 5,470,380 issued to the Company. The suit seeks to enjoin the manufacture and sale of the alleged infringing product and like products sold under different name designations and seeks unspecified damages. On June 17, 1996, a Motion by Defendant for Summary Judgment of Non-Infringement was granted. The Company is appealing the decision to the U.S. Court of Appeals for the Federal Circuit in Washington, DC. On February 13, 1996, the Company settled its lawsuit against a vendor and received approximately $290,000 in consideration thereof. In October 1996, Astoria-Pacific, Inc. (API), an Oregon corporation, filed a complaint against the Company and Perstorp Analytical, Inc. (Perstorp) in the Circuit Court of the State of Oregon for the County of Multnomah. API claims that the Alpkem product line purchased by the Company from Perstorp had been previously purchased by API, and therefore, those rights could not be sold to the Company. The Company believes it is an innocent third party in this matter. In the event an unfavorable verdict is entered against the Company, the Company will have a claim against Perstorp under the Purchase Agreement between the two companies. At this time, the Company intends to contest the case vigorously. - -------------------------------------------------------------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the security holders of the Company, through solicitation of proxies or otherwise, during the fourth quarter of 1996. 9 10 PART II - -------------------------------------------------------------------------------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS COMMON STOCK MARKET INFORMATION The Company's common stock trades on the Nasdaq Stock Market under the symbol: OICO. Information below is contained in a statistical report provided to the Company by the National Association of Securities Dealers, Inc. (NASD). The ranges of high and low trade prices for the Company's common stock for 1996 and 1995 were as follows:
1996 1995 -------------------------------------------------------------- HIGH LOW HIGH LOW ---- --- ---- --- First Quarter 4 1/4 2 5/8 4 5/8 3 3/4 Second Quarter 5 1/4 3 4 1/2 3 1/4 Third Quarter 4 3 1/2 4 2 3/4 Fourth Quarter 4 1/4 3 1/4 3 3/4 2 1/2
NOTE: The above quotations represent prices between dealers and do not include retail markup, markdown, or commission and may not necessarily represent actual transactions. DIVIDENDS The Company has never paid dividends. Management does not anticipate paying any dividends in the near future. APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK As of February 28, 1997, there were approximately 1,184 holders of record of the Company's common stock. 10 11 - -------------------------------------------------------------------------------- ITEM 6. SELECTED FINANCIAL DATA
($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------- Income statement data: Net revenue $20,156 $17,942 $18,356 $18,412 $20,779 Income before income taxes 1,469 1,507 2,131 2,257 3,003 Net income 1,003 1,023 1,545 1,405 1,950 Earnings per share $ 0.24 $ 0.24 $ 0.37 $ 0.34 $ 0.47 Balance sheet data: Total assets $19,186 $17,700 $15,979 $14,706 $12,470 Working capital 12,391 11,855 11,156 9,876 7,784 Shareholders' equity 14,961 14,212 12,882 11,150 9,485 Common size income statement data: Net revenue 100.0% 100.0% 100.0% 100.0% 100.0% Cost of revenue 50.0 51.5 55.2 54.4 53.7 ------- ------- ------- ------- ------- Gross profit 50.0 48.5 44.8 45.6 46.3 Selling, general and administrative 31.7 30.7 25.5 29.1 25.7 Research and development 9.0 10.8 9.9 5.7 7.3 Patent litigation expense 4.5 1.6 0.0 0.0 0.0 ------- ------- ------- ------- ------- Operating income 4.8 5.4 9.4 10.8 13.3 Other income (expense), net 2.5 3.0 2.2 1.5 1.1 ------- ------- ------- ------- ------- Income before income taxes 7.3 8.4 11.6 12.3 14.4 Provision for income taxes 2.3 2.7 3.2 4.7 5.0 ------- ------- ------- ------- ------- Net income 5.0% 5.7% 8.4% 7.6% 9.4% ======= ======= ======= ======= =======
- -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On May 1, 1996, the Company acquired certain assets of Alpkem Corporation (Alpkem), a division of Perstorp Analytical, Inc. The acquisition was made with a combination of cash and the Company's common stock and was accounted for as an asset purchase. Alpkem designs, manufactures and markets Segmented Flow Analyzers, Flow Injection Analyzers, and field portable instruments. Alpkem's principal customers are industrial businesses, semiconductor manufacturers, engineering and consulting firms, municipalities, and environmental testing labs. SUMMARY Net revenue increased 12% in 1996, compared to 1995, while net income was down 2% for the same period. The Company's financial position as of December 31, 1996 reflects an increase in working capital of 5% to $12,391,000, compared to $11,855,00 at December 31, 1995. Earnings per share were $0.24 in 1996, $0.24 in 1995, and $0.37 in 1994. 11 12 RESULTS OF OPERATIONS Net revenue was $20,156,000 in 1996, compared to $17,942,000 in 1995, and $18,356,000 in 1994. Export revenue increased by 62% to $4,588,000 in 1996, while domestic revenue increased 3% to $15,568,000. The Company believes its results of operations during 1995 and 1996 were impacted by adverse market conditions which affected all companies serving the environmental instruments market. Market conditions of the environmental instruments market have been significantly influenced by continued consolidation among environmental testing laboratories. This consolidation has resulted in fewer testing labs and, as a result thereof, excess equipment which has been sold at discounted prices to end users, thus reducing demand for the Company's products. The Company introduced and began shipping in the fourth quarter of 1996 a new Model 1020 Total Organic Carbon Analyzer for heavy particulated samples, an Autosampler for such product, and a module to allow solid samples to be analyzed using either one of the Company's TOC analyzers. The Company introduced and began shipping in 1995 a new TOC Analyzer Model 1010 and autosampler accessory Model 1051 both replacing prior generation products. Sales of TOC analyzers increased due to the new product introductions and efforts to sell to non-environmental industries, such as pharmaceuticals and semiconductors. Microwave product sales were higher in 1996 due to increased sales of the Company's Closed-Vessel Microwave Systems and sales of private label, open-vessel microwave systems, which began shipping in early 1996. Sales of GC components and systems declined in 1996 due to shrinking demand in the environmental market. Sales of GC analyzer systems, including VOC systems and BTEX systems, were lower in 1996 as compared to 1995. This decline, however, was partially offset by the Company's initiative during the year to enter the resale, lease and rental market for GC/MS systems configured with the Company's sample inlet systems. This initiative allows the Company to directly participate in the GC/MS market segment. Previously, the GC/MS system sold by others displaced GC systems offered by the Company that included detectors manufactured by the Company. By offering GC/MS systems, the Company joins the trend for environmental testing to be performed using MS detectors, rather than selective detectors. GC/MS systems sales have less value added by the Company than GC systems configured with the Company's selective detector; therefore, gross profit margins will be reduced to the extent that GC/MS systems sales increase. The Company is also positioning its GC components and systems to serve non- environmental markets, in order to offset shrinking demand in the environmental market. The HF analyzer, consisting of the Company's detectors and GC, is used in the petrochemical industry and is an example of the Company using its existing products to perform new applications that serve non-environmental markets. Sales of CEM systems increased in 1996 compared to 1995 due primarily to U.S. government purchases of chemical warfare agent monitoring systems. Management remains optimistic about applying CEM technology to air monitoring applications in the commercial market. The Company began selling Flow Analyzer products with the acquisition of Alpkem in May of 1996; therefore, there were no prior year sales of such products. During 1996, leasing sales decreased compared to 1995. Leases are generally three to five years and allow customers to manage their cash out flow against the income generated by their instruments. International revenues increased by 62% to $4,588,000, or 23% of total revenue in 1996 compared to $2,832,000, or 16% of total revenue in 1995, and $1,562,000, or 9% of total revenue in 1994. The Company has 77 distributors and representatives in 37 countries at December 31, 1996, compared to 35 distributors and representatives in 38 countries at December 31, 1995. Gross profit was 50% in 1996, compared to 48% in 1995, and 45% in 1994. During 1996, gross profit increased due to decreased depreciation expense related to demonstration equipment, decreased costs related to service revenue 12 13 and the receipt of $290,000 related to a legal settlement in February 1996. Selling, general, and administrative (SG&A) expenses were $6,404,000 in 1996, or 32% of revenue, compared to $5,512,000, or 31% of revenue in 1995, and $4,688,000, or 26% of revenue in 1994. The increase in SG&A expenses from 1995 to 1996 resulted from higher commissions due to the increase in sales, increased advertising and the accrual of fees for ISO 9000 certification. Other expenses, such as salaries, rent, utilities and telephone increased due to the acquisition of Alpkem. Research and development (R&D) expenditures amounted to $1,811,000, or 9% of revenue in 1996, compared to $1,937,000, or 11% of revenue in 1995, and $1,809,000, or 10% of revenue in 1994. R&D expenses decreased from 1995 to 1996 due to fewer people working on projects and a decrease in the purchase of supplies, offset in part by an increase in consulting fees. Additionally, the Company incurred expenses relating to product redesign and certification to qualify certain of its products for the CE mark. Patent litigation expenses were $901,000, or 5% of revenue, in 1996 compared to $285,000, or 2% of revenue, in 1995 and $0 in 1994. Legal billings in 1996 relating to the Company's claim that a competitor infringed a patent of the Company were approximately $1,031,000, offset in part by $130,000 from a reserve established in 1995. Such expenditures were higher in 1996 as a result of the Tekmar trial activity in 1996. Interest income decreased 18% to $398,000 in 1996 from $483,000 in 1995, which increased 32% from $366,000 in 1994. The decrease in interest income is due to a decrease in cash and cash equivalents during 1996, offset by interest income relating to sales type leases of $53,000 for 1996, compared to $31,000 in 1995. Cash and cash equivalents decreased in 1996 due to the purchase of treasury stock, the acquisition of Alpkem, and the purchase of investments. Income before income taxes declined 3% to $1,469,000, or 7% of revenue in 1996 from $1,507,000 or 8% of revenue in 1995, which decreased 29% from $2,131,000, or 12% of revenue in 1994. Income before tax declined in 1996 compared to 1995 due to the increase in patent litigation and SG&A expenses and the decrease in interest income, offset in part by the increase in sales. The Company's effective income tax rate was 32% in 1996, compared to 32% in 1995, and 28% in 1994. Net income decreased 2% to $1,003,000, or 5% of revenue for 1996 compared to $1,023,000, or 6% of revenue for 1995, which decreased 34% from $1,545,000, or 8% of revenue for 1994. Earnings per share were $0.24 for 1996, compared to $0.24 for 1995 and $0.37 for 1994 computed based on 4,146,777 shares outstanding for 1996, 4,287,556 in 1995, and 4,156,922 in 1994. 13 14 LIQUIDITY AND CAPITAL RESOURCES The Company considers a number of liquidity measures that aid in measuring the Company's ability to meet its financial obligations. Such ratios, working capital, and changes in cash and cash equivalents as of the end of the Company's last three years are as follows:
($ in thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------------ LIQUIDITY MEASURES Ratio of current assets to current liabilities 4.2 4.8 4.9 Total liabilities to equity 28% 25% 24% Days sales in accounts receivable 71 67 65 Average annual inventory turnover 3.2 4.0 4.7 Working capital $12,391 $11,855 $11,156 CHANGES IN CASH AND CASH EQUIVALENTS Net cash provided by (used in): Operating activities $ 511 $ 1,561 $ 146 Investing activities (3,447) 1,094 (5,870) Financing activities (604) 0 130 Net increase (decrease) in: Cash and cash equivalents $(3,540) $ 2,655 $(5,594) Cash and cash equivalents: Beginning of year 5,503 2,848 8,442 End of year 1,963 5,503 2,848
Working capital increased 5%, or $536,000 to $12,391,000 in 1996, compared to $11,855,000 in 1995. The current ratio of 4.2 for 1996 was down from 4.8 for 1995, primarily due to an increase in accounts payable, accrued compensation expense and accrued acquisition expenses related to Alpkem. The Company's cash position decreased to $1,963,000 in 1996 from $5,503,000 in 1995, primarily due to the acquisition of Alpkem, the purchase of treasury stock and the purchase of short-term investments. Average annual inventory turnover was lower at 3.2 in 1996, compared to 4.0 in 1995 due primarily to slower turns in inventories of acquired assets and an increase in finished goods in order to provide quicker delivery to customers. The number of days of sales in accounts receivable increased to 71 days in 1996, from 67 days in 1995, due to an increase in international sales, which typically have more extended term arrangements than domestic sales. Current liabilities increased to $3,839,000 in 1996 from $3,137,000 in 1995 due to an increase in unearned revenue and accrued compensation. Total liabilities represented 28% of equity in 1996, compared to 25% in 1995. Net cash flow provided by operating activities for 1996 was $511,000, compared to $1,561,000 in 1995. The decrease in cash flow from operations in 1996 was primarily due to an increase in accounts receivable and inventory and a decrease in net income, offset in part by an increase in accrued liabilities. All working capital account changes are net of the effect of the purchase of Alpkem. Net cash flow provided by (used in) investing activities for 1996 was ($3,447,000), compared to $1,094,000 in 1995. The decrease in cash flow from investing activities was primarily due to the purchase of investments. Net cash flow provided by financing activities was ($604,000) in 1996, compared to $-0- in 1995. The cash flow used in financing activities in 1996 was due to the purchase of treasury stock. The Company has historically been able to fund working capital and capital expenditures from operations, and 14 15 expects to be able to finance its 1997 working capital requirements from cash on hand and funds generated from operations. The Company is in the initial planning phase of a facilities expansion at its College Station location to accommodate future growth and consolidation of certain existing operations. The preliminary budget for the project is $1,500,000. The Company plans to complete the expansion by the fourth quarter of 1997. RISK FACTORS In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, The Company wishes to caution readers that the following important factors, among others, in some cases have affected, and in the future could affect, the Company's actual results and could cause its actual results in 1997 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. CHANGING PRICES/EFFECT OF INFLATION Inflation has not had a material impact on the Company's operations. The prices of some components purchased by the Company have increased in the past several years due in part to decreased volume. Certain other material and labor costs have increased, but the Company believes that such increases are approximately consistent with overall inflation rates. The Company believes that competition based on price is the significant factor affecting its customers' buying decisions. There is no assurance that the Company can pass along cost increases in the form of price increases or sustain profit margins that have been achieved in prior years. UNCERTAINTY OF GROWTH The environmental instrument markets in which the Company competes have been flat or declining over the past several years. The Company has identified a number of strategies it believes will allow it to grow its business, including acquiring complementary businesses; developing new applications for its technologies; and strengthening its presence in selected geographic markets. No assurance can be given that the Company will be able to successfully implement these strategies, or that these strategies will result in growth of the Company's business. RISKS ASSOCIATED WITH ACQUISITION STRATEGY One of the Company's growth strategies is to supplement its internal growth with the acquisition of businesses and technologies that complement or augment the Company's existing product lines. Certain businesses acquired by the Company within the past three years, have produced net operating losses and low levels of profitability. In addition, businesses that the Company may seek to acquire in the future may also be marginally profitable or unprofitable. In order for any acquired businesses to achieve the level of profitability desired by the Company, the Company must successfully change operations of the acquired companies and improve their market penetration. No assurance can be given that the Company will be successful in this regard. In addition, promising acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers and the need for regulatory approvals, including antitrust approvals. There can be no assurance that the Company will be able to complete pending or future acquisitions. In order to finance any such acquisitions, it may be necessary for the Company to raise additional funds either through public or private financing. Any equity or debt financing, if available at all, may be on terms which are not favorable to the Company and may result in dilution to the Company's shareholders. RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE, OBSOLESCENCE AND THE DEVELOPMENT AND ACCEPTANCE OF NEW PRODUCTS The market for the Company's products and services is characterized by rapid and significant technological change and evolving industry standards. New product introductions responsive to these factors require significant planning, design, development and testing at the technological, product and manufacturing process levels, and may render existing products and technologies uncompetitive or obsolete. There can be no assurance that the Company's products will not become uncompetitive or obsolete. In addition, industry acceptance of new technologies developed by the Company may be slow to develop due to, among other things, existing regulations written specifically for older technologies and general unfamiliarity of users with new technologies. 15 16 POSSIBLE ADVERSE EFFECT FROM CONSOLIDATION IN THE ENVIRONMENTAL MARKET AND CHANGES IN ENVIRONMENTAL REGULATIONS One of the important markets for the Company's products is environmental analysis. During the past three years, there has been a contraction in the market for analytical instruments used for environmental analysis. This contraction has caused consolidation in the businesses serving this market. Such consolidation may have an adverse impact on certain of the Company's businesses. In addition, most air, water, and soil analysis is conducted to comply with Federal, state, local, and foreign environmental regulations. These regulations are frequently specific as to the type of technology required for a particular analysis and the level of detection required for that analysis. The Company develops, configures, and markets its products to meet customer needs created by existing and anticipated environmental regulations. These regulations may be amended or eliminated in response to new scientific evidence or political or economic considerations. Any significant change in environmental regulations could result in a reduction in demand for the Company's products. RISKS ASSOCIATED WITH DEPENDENCE ON CAPITAL SPENDING POLICIES AND GOVERNMENT FUNDING The Company's customers include pharmaceutical and chemical companies, laboratories, government agencies, and public and private research institutions. The capital spending of these entities can have a significant effect on the demand for the Company's products. Any decrease in capital spending by any of the customer groups that account for a significant portion of the Company's sales could have a material adverse effect on the Company's business and results of operations. POSSIBLE ADVERSE IMPACT OF SIGNIFICANT INTERNATIONAL OPERATIONS Sales outside the United States accounted for approximately 23% of the Company's revenues in 1996, and the Company expects that international sales will continue to account for a significant portion of the Company's revenues in the future. Sales to customers in foreign countries are subject to a number of risks, including the following: agreements may be difficult to enforce and receivables difficult to collect through a foreign country's legal system; foreign customers may have longer payment cycles; foreign countries could impose withholding taxes or otherwise tax the Company's foreign income, impose tariffs, or adopt other restrictions on foreign trade; fluctuations in exchange rates may affect product demand; export licenses, if required, may be difficult to obtain and the protection of intellectual property in foreign countries may be more difficult to enforce. There can be no assurance that any of these factors will not have a material adverse effect on the Company's business and results of operations. COMPETITION The Company encounters and expects to continue to encounter intense competition in the sale of its products. The Company believes that the principal competitive factors affecting the market for its products include product performance, price, reliability, and customer service. The Company's competitors include large multinational corporations and their operating units. Some of the Company's other competitors have substantially greater financial, marketing, and other resources than those of the Company. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the promotion and sale of their products than the Company. In addition, competition could increase if new companies enter the market or if existing competitors expand their product lines or intensify efforts within existing product lines. There can be no assurance that the Company's current products, products under development or ability to discover new technologies will be sufficient to enable it to compete effectively with its competitors. RISKS ASSOCIATED WITH PROTECTION, DEFENSE AND USE OF INTELLECTUAL PROPERTY The Company holds patents relating to various aspects of its products, and believes that proprietary technical know-how is critical to many of its products. Proprietary rights relating to the Company's products are protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or are maintained in confidence as trade secrets. There can be no assurance that patents will issue from any pending or future patent applications owned by or licensed to the Company or that the claims allowed under any issued patents will be sufficiently broad to protect the Company's technology and, in the absence of patent protection, the Company may be vulnerable to competitors who attempt to copy the Company's products or gain access to its trade secrets and know-how. Proceedings initiated by the Company to protect its proprietary rights could result in substantial costs to the Company. There can be no assurance that competitors of the Company will not initiate litigation to challenge 16 17 the validity of the Company's patents, or that they will not use their resources to design comparable products that do not infringe the Company's patents. There may also be pending or issued patents held by parties not affiliated with the Company that relate to the Company's products or technologies. The Company may need to acquire licenses to, or contest the validity of, any such patents. There can be no assurance that any license required under any such patent would be made available on acceptable terms or that the Company would prevail in any such contest. The Company could incur substantial costs in defending itself in suits brought against it or in suits in which the Company may assert its patent rights against others. If the outcome of any such litigation is unfavorable to the Company, the Company's business and results of operations could be materially adversely affected. In addition, the Company relies on trade secrets and proprietary know-how which it seeks to protect, in part, by confidentiality agreements with its collaborators, employees, and consultants. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach or that the Company's trade secrets will not otherwise become known or be independently developed by competitors. - -------------------------------------------------------------------------------- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING Management is responsible for the integrity and objectivity of the data included in this report. We believe we have provided financial information (both audited and unaudited) that is representative of the Company's operations, reliable on a consistent basis, and relevant for a meaningful appraisal of the Company. The financial statements have been prepared in accordance with generally accepted accounting principles. Where necessary, they reflect estimates based on management's judgment. Established accounting procedures and related systems of internal control provide reasonable assurance that assets are safeguarded, that the books and records properly reflect all transactions, and that policies and procedures are implemented by qualified personnel. Management periodically reviews the accounting and control systems. The Company's Audit Committee, composed of at least two members of the Board of Directors who are not employees of the Company, meets regularly with representatives of management and the independent accountants to monitor the functioning of the accounting and control systems and to review the results of the audit performed by the independent accountants. The independent accountants and Company employees have full and free access to the Audit Committee without the presence of management. The Audit Committee recommends independent accountants for appointment by the Board. The independent accountants conduct an objective, independent examination of the financial statements. Their report appears as a part of the Company's Annual Report on Form 10-K. /s/ Julie A. Wright --------------------------------- Julie A. Wright, Controller /s/ William W. Botts --------------------------------- William W. Botts, President/CEO 17 18 REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors and Stockholders of O.I. Corporation In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 33 present fairly, in all material respects, the financial position of O.I. Corporation and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Houston, Texas January 30, 1997 18 19 CONSOLIDATED BALANCE SHEET
December 31, ------------------------------ 1996 1995 - ------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 1,963,174 $ 5,503,322 Investments 5,137,471 2,621,160 Accounts receivable-trade, net of allowance for doubtful accounts of $259,989 and $270,018, respectively 3,928,149 3,273,170 Investment in sales-type leases 312,359 245,632 Inventories 3,779,953 2,422,849 Deferred tax assets 809,938 735,000 Other current assets 298,832 191,174 ----------- ----------- Total current assets 16,229,876 14,992,307 Property, plant and equipment, net 1,548,002 1,590,804 Investment in sales-type leases, net of current 300,551 363,072 Other assets 1,107,262 753,391 ----------- ----------- Total assets $19,185,691 $17,699,574 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, trade $ 1,308,475 $ 849,697 Accrued liabilities 2,530,112 2,287,263 ----------- ----------- Total current liabilities 3,838,587 3,136,960 ----------- ----------- Deferred income taxes 386,352 351,000 ----------- ----------- Commitments and contingencies (Note 12) ----------- ----------- Stockholders' equity: Preferred stock, $0.10 par value, 3,000,000 shares authorized, no shares issued and outstanding Common stock, $0.10 par value, 10,000,000 shares authorized, 4,143,046 and 4,116,129 shares issued, respectively 414,305 411,613 Additional paid-in capital 4,586,661 4,730,669 Treasury stock, 32,482 and 0 shares, respectively, at cost (112,968) 0 Retained earnings 10,072,754 9,069,332 ----------- ----------- 14,960,752 14,211,614 ----------- ----------- Total liabilities and stockholders' equity $19,185,691 $17,699,574 =========== ===========
The accompanying notes are an integral part of this statement. 19 20 CONSOLIDATED STATEMENT OF INCOME
Years Ended December 31, ------------------------------------------------- 1996 1995 1994 - ---------------------------------------------------------------------------------------------------- Net revenue $20,156,448 $17,942,343 $18,356,194 Cost of revenue 10,076,740 9,240,786 10,135,286 ----------- ----------- ----------- Gross profit 10,079,708 8,701,557 8,220,908 Selling, general and administrative expenses 6,403,810 5,511,924 4,688,486 Research and development expenses 1,811,403 1,936,792 1,809,190 Patent litigation expense 900,951 284,959 0 ----------- ----------- ----------- Operating income 963,544 967,882 1,723,232 Other income (expense): Interest income 398,095 483,499 366,091 Other income 106,930 60,494 42,944 Interest expense 0 (4,649) (1,043) ----------- ----------- ----------- Income before income taxes 1,468,569 1,507,226 2,131,224 Provision for income taxes (465,147) (484,000) (586,536) ----------- ----------- ----------- Net income $ 1,003,422 $ 1,023,226 $ 1,544,688 =========== =========== =========== Earnings per share $ 0.24 $ 0.24 $ 0.37 =========== =========== ===========
The accompanying notes are an integral part of this statement. 20 21 CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31, ------------------------------------------------- 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 1,003,422 $ 1,023,226 $ 1,544,688 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 576,589 447,527 399,700 Deferred income taxes (39,586) (242,000) (19,673) Gain on disposition of property (6,639) (16,039) (2,743) Amortization of unearned compensation and other compensation 47,634 Changes in assets and liabilities, net of the effect of the purchase of Alpkem (1996) and LAI (1995): Accounts receivable (654,979) 370,013 (1,110,122) Inventories (757,104) 593,363 12,182 Other assets (111,863) (186,547) (243,901) Accounts payable 458,778 (501,477) (103,346) Accrued liabilities 42,850 72,541 (377,842) ----------- ----------- ----------- Net cash provided by operating activities 511,468 1,560,607 146,577 ----------- ----------- ----------- Cash flows from investing activities: Purchase of property, plant and equipment (299,540) (251,781) (369,502) Proceeds from sale of assets 18,900 36,150 10,206 Purchase of Alpkem (1996) and LAI (1995) (526,743) (1,173,706) Purchase of investments (8,710,000) (3,425,359) (7,526,026) Maturity of investments 6,124,000 5,917,000 2,300,000 Investment in patents and other intangibles (53,949) (7,621) (284,966) ----------- ----------- ----------- Net cash provided by (used in) investing activities (3,447,332) 1,094,683 (5,870,288) ----------- ----------- ----------- Cash flows from financing activities: Purchase of treasury stock (640,182) Proceeds from issuance of common stock 35,898 129,760 ----------- ----------- ----------- Net cash provided by (used in) financing activities (604,284) 0 129,760 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents (3,540,148) 2,655,290 (5,593,951) Cash and cash equivalents: Beginning of year 5,503,322 2,848,032 8,441,983 ----------- ----------- ----------- End of year $ 1,963,174 $ 5,503,322 $ 2,848,032 =========== =========== =========== Supplemental disclosures of cash flow information: Cash paid during year for: Interest $ 594 $ 4,705 $ 301 Income taxes 567,039 621,135 646,561
The accompanying notes are an integral part of this statement. 21 22 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Unearned Compensation Common Stock Additional and -------------------- Paid-in Stockholder Treasury Retained Shares Amount Capital Loans Stock Earnings - --------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993, as restated 4,018,650 $401,865 $4,370,410 $(123,556) $ 0 $ 6,501,418 Amortization of unearned com- pensation charged to opera- tions and repayment of stockholder loans 123,556 Exercise of stock options and employee stock awards 21,000 2,100 51,738 Tax benefit associated with exercised options 10,253 Net income 1,544,688 --------- -------- ---------- --------- --------- ----------- Balance, December 31, 1994 4,039,650 403,965 4,432,401 0 0 8,046,106 Issuance of shares in con- junction with the acquisi- tion of LAI 76,479 7,648 298,268 Net income 1,023,226 --------- -------- ---------- --------- --------- ----------- Balance, December 31, 1995 4,116,129 411,613 4,730,669 0 0 9,069,332 Purchase of treasury stock (640,182) Issuance of common and treasury shares in conjunction with the acquisition of Alpkem 26,917 2,692 144,955 202,353 Issuance of shares from treasury for exercise of stock options (290,625) 309,375 Issuance of shares from treasury to Employee Stock Purchase Plan 1,662 15,486 Net income 1,003,422 --------- -------- ---------- --------- --------- ----------- Balance, December 31, 1996 4,143,046 $414,305 $4,586,661 $ 0 $(112,968) $10,072,754 ========= ======== ========== ========= ========= ===========
The accompanying notes are an integral part of this statement. 22 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES O.I. Corporation (the Company) was organized in 1963. The Company develops, manufactures, markets and services analytical, monitoring, and sample preparation products, components, and systems used to prepare samples for analysis and to detect, measure, and analyze chemical compounds. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. REVENUE RECOGNITION Revenue and the related cost of sales are generally recognized upon shipment of goods with no substantial right of return. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. INVESTMENTS In January 1994, the Company adopted Statement of Financial Accounting Standards (FAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The adoption of FAS No. 115 did not have a material effect on the Company's financial position or results of operations. The Company's investments in debt securities are classified as held to maturity as the Company has the positive intent and ability to hold the investments until maturity. These investments are reported at amortized cost. LEASES The Company's leasing operations consist of the leasing of analytical instruments. The majority of the Company's leases are classified as sales-type leases. These leases expire over the next five years. INVENTORIES Inventories consist of electronic equipment and various components and are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment is recorded at cost and depreciated over the estimated useful lives using the straight-line method. LONG-LIVED ASSETS In accordance with Statement of Financial Accounting Standards No. 121 (FAS 121) "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", the Company reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Under FAS 121, an impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. No such impairment losses have been identified by the Company. PRODUCT WARRANTIES Products are sold with warranties ranging from 90 days to one year. Estimated expenses associated with these warranties are accrued in the accompanying financial statements. The Company also sells extended product warranties typically covering a period of nine months. Revenue from extended warranties is recorded ratably over the period and warranty charges are expensed as incurred. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. INCOME TAXES The Company uses the asset and liability approach to account for income taxes. This approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. 23 24 BUSINESS SEGMENT AND MAJOR CUSTOMERS The Company operates in a single segment. No single customer accounted for more than 10% of revenue in 1996, 1995, or 1994. Federal, state and municipal governments accounted for 27% of revenue in 1996, 26% in 1995, and 33% in 1994. Export sales accounted for approximately 23% of total revenue in 1996, 16% in 1995 and 9% in 1994. OTHER ASSETS Other assets primarily include acquired patents, licenses, customer lists, and trademarks that are amortized on a straight-line basis over 10-17 years. EARNINGS PER SHARE Earnings per share is calculated using the weighted-average number of shares outstanding assuming exercise of dilutive stock options. The number of shares that would be issued from the exercise of stock options has been reduced by the number of shares that could have been purchased from the proceeds at the estimated fair market value of the Company's common stock. The weighted-average number of shares used in the computation was 4,146,777 in 1996, 4,287,556 in 1995, and 4,156,922 in 1994. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of investments and trade receivables. The Company places its available cash in money market funds and short-term investment grade domestic corporate bonds. The Company's short-term investments are subject to fluctuations based on interest rates prevailing in the market place. The Company sells its products to large corporations, environmental testing laboratories, and governmental agencies. The majority of its customers are located in the United States and all sales are denominated in the U.S. dollar. Concentrations of credit risk with respect to trade receivables are limited due to the financial stability of the customers comprising the Company's customer base. The Company performs ongoing credit evaluations of its customers to minimize credit risk. As of December 31, 1996 and 1995, the Company had no significant concentrations of credit risk related to accounts receivable. However, the U.S. government does constitute a significant percent of the Company's sales. Any budget cuts affecting the chemical warfare programs or the U.S. Environmental Protection Agency may have a negative impact on the Company's future sales. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires the use of management estimates and judgments. RECENT ACCOUNTING DEVELOPMENTS In January 1996, the Company adopted FAS No. 123, "Accounting for Awards of Stock-based Compensation to Employees." The Statement encourages but does not require the fair value based method of accounting for stock compensation awards at the date the awards are granted. The Company continues to measure compensation cost for plans using the intrinsic value method and discloses the pro forma effect on net income had the company recognized expense for options based on the fair market value method (See Note 8). RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to current year presentation. - -------------------------------------------------------------------------------- NOTE 2: ACQUISITIONS On May 1, 1996, the Company purchased certain assets of Alpkem Corporation, a division of Perstorp Analytical. Alpkem designs, manufactures and markets Segmented Flow Analyzers, Flow Injection Analyzers and portable field instruments. The acquisition was for cash and the Company's common stock. The transaction was accounted for as a purchase, with results of the acquired operations being included from the date of acquisition. On February 9, 1995, the Company acquired Laboratory Automation, Inc. (LAI), an environmental instruments company headquartered in Columbia, Missouri. Under the terms of the agreement, the Company made a $1,000,000 capital investment in LAI, which was used to retire outstanding long-term debt, and acquired all of the 24 25 shares of LAI stock in exchange for 76,479 shares of the Company's common stock and $117,000. In addition, $880,000 of liabilities of LAI were reflected on the Company's consolidated balance sheet as of the closing date. The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired operations of LAI have been included in the results of operations since the date of acquisition. The purchase price has been allocated to the net assets acquired based on estimated fair market values at the date of acquisition. Pro forma results of operations for 1994 as if the acquisition had occurred at the beginning of 1994 are as follows:
(Unaudited) (In 000's) ----------- Revenues $21,632 Net income $ 1,469 Earnings per Share $ 0.35 =======
On January 4, 1994, the Company acquired CMS Research Corporation (CMS), a Birmingham, Alabama based company which specializes in the design, manufacture, and sale of air quality monitoring and analysis devices. In connection with the acquisition, the Company issued 650,000 shares of its common stock in exchange for all of the common stock of CMS. This acquisition was accounted for as a pooling of interests. There were no intercompany transactions between the Company and CMS prior to the acquisition. On June 24, 1994, the Company purchased substantially all of the assets of Floyd Associates, Inc. (Floyd), a North Carolina corporation headquartered in Lake Wylie, South Carolina. Floyd manufactures and markets microwave products used to prepare chemical compounds for analysis. The acquisition was for cash and royalties on future sales. - -------------------------------------------------------------------------------- NOTE 3: INVESTMENTS Investments considered held to maturity at December 31, 1996, consist of the following:
Gross Gross Amortized Market Unrealized Unrealized Cost Value Holding Gains Holding Losses ---------- ---------- ------------- -------------- Corporate bonds $5,137,471 $5,133,178 $372 $(4,665)
All of the investments at December 31, 1996 are scheduled to mature within one year. Market value is based upon quoted market prices for the investments. Short-term investments at December 31, 1995, consisted of the following:
Gross Gross Amortized Market Unrealized Unrealized Cost Value Holding Gains Holding Losses ---------- ---------- ------------- -------------- Corporate bonds $2,621,160 $2,621,662 $1,330 $(828)
25 26 - -------------------------------------------------------------------------------- NOTE 4: NET INVESTMENT IN SALES-TYPE LEASES The following sets forth the components of the net investment in sales-type leases as of December 31, 1996: Future minimum lease payments to be received are: 1997 $312,359 1998 169,365 1999 92,711 2000 38,147 2001 328 -------- 612,910 Less: amount relating to interest 76,493 -------- Present value of minimum lease payments to be received $536,417 ========
- -------------------------------------------------------------------------------- NOTE 5: INVENTORIES Inventories, which include material, labor, and overhead, on December 31, 1996 and 1995, consist of the following:
1996 1995 ----------------------------------------------------------- Raw materials $2,365,496 $1,116,559 Work-in-process 457,721 531,388 Finished goods 956,736 774,902 ---------- ---------- $3,779,953 $2,422,849 ========== ==========
- -------------------------------------------------------------------------------- NOTE 6: PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment on December 31, 1996 and 1995, consists of the following:
Estimated Useful lives 1996 1995 ----------------------------------------------------------------------------- Land $ 41,221 $ 41,221 Buildings 33-40 years 1,474,391 1,474,391 Furniture and equipment 3-10 years 2,280,231 2,049,542 ----------- ----------- 3,795,843 3,565,154 Less accumulated depreciation and amortization (2,247,841) (1,974,350) ----------- ----------- $ 1,548,002 $ 1,590,804 =========== ===========
26 27 - -------------------------------------------------------------------------------- NOTE 7: ACCRUED LIABILITIES Accrued liabilities on December 31, 1996 and 1995, consist of the following:
1996 1995 -------------------------------------------------------------------------- Accrued compensation $ 636,872 $ 482,515 Accrued warranties 551,342 639,438 Accrued acquisition expenses 219,600 54,867 Accrued legal expenses 127,847 209,483 Unearned revenue 347,790 209,717 Other liabilities and accrued expenses 646,661 691,243 ---------- ---------- $2,530,112 $2,287,263 ========== ==========
- -------------------------------------------------------------------------------- NOTE 8: STOCK OPTION AND STOCK PURCHASE PLAN In 1987, the Company established a stock option and stock appreciation rights plan (1987 Plan) qualified under Section 422 of the Internal Revenue Code of 1986. The 1987 Plan provides for the granting of options for the purchase of up to 500,000 shares of common stock of the Company with the options having an exercise price of not less than the par value of such stock. Employees of the Company are eligible for such grants. The options generally expire ten years from the date of grant and generally vest over three years from the date of grant. During 1991, the stockholders approved an amendment to the 1987 Plan allowing restricted stock grants. As a result of such amendment, the 1987 Plan allows for stock grants subject to vesting requirements that may be determined at the time of such grant. During 1996, the Company granted 81,500 options under the 1987 Plan, with a weighted average fair value of $3.46 at the date of grant. During 1992, the Company's Board of Directors, and during 1993, the Company's stockholders, approved the O.I. Corporation 1993 Incentive Compensation Plan (1993 Plan). The 1993 Plan provides for the granting of options to purchase up to 500,000 shares of the Company's common stock with the options having an exercise price of not less than the par value of such stock. Employees and non-employee directors of the Company are eligible for such grants. The options generally expire ten years from the date of grant. During 1996, the Company granted 4,000 options under the 1993 Plan, with a weighted average fair value of $3.81 at the date of grant. The 1993 Plan also allows for the granting of stock appreciation rights (SARs) and stock awards, although none have been granted. Options outstanding under the 1987 Plan and the 1993 Plan have exercise prices equal to the market value on the date of grant. At December 31, 1996, the Company has two stock-based compensation plans, which are described above. The Company applies APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed stock option plans. Had compensation cost for the Company's two stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of Statement of Financial Accounting Standards No. 123, Accounting for Awards of Stock-Based Compensation (FAS 123), the Company's net income and earnings per share would have 27 28 been reduced to the pro forma amounts indicated below:
1996 1995 ------ ------ Net income As reported 1,003 1,023 Pro forma 981 1,020 Earnings per share As reported $ 0.24 $ 0.24 Pro forma $0.237 $0.238
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1996, 1995, and 1994, respectively; dividend yield of zero for each year; expected volatility of 33, 27, and 28 percent; risk-free interest rates of 6.13, 5.63, and 7.79 percent; and expected lives of seven years for each year. The weighted average fair values at the date of grant for options granted during 1996, 1995, and 1994 were $1.73, $1.26, and $2.27, respectively. Activity under the 1987 Plan and the 1993 Plan for each of the three years in the period ended December 31, 1996 was as follows:
Weighted Average Shares Price per Share Price per Share - -------------------------------------------------------------------------------------------------- Options outstanding, December 31, 1993 356,500 $ $3.93 Options granted 71,100 3.94 - 5.00 4.58 Options exercised (21,000) 0.56 0.56 Options forfeited or cancelled (5,499) 3.63 - 6.00 4.94 -------- Options outstanding, December 31, 1994 401,101 4.21 Options granted 84,500 3.50 - 2.50 2.54 Options exercised 0 4.21 Options forfeited or cancelled (26,701) 3.94 - 6.00 5.01 -------- Options outstanding December 31, 1995 458,900 3.86 Options granted 85,500 3.375 - 3.81 3.48 Options exercised (110,000) 0.10 - 0.875 0.17 Options forfeited or cancelled (86,400) 2.50 - 14.00 7.09 -------- Options outstanding, December 31, 1996 348,000 4.12 ========
There were 194,510, 268,304, and 250,175 shares options exercisable at December 31, 1996, 1995 and 1994, respectively. The following table summarizes significant ranges of outstanding and exercisable options at December 31, 1996.
Options Outstanding Options Exercisable ------------------------------------- ------------------------ Weighted Weighted Weighted average average average Ranges of remaining exercise exercise Exercise prices Shares life in years price Shares price - --------------- ------- ------------- --------- ------ -------- 0.8125 20,000 1.0 0.8125 20,000 0.8125 2.50 - 3.75 192,500 8.4 3.06 60,341 2.99 3.75 - 5.63 103,500 6.3 4.46 82,169 4.39 5.63 - 8.45 10,000 6.2 6.01 10,000 6.01 14.00 22,000 5.0 14.00 22,000 14.00
28 29 In 1989, the Company established an Employee Stock Purchase Plan. Under the plan provisions, employees may purchase shares of the Company's common stock on a regular basis through payroll deductions. Any person who is a full-time employee of the Company is eligible to participate in the plan, with each participant's purchases limited to 10% of annual gross compensation. The plan is administered by the Compensation Committee of the Board of Directors. Shares of common stock are purchased in the open market. The Company pays all commissions and contributes an additional 15% for the purchase of shares that are distributed to eligible participating employees. The Company's contribution to the plan was not significant in any of the years reported. The aggregate number of shares of common stock available for purchase under this plan is 200,000. As of December 31, 1996, 29,671 shares had been purchased under the plan. - -------------------------------------------------------------------------------- NOTE 9. PREFERRED STOCK The Company's Articles of Incorporation authorize the issuance of up to 3,000,000 shares of preferred stock with $0.10 par value per share. The voting rights, dividend rate, redemption price, rights of conversion, rights upon liquidation, and other preferences are subject to determination by the Board of Directors. As of December 31, 1996, no preferred stock had been issued. - -------------------------------------------------------------------------------- NOTE 10. INCOME TAXES The Company adopted FAS No. 109, Accounting for Income Taxes, in 1993. The adoption had no material effect on the Company's consolidated financial position. The Company's operations are only taxed under domestic jurisdictions. The provision for income taxes is summarized as follows:
Years Ended December 31 -------------------------------------- 1996 1995 1994 ------------------------------------------------------------------ Current provision: Federal $384,583 $ 587,000 $541,503 State 120,150 139,000 64,706 Deferred provision (39,586) (242,000) (19,673) -------- --------- -------- $465,147 $ 484,000 $586,536 ======== ========= ========
The provision for income taxes differs from the amount computed by applying the federal statutory rates for the following reasons:
Years Ended December 31 ----------------------- 1996 1995 1994 --------------------------------------------------------------------- Tax at statutory rate 34.0% 34.0% 34.0% State income taxes, net of federal benefit 4.0 3.1 2.0 Research and development credit (5.9) Permanent differences (6.3) 6.3 Changes in valuation allowance (13.8) Other, net 2.5 (2.6) ---- ---- ---- 31.7% 32.1% 27.5% ==== ==== ====
29 30 Deferred tax assets (liabilities) are comprised of the following at December 31, 1996 and 1995:
December 31, ---------------------------- 1996 1995 ---------------------------- Noncurrent: Depreciation $(243,938) $(255,369) Deferred compensation 20,000 73,548 Intangibles (107,787) (113,224) Other (3,110) (4,475) --------- --------- Total noncurrent $(334,835) $(299,520) ========= ========= Current: Warranty reserve $ 220,537 $ 242,731 Accrued acquisition expenses 0 18,645 Bad debt allowance 102,224 100,812 Inventory reserve 199,700 203,508 Uniform capitalization 177,046 63,184 Accrued commissions 0 5,694 Accrued legal 51,139 56,700 Accrued vacation 59,292 43,763 --------- --------- Total current $ 809,938 $ 735,037 --------- --------- Net tax asset before valuation allowance 475,103 435,517 Valuation allowance (51,517) (51,517) --------- --------- Net deferred tax asset (liability) $ 423,586 $ 384,000 ========= =========
In connection with the acquisition of LAI in February 1995, the future tax effects of the differences between the tax bases and the fair values of acquired net assets were recorded, resulting in a net increase in deferred tax assets of approximately $150,000. - -------------------------------------------------------------------------------- NOTE 11: EMPLOYEE BENEFIT PLANS The Company maintains a Retirement Savings Plan (the Plan) for its employees that allows participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code. The Company's contributions to the Plan are discretionary. Employees vest immediately in their contributions and vest in the Company's contributions ratably over five years. The Company contributed $100,000, $90,000 and $90,000 to the Plan for the years ended December 31, 1996, 1995, and 1994, respectively. - -------------------------------------------------------------------------------- NOTE 12: COMMITMENTS AND CONTINGENCIES The Company has agreed to pay the former owner of Floyd a royalty equal to 5% of the net revenue earned from microwave based products up to a maximum amount of $1,182,500. No minimum payments are required in the agreement. The Company recognized royalty expense of $51,683, $28,233 and $9,000 in 1996, 1995 and 1994, respectively. The Company has entered into operating leases for certain of its facilities. These operating leases expire in 1997 and in 1998. Rental expense recognized in 1996, 1995, and 1994 was $229,000, $184,000 and $133,000, respectively. Future minimum rental payments under these leases for the years 1997 and 1998 are $156,745, and $94,109, respectively. 30 31 - -------------------------------------------------------------------------------- NOTE 13: RELATED PARTY TRANSACTION In January 1996, the Company purchased from Gary D. Sides, Vice President of the Company, 162,658 shares of the Company's common stock at a price of $2.75 per share. The Company also purchased 10,721 shares from an employee of CMS at the same price. - -------------------------------------------------------------------------------- NOTE 14: QUARTERLY INFORMATION (UNAUDITED) Quarterly financial information for 1996 and 1995, is summarized as follows:
($ in thousands, except per share amounts) First Second Third Fourth 1996 Qtr. Qtr. Qtr. Qtr. - ------------------------------------------------------------------------------------- Net revenue $4,648 $5,094 $5,107 $5,307 Gross profit 2,477 2,405 2,445 2,753 Net income 214 224 185 380 Earnings per share $ 0.05 $ 0.05 $ 0.04 $ 0.10
($ in thousands, except per share amounts) First Second Third Fourth 1995 Qtr. Qtr. Qtr. Qtr. - ------------------------------------------------------------------------------------- Net revenue $4,702 $4,425 $4,450 $4,365 Gross profit 2,184 2,113 2,158 2,247 Net income 203 221 300 299 Earnings per share $ 0.05 $ 0.05 $ 0.07 $ 0.07
- -------------------------------------------------------------------------------- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE. PART III - -------------------------------------------------------------------------------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information relating to the identification, business experience, and directorships of each director and nominee for director of the Company, required by Item 401 of Regulation S-K and presented in the section entitled "Election of Directors-Nominees for Board of Directors" of the Company's Proxy Statement for the annual meeting of shareholders on May 12, 1997 (the "Proxy Statement"), is hereby incorporated by reference. See Item 1 for information relating to the identification and business experience of the Company's executive officers. The information relating to persons subject to Section 16 of the Securities Exchange Act of 1934 and the timeliness with which they have filed Forms 3, 4, and 5, required by Item 405 of Regulation S-K and presented in the section titled "Section 16(a) Beneficial Ownership Reporting Compliance" of the Proxy Statement is hereby incorporated by reference. 31 32 William R. Hart, Vice President/Director of Marketing, left the Company effective September 30, 1996 and started an independent sales business. Dennis D. Schupp, Vice President, resigned effective February 9, 1997. Mr. Schupp also served as president of LAI. - -------------------------------------------------------------------------------- ITEM 11. EXECUTIVE COMPENSATION The information relating to the cash compensation of directors and officers, required by Item 402 of Regulation S-K and presented in the section entitled "Election of Directors-Compensation of Directors" and "Election of Directors- Compensation of Executive Officers" of the Company's Proxy Statement for the annual meeting of shareholders on May 12, 1997, is hereby incorporated by reference. - -------------------------------------------------------------------------------- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information relating to security ownership required by Item 403 of Regulation S-K, which is presented in the section entitled "Security Ownership of Certain Beneficial Owners and Management" of the Company's Proxy Statement for the annual meeting of shareholders on May 12, 1997, is hereby incorporated by reference. - -------------------------------------------------------------------------------- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information relating to relationships and transactions required by Item 404 of Regulation S-K, which is presented in the section, "Election of Directors -- Executive Compensation -- Certain Transactions, Employment Contracts, Termination of Employment and Change-in-Control Arrangements" of the Company's Proxy Statement for the annual meeting of shareholders on May 12, 1997, is hereby incorporated by reference. 32 33 PART IV - -------------------------------------------------------------------------------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Consolidated Financial Statements of O.I. Corporation and its subsidiary that are included in Part II, Item 8:
Page Report of Independent Accountants 18 Consolidated Balance Sheet at December 31, 1996 and 1995 19 Consolidated Statement of Income for the years ended December 31, 1996, 1995, and 1994 20 Consolidated Statement of Cash Flows for the years ended December 31, 1996, 1995, and 1994 21 Consolidated Statement of Stockholders' Equity for the years ended December 31, 1996, 1995, and 1994 22 Notes to Consolidated Financial Statements 23
(a) 2. Financial Statement Schedules required to be filed by Item 8 of this Form: All schedules are omitted as they are not required, or are not applicable, or the required information is included in the financial statements or notes thereto. (a) 3. Exhibits 3.1 Articles of Incorporation of the Company, as amended (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 33-24505) and incorporated herein by reference). 3.2 Bylaws of the Company (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (No. 33-24505) and incorporated herein by reference). *10.1 Amended and Restated 1987 Stock Option and SAR Plan (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-24505) and incorporated herein by reference). *10.2 Employee Stock Purchase Plan (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-62209) and incorporated herein by reference). *10.3 Employment Agreement between the Company and William W. Botts. 10.4 Value-Added Reseller Agreement between the Company and Hewlett-Packard Company (filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). *10.5 1993 Incentive Compensation Plan (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). 33 34 10.6 Registration Rights Agreement among O.I. Corporation and the former shareholders of CMS Research Corporation dated January 4, 1994 (filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 23.1 Consent of Price Waterhouse LLP 99.1 The O.I. Corporation definitive Proxy Statement, dated March 24, 1997 is incorporated by reference as an Exhibit hereto for the information required by the Securities and Exchange Commission, and, except for those portions of such definitive proxy statement specifically incorporated by reference elsewhere herein, such definitive proxy statement is deemed not to be filed as a part of this report. (b) Reports on Form 8-K. No Form 8-K was filed for the quarter ended December 31, 1996. - ---------- * Management contract or compensatory plan or arrangement. 34 35 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. O. I. CORPORATION /s/ William W. Botts -------------------------- Date: February 17, 1997 By: William W. Botts President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ William W. Botts President, Chief Executive Officer, February 17, 1997 - ------------------------ Director and Principal Financial Officer William W. Botts /s/ Julie A. Wright Controller, Principal Accounting Officer February 17, 1997 - ------------------------ Julie A. Wright /s/ Jack S. Anderson Director February 17, 1997 - ------------------------ Jack S. Anderson /s/ J. Lester Heath, Jr. Director February 17, 1997 - ------------------------ J. Lester Heath, Jr. /s/ Edwin B. King Director February 17, 1997 - ------------------------ Edwin B. King /s/ Craig R. Whited Director February 17, 1997 - ------------------------ Craig R. Whited
35 36 INDEX TO EXHIBITS Exhibit No. Description 3.1 Articles of Incorporation of the Company, as amended (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 33-24505) and incorporated herein by reference). 3.2 Bylaws of the Company (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (No. 33-24505) and incorporated herein by reference). *10.1 Amended and Restated 1987 Stock Option and SAR Plan (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-24505) and incorporated herein by reference). *10.2 Employee Stock Purchase Plan (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-62209) and incorporated herein by reference). *10.3 Employment Agreement between the Company and William W. Botts. 10.4 Value-Added Reseller Agreement between the Company and Hewlett-Packard Company (filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). *10.5 1993 Incentive Compensation Plan (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). 10.6 Registration Rights Agreement among O.I. Corporation and the former shareholders of CMS Research Corporation dated January 4, 1994 (filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 23.1 Consent of Price Waterhouse LLP 27.1 Financial Data Schedule 99.1 The O.I. Corporation definitive Proxy Statement, dated March 24, 1997 is incorporated by reference as an Exhibit hereto for the information required by the Securities and Exchange Commission, and, except for those portions of such definitive proxy statement specifically incorporated by reference elsewhere herein, such definitive proxy statement is deemed not to be filed as a part of this report. - ---------- * Management contract or compensatory plan or arrangement. EX-10.3 2 EMPLOYMENT AGREEMENT - WILLIAM W. BOTTS 1 EXHIBIT 10.3 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into effective as of May 1, 1996 by and between O. I. Corporation, an Oklahoma corporation ("Company"), and William W. Botts ("Employee"). WHEREAS, the Company employs Employee and desires to continue such employment relationship and Employee desires to continue such employment; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties, and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Employment. The Company hereby employs Employee, and Employee hereby accepts employment by the Company, on the terms and conditions set forth in this Agreement. 2. Term of Employment. Subject to the provisions for earlier termination provided in the Agreement, the term of this Agreement ("Term") shall commence on the effective date of this Agreement as stated above and shall terminate on December 31, 1998; provided, however, commencing on January 1, 1997 and on each January 1 thereafter, the Term shall automatically be extended one additional year unless, not later than September 30 of the preceding year, the Board of Directors of the Company ("Board") shall give written notice to Employee that the Term shall cease to be so extended. In no event, however, shall the Term extend beyond the end of the calendar month in which Employee's 65th birthday occurs. 3. Employee's Duties. During the Term, Employee shall serve as the President and Chief Executive Officer of the Company, with such customary duties and 2 responsibilities as may from time to time be assigned to him by the Board, provided that such duties are at all times consistent with the duties of such position. Employee agrees to devote his full attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the duties and responsibilities assigned to Employee hereunder, to use reasonable best efforts to perform faithfully and efficiently such duties and responsibilities and shall not, either directly or indirectly, enter into any business or employment with or for any person, firm, association or corporation other than with the Company during the Term; provided however, that Employee shall not be prohibited form making financial investments in any other company or business or from serving on the board of directors of any other company. Employee shall at all times observe and comply with all lawful directions and instructions of the Board. 4. Base Compensation. For services rendered by Employee under this Agreement, the Company shall pay to Employee a base salary ("Base Compensation") of $123,250 per annum payable in accordance with the Company's customary payroll practice for its executive officers. The amount of Base Compensation shall be reviewed by the Board on an annual basis as of the close of each fiscal year of the Company and may be increased as the Board may deem appropriate. Employee's Base Compensation, as increased from time to time, may not thereafter be decreased unless agreed to by Employee. 5. Additional Benefits. In addition to the Base Compensation provided for in Section 4 herein, Employee shall be entitled to the following: (a) Expenses. The Company shall, in accordance with any rules and policies that it may establish from time to time for executive officers, reimburse Employee for -2- 3 business expenses reasonably incurred in the performance of his duties. It is understood that Employee is authorized to incur reasonable business expenses for promoting the business of the Company, including reasonable expenditures for travel, lodging, meals and client or business associate entertainment. Requests for reimbursement for such expense must be accompanied by appropriate documentation. (b) Life Insurance. (i) The Company has purchased and will maintain, for the duration of this Agreement, an insurance policy in the amount of $750,000 on the life of Employee. Employee will own and benefit from such insurance, and the Company will have no interest whatsoever in such policy (unless otherwise mutually determined by Employee and the Board). (ii) The Company may, in its discretion, apply for and procure as owner and for its own benefit, insurance on the life of Employee, in such amounts and in such form or forms as the Company may choose. Employee shall have no interest whatsoever in any such policy or policies (unless otherwise determined by the Board), but he shall, at the request of the Company, submit to such medical examinations, supply such information and execute such documents as may be required by the insurance company or companies to whom the Company has applied for such insurance. (c) Automobile Allowance. Employee shall be entitled to the use of an automobile provided by the Company, or alternatively, at Employee's discretion, to receive monthly an automobile allowance payable on the first of each month during the -3- 4 Term, which will fully reimburse Employee for the cost of leasing or purchasing of an automobile for Employee's business use. The Company shall apply for and procure for Employee's benefit, insurance on the automobile, in such amounts and in such form or forms as the Company may choose. The Company shall reimburse Employee for gasoline expenditures related to business use, repairs and other maintenance expenses incurred, provided the requests for reimbursement are accompanied by appropriate documentation. (d) General Benefits. Employee shall be entitled to receive all fringe benefits customarily offered by the Company to its executive officers, including without limitation participation in any incentive plans offered to key employees, the various employee benefit plans or programs provided to the employees of the Company in general, subject to the eligibility requirements with respect to each of such benefit plans or programs, and such other benefits or perquisites as may be approved by the Board during the Term of this Agreement. Nothing in this paragraph shall be deemed to prohibit the Company from making any changes in any of the plans, programs or benefits described in this Section 5, provided the change similarly affects all executives of the Company similarly situated. 6. Confidential Information. During the Term, Employee will have access to and become familiar with confidential information, secrets and proprietary information concerning the business and affairs of the Company. As to such confidential information, Employee agrees as follows: -4- 5 (a) During the term and thereafter, Employee will not, either directly or indirectly, disclose to any third party without the written permission of the Company, nor use in any way, except as required in the course of his employment with the Company or as required by law, any confidential information, secret or proprietary information of the Company. (b) Upon termination of Employee's employment, for whatever reason, Employee shall surrender to the Company any documents, manuals, correspondence, reports, records and similar items then or thereafter coming into the possession of Employee which contain any confidential, secret or proprietary information of the Company. 7. Termination. This Agreement may be terminated prior to end of its Term as set forth below: (a) Resignation (other than for Good Reason). Employee may resign, including by reason of retirement, his position at any time. In the event of such resignation, except in the case of resignation for Good Reason (as defined below), this Agreement shall terminate and Employee shall not be entitled to further compensation pursuant to this Agreement other than the payment of any unpaid Base Compensation accrued hereunder at the date of Employee's resignation. (b) Death. If Employee's employment is terminated due to his death, this Agreement shall terminate and the Company shall have no obligations to Employee or his legal representatives with respect to this Agreement other than the payment of any unpaid Base Compensation accrued hereunder at the date of Employee's death. -5- 6 (c) Discharge. (i) The Company may terminate Employee's employment for any reason deemed sufficient by the Company upon no less than 10 business days advance notice given as provided in Section 9. However, in the event that Employee's employment is terminated during the Term by the Company for any reason other than his Misconduct or Disability (both as defined below), then: (A) for the period of the Term then remaining (the "Remaining Term") the Company shall (i) continue to pay Employee, at the regular payroll periods, Employee's Base Compensation as in effect immediately prior to the Notice of Termination, plus an amount equal to the Company's maximum contribution it would have made on behalf of Employee to the Company's qualified 401(k) plan assuming Employee had continued his active participation in such plan at the maximum participant contribution level permitted under such Plan, and (ii) the Company, at its cost, shall provide or arrange to provide Employee (and Employee's eligible dependents) with life, disability, accident and group health insurance benefits substantially similar to those which Employee (and Employee's dependents) were receiving immediately prior to the Notice of Termination; however, the welfare benefits otherwise receivable by Employee pursuant to this clause (ii) shall be reduced to the extent comparable welfare benefits are actually received by Employee (and/or Employee's dependents) during such period under any other employer's welfare plan(s) or program(s), and any such welfare benefits actually received shall be reported to the Company by Employee; however, in no event -6- 7 shall Employee's COBRA continuation period begin prior to the end of the Remaining Term, and (B) if Employee is being provided a Company automobile at the date of termination, the Company shall transfer title of such automobile to Employee, free of any liens thereon. (ii) Notwithstanding the foregoing provisions of this Section 7, in the event Employee is terminated because of Misconduct, the Company shall have no obligations pursuant to this Agreement after the Date of Termination. As used herein, "Misconduct" means (a) the willful and continued failure by Employee to substantially perform his duties with the Company (other than any such failure resulting from Employee's incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by Employee for Good Reason), after a written demand for substantial performance is delivered to Employee by the Board, which demand specifically identifies the manner in which the Board believes that Employee has not substantially performed his duties, or (b) the willful engaging by Employee in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise (other than such conduct resulting from Employee's incapacity due to physical or mental illness or any such actual or anticipated conduct after the issuance of a Notice of Termination by Employee for Good Reason), after a written demand for substantial change in conduct is delivered to Employee by the Board which demand specifically identifies the manner in which the Board believes that employee has engaged in injurious conduct. For purposes hereof, no act, or -7- 8 failure to act, on Employee's part shall be deemed "willful" unless done, or omitted to be done, by Employee not in good faith and without reasonable belief that Employee's action or omission was in the best interest of the Company. Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for Misconduct unless and until there shall have been delivered to Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable advance written notice to Employee of not less than 10 business days and an opportunity for Employee, together with Employee's counsel, to be heard before the Board before the Board votes on such matter), finding that in the good faith opinion of the Board Employees were guilty of conduct set forth above and specifying the particulars thereof in detail. (d) Disability. If Employee shall have been absent from the full-time performance of Employee's duties with the Company for six consecutive months as a result of Employee's incapacity due to physical or mental illness, as determined by Employee's physician, and within 30 days after written Notice of Termination is given by the Company Employees shall not have returned to the full-time performance of Employee's duties, Employee's employment may be terminated by the Company for "Disability" and Employee shall not be entitled to further compensation pursuant to this Agreement. -8- 9 (e) Resignation for Good Reason. Employee shall be entitled to terminate his employment for Good Reason as defined herein. If Employee terminates his employment for Good Reason he shall be entitled to the compensation and benefits provided in Paragraph 7(c)(i) hereof. "Good Reason" shall mean the occurrence of any of the following circumstances without Employee's express written consent unless such breach or circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (i) the assignment to Employee of any duties inconsistent with, or a material adverse change in the functions, duties or responsibilities of the office of President and Chief Executive Officer of the Company; (ii) the failure by the Company to pay to Employee any portion of Employee's compensation within seven days of the date such compensation is due; (iii) on or following a Corporate Change, the failure by the Company to continue in effect any compensation or employee benefit plan in which Employee participates that is material to Employee's total compensation unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue Employee's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Employee's participation relative to other participants, as existed at such time; -9- 10 (iv) the Company shall amend, modify or repeal any provision of its Articles of Incorporation or Bylaws, if such amendment, modification or repeal would materially adversely affect Employee's rights to indemnification by the Company; (v) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 11 hereof; (vi) any purported termination of Employee's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of this Agreement, which purported termination shall not be effective for purposes of this Agreement; (vii) the relocation of the Company's principle executive offices from Bryan/College Station, Texas or requiring Employee to office anywhere other than at such principal executive offices; or (viii) the material breach of any of the Company's material obligations under this Agreement. Employee's right to terminate his employment pursuant to this subsection shall not be affected by his incapacity due to physical or mental illness. Employee's continued employment shall not constitute consent to, or constitute a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. A "Corporate Change" shall occur if (i) the Company shall not be the surviving entity in any merger or consolidation (or survives only as a subsidiary of another entity), (ii) the -10- 11 Company sells all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary), (iii) any person or entity (including a "group" as contemplated by Section 13(d)(3) of the 1934 Act) acquires or gains ownership or control of (including, without limitation, power to vote) more than 30% of the outstanding shares of common stock of the Company, (iv) the Company is to be dissolved and liquidated, or (v) as a result of or in connection with a contested election the members of the Board as of the date of this Agreement shall cease to constitute a majority of the Board. (f) Notice of Termination. Any purported termination of Employee's employment by the Company or by Employee shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 9 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which, if by the Company and is for Misconduct or Disability, shall set forth in reasonable detail the reason for such termination of Employee's employment, or in the case of resignation by Employee for Good Reason, said notice must specify in reasonable detail the basis for such resignation. A Notice of Termination given by Employee pursuant to Section 7(e)(3) shall be effective even if given after the receipt by Employee of notice that the Board has set a meeting to consider terminating Employee for Misconduct. No purported termination which is not effected pursuant to this Section 7(f) shall be effective. (g) Date of Termination, Etc. "Date of Termination" shall mean the date specified in the Notice of Termination. Either party may, within 15 days after any Notice of Termination is given, provide notice to the other party pursuant to Section 9 hereof that a dispute exists concerning the termination. Notwithstanding the pendency of any such dispute, -11- 12 the Company will continue to pay Employee his full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, Base Compensation) and continue Employee as a participant in all compensation, benefit and insurance plans in which he was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved, but in no event past the expiration date of this Agreement. (h) No Mitigation. Employee shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Agreement be reduced by any compensation earned by Employee as a result of employment by another employer, by offset against any amount claimed to be owing by Employee to the Company, or otherwise, except that any severance amounts payable to Employee pursuant to the Company's severance plan or policy for employees in general shall reduce the amount otherwise payable pursuant to Section 7(c)(i). 7. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Employee's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its affiliated companies and for which Employee may qualify, nor shall anything herein limit or otherwise adversely affect such rights as Employee may have under any stock option or other agreements with the Company or any of its affiliated companies. 8. Assignability. The obligations of Employee hereunder are personal and may not be assigned or delegated by him or transferred in any manner whatsoever, nor are such obligations subject to involuntary alienation, assignment or transfer. The Company shall have the right to assign this Agreement and to delegate all rights, duties and obligations hereunder, -12- 13 either in whole or in part, to any parent, affiliate, successor or subsidiary organization or company of the Company. 9. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Company at its principal office address, directed to the attention of the Board with a copy to the Secretary of the Company at Employee's residence address on the records of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith except that notice of change of address shall be effective only upon receipt. 10. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 11. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Employee to compensation from the Company in the same amount and on the same terms as he would be entitled to hereunder if he terminated his -13- 14 employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used herein, the term "Company" shall include any successor to its business and/or assets as aforesaid which executes and delivers the Agreement provided for in this Section 11 or which otherwise becomes bound by all terms and provisions of this Agreement by operation of law. (b) This Agreement and all rights of Employee hereunder shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die while any amounts would be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's devisee, legatee, or other designee or, if there be no such designee, to Employee's estate 12. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Employee and such officer as may be specifically authorized by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement is an integration of the parties agreement; no agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. THE -14- 15 VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS. 13. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Arbitration. Employee shall be permitted (but not required) to elect that any dispute or controversy arising under or in connection with this Agreement be settled by arbitration in Houston, Texas, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 15. Prior Agreement. This Agreement shall supersede and replace that Employment Agreement between the Company and Employee dated as of May 17, 1988. IN WITNESS WHEREOF, the parties have executed this Agreement on _______________ 1996, effective for all purposes as provided above. O. I. Corporation By: /s/ J. Lester Heath -------------------------------------- Name: J. Lester Heath Title: Chairman of the Compensation Committee EMPLOYEE /s/ W. W. Botts -------------------------------------- William W. Botts -15- EX-23.1 3 CONSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (SEC File No. 33-24505 and No. 33-62209 and NO. 33-66822) of O.I. Corporation of our report dated January 30, 1997 appearing on page 18 of this Annual Report on Form 10-K. PRICE WATERHOUSE LLP Houston, Texas March 11, 1997 EX-27 4 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1996 DEC-31-1996 1,963,174 5,137,471 4,188,138 259,989 3,779,953 16,229,876 3,795,843 2,247,841 19,185,691 3,838,587 0 0 0 414,305 14,546,447 19,185,691 20,156,448 20,156,448 10,076,740 4,512,321 4,603,843 0 0 1,468,569 465,147 1,003,422 0 0 0 1,003,422 .24 .24
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