10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2009

OR

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _________to_________

Commission File Number: 0-6511

O. I. CORPORATION

(Exact name of registrant as specified in its charter)

OKLAHOMA	73-0728053
State of Incorporation	I.R.S. Employer Identification No.

P.O. Box 9010	77842-9010
151 Graham Road	(Zip Code)
College Station, Texas
(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (979) 690-1711

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No x

As of August 1, 2009, there were 2,355,223 shares of the issuer’s common stock, $.10 par value, outstanding.

Caution Regarding Forward-Looking Information; Risk Factors

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of United States securities laws, including the United States Private Securities Litigation Reform Act of 1995. From time to time, our public filings, press releases and other communications will contain forward-looking statements. Forward-looking information is often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast”, “target”, “project”, “may”, “will”, “should”, “could”, “estimate”, “predict” or similar words suggesting future outcomes or language suggesting an outlook. Forward-looking statements in this quarterly report on Form 10-Q include, but are not limited to, statements with respect to expectations of our prospects, future revenues, earnings, activities and technical results.

Forward-looking statements and information are based on current beliefs as well as assumptions made by, and information currently available to, us concerning anticipated financial performance, business prospects, strategies and regulatory developments. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. The forward-looking statements in this quarterly report on Form 10-Q are made as of the date it was issued and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that outcomes implied by forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements. These risks and uncertainties may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. When relying on our forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.

Our public filings are available at www.oico.com and on EDGAR at www.sec.gov.

Please see “Part I, Item 1A—Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2008, as well as Part II, Item IA—“Risk Factors” of this quarterly report on Form 10-Q, for further discussion regarding our exposure to risks. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such factors nor to assess the impact such factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

O.I. Corporation

and Subsidiary

Condensed Consolidated Balance Sheets

(In Thousands, Except Par Value)

	June 30,
	2009			December 31,
Assets	(Unaudited)			2008
Current assets:
Cash and cash equivalents	$	3,654		$	3,134
Accounts receivable, trade, net of allowance for
doubtful accounts of $277 and $299, respectively		4,327			6,195
Investments at market		103			300
Inventories, net		5,568			5,754
Current deferred income tax assets		825			825
Other current assets		737			729
Total current assets		15,214			16,937
Property, plant, and equipment ,net		2,934			3,159
Long-term deferred income tax assets		657			657
Intangible assets, net		508			462
Other assets		331			389
Total assets	$	19,644		$	21,604
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade	$	976		$	1,516
Accrued compensation and other related expenses		1,001			1,281
Accrued liabilities		320			846
Total current liabilities		2,297			3,643
Uncertain tax positions-Long term liabilities		27			27
Commitments and contingencies
Stockholders' equity:
Common stock, $.10 par value, 10,000 shares
authorized, 4,103 shares issued, 2,355 and 2,349 outstanding, respectively		410			410
Additional paid-in capital		5,478			5,402
Treasury stock, 1,748 and 1,754 shares, respectively, at cost		(13,167	)		(13,195	)
Retained earnings		24,599			25,317
Total stockholders' equity		17,320			17,934
Total liabilities and stockholders' equity	$	19,644		$	21,604

See Notes to Unaudited Condensed Consoldiated Financial Statements.

O.I. Corporation

and Subsidiary

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In Thousands, Except Per $ Share Amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Net revenues:
Products	$	4,070		$	7,186		$	7,901		$	13,593
Services		806			858			1,596			1,778
		4,876			8,044			9,497			15,371
Cost of revenues:
Products		2,211			3,736			4,280			7,093
Services		293			419			674			942
		2,504			4,155			4,954			8,035
Gross profit		2,372			3,889			4,543			7,336
Selling, general and administrative expenses		1,629			2,462			3,605			4,761
Research and development expenses		746			957			1,692			1,865
Operating (loss) income		(3	)		470			(754	)		710
Other income (loss), net		16			(216	)		27			(136	)
Income (loss) before income taxes		13			254			(727	)		574
Provision (benefit) for income taxes		-			63			(244	)		143
Net income (loss)	$	13		$	191		$	(483	)	$	431
Other comprehensive income, net of tax,
Unrealized gains on investments	$	-		$	169		$	-		$	147
Comprehensive income (loss)	$	13		$	360		$	(483	)	$	578
Earnings (loss) per share:
Basic	$	0.01		$	0.07		$	(0.21	)	$	0.16
Diluted	$	0.01		$	0.07		$	(0.21	)	$	0.16
Shares used in computing earnings (loss) per share:
Basic		2,354			2,611			2,353			2,613
Diluted		2,369			2,647			2,353			2,648
Cash dividends declared per share of common stock	$	0.05		$	0.05		$	0.10		$	0.10

See Notes to Unaudited Condensed Consolidated Financial Statements.

O.I. Corporation

and Subsidiary

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2009			2008
Cash Flows from Operating Activities:
Net (loss) / income	$	(483	)	$	431
Depreciation and amortization		271			285
Stock based compensation		60			81
Loss on securities including amortization of discounts		-			353
Change in working capital		755			(801	)
Net cash flows provided by operating activities		603			349
Cash Flows from Investing Activities:
Purchase of investments		-			(2,881	)
Sales and maturity of investments		197			3,917
Purchase of property, plant and equipment		(37	)		(180	)
Proceeds from sale of property, plant and equipment		4			37
Change in other assets		(55	)		(44	)
Net cash flows provided by investing activities		109			849
Cash Flows from Financing Activities:
Proceeds from issuance of common stock pursuant to exercise
of employee stock options and employee stock purchase plan		43			52
Purchase of Treasury stock		-			(267	)
Payment of cash dividends on common stock		(235	)		(261	)
Net cash flows used in financing activities		(192	)		(476	)
Net increase in cash and cash equivalents		520			722
Cash and cash equivalents:
Beginning of period		3,134			3,356
End of period	$	3,654		$	4,078

See Notes to Unaudited Condensed Consolidated Financial Statements.

O.I. CORPORATION and SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation.

O.I. Corporation (the “Company”, “we”, or “our”), an Oklahoma corporation, was organized in 1963.  The Company designs, manufactures, markets, and services analytical, monitoring and sample preparation products, components, and systems used to detect, measure, and analyze chemical compounds.

The consolidated financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation. These financial statements have not been audited by an independent accountant. The consolidated financial statements include the accounts of the Company and its subsidiary.  All inter-company transactions and balances have been eliminated in the financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations for interim reporting.

The Company believes that the disclosures are adequate to prevent the information from being misleading. However, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, for the year ended December 31, 2008.  The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year.

2. Inventories, net.

Inventories, net, which include material, labor, and manufacturing overhead, are stated at the lower of first-in, first-out cost or market (in thousands):

	June 30,			December 31,
	2009			2008
Raw materials	$	4,878		$	4,838
Work-in-process		152			486
Finished goods		1,110			1,084
Reserves		(572	)		(654	)
	$	5,568		$	5,754

3. Comprehensive Income/(Loss).

Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are recorded as an element of stockholders' equity. The Company's components of comprehensive income (loss) are net income (loss) and unrealized gains and losses on available-for-sale investments.

4.Earnings (loss) Per Share.

The following table sets forth the computation of basic and diluted earnings per share (in thousands except per share data):

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009			2008
Numerator, earnings (loss) attributable to common stockholders	$	13	$	191	$	(483	)	$	431
Denominator:
Basic-weighted average common shares outstanding		2,354		2,611		2,353			2,613
Dilutive effect of employee stock options		15		36		-			35
Diluted outstanding shares		2,369		2,647		2,353			2,648
Basic earnings (loss) per common share	$	0.01	$	0.07	$	(0.21	)	$	0.16
Diluted earnings (loss) per common share	$	0.01	$	0.07	$	(0.21	)	$	0.16

For the three months ended June 30, 2009, 107,550 shares were not in-the-money and were thus anti-dilutive.  These shares were not used in the calculation of diluted earnings per share for the second quarter of 2009.  For the six months ended June 30, 2009, the Company’s potentially dilutive options of 107,550 were not used in the calculation of diluted earnings since the effect of potentially dilutive securities in computing a loss per share was anti-dilutive.  For the three and six months ended June 30, 2008, there were 69,500 and 89,500 anti-dilutive shares, respectively.

5.  Stock-Based Compensation.

On January 1, 2006, we adopted the provisions of Statement 123 (revised 2004) (“Statement 123(R)”), “Share-Based Payment”, which revises Statement 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion 25, Accounting for Stock Issued to Employees.  In accordance with Statement 123(R), our financial statements recognize expense related to our stock-based compensation awards that were granted after January 1, 2006, or that were unvested as of January 1, 2006, based on their grant-date fair value.

Our pre-tax compensation cost for stock-based compensation for the three months ended June 30, 2009 and 2008 was $29,000 and $40,000 ($17,000 and $24,000 after tax effects), respectively.  Our pre-tax compensation cost for stock-based compensation was $60,000 and $81,000 ($36,000 and $48,000 after tax effects) for the six months ended June 30, 2009 and 2008, respectively.

Statement 123(R) requires that cash flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative compensation cost (excess tax benefits) be classified as financing cash flows.  There was no excess tax benefit for the six months ended June 30, 2009 or 2008.

No options were granted during the six months ended June 30, 2009 or 2008.

Other information

As of June 30, 2009, we had $172,000 of total unrecognized compensation cost related to non-vested awards granted under our various share-based plans, which we expect to recognize over a 1.6 year period.

We received cash from options exercised during the first six months of fiscal years 2009 and 2008 of $14,000 and $35,000, respectively.  The impact of these cash receipts is included in financing activities in the accompanying consolidated statements of cash flows.

The Company’s practice has been to issue shares for option exercises out of treasury stock as provided under the terms of the 2003 Incentive Compensation Plan. We believe our treasury stock holdings are sufficient to satisfy any exercises in 2009.

6. Segment Data

The Company categorizes its operations into two business segments: Laboratory Products and Air-Monitoring Systems.  Operations in these segments include designing, manufacturing, marketing and selling analytical instruments.  In the Laboratory Products segment, the Company provides products generally used to ensure regulatory compliance with environmental requirements for water.  Analytical instruments sold in the Air-Monitoring Systems segment are used for trace-level detection of airborne gaseous chemical-warfare agents.

Following is the Company’s business segment information for June 30, 2009 and 2008:

		Laboratory			Air-Monitoring
		Products			Systems			Total
2009
	2nd Quarter Revenue	$	3,684		$	1,192		$	4,876
	Year to Date Revenue		6,911			2,586			9,497
	2nd Quarter Operating income (loss)		21			(24	)		(3	)
	Year to Date Operating income (loss)		(555	)		(199	)		(754	)
	Total Assets		16,093			3,551			19,644
	Capital Expenditures		36			1			37
	Depreciation and amortization		236			35			271
2008
	2nd Quarter Revenue	$	6,040		$	2,004		$	8,044
	Year to Date Revenue		11,590			3,781			15,371
	2nd Quarter Operating income (loss)		320			150			470
	Year to Date Operating income (loss)		664			46			710
	Total Assets		21,248			4,073			25,321
	Capital Expenditures		172			8			180
	Depreciation and amortization		236			49			285

7. Subsequent Events

The Company has performed an evaluation of subsequent events through August 11, 2009, which is the date the financial statements were issued.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto.  This discussion also contains forward-looking statements.  Please see the “Caution Regarding Forward-Looking Information; Risk Factors” above.

COMPANY OVERVIEW

O.I. Corporation, referred to as “the Company,” “OI,” “we,” “our” or “us”, was organized in 1963 in accordance with the Business Corporation Act of the State of Oklahoma as Clinical Development Corporation, a builder of medical and research laboratories.  In 1969, we moved from Oklahoma City, Oklahoma to College Station, Texas and changed our name to Oceanography International Corporation.  To better reflect current business operations, we again changed our name to O.I. Corporation in July 1980, and in January 1989 we began doing business as OI Analytical.

At OI, we provide innovative products for chemical monitoring and analysis.  Our products perform chemical detection, analysis, measurement and monitoring applications in a wide variety of industries including food, beverage, pharmaceutical, semiconductor, power generation, chemical, petrochemical and security.  Headquartered in College Station, Texas, we sell our products throughout the world utilizing a direct sales force as well as a network of independent sales representatives and distributors.

RECENT DEVELOPMENTS

We continued to feel the effects of the global economic downturn during the second quarter of 2009 as our sales declined 39% in comparison to the second quarter of 2008.  Despite continued slow sales, we generated a small profit in the second quarter of 2009, primarily due to cost savings measures implemented during the first and second quarters.

The staff reduction and other cost cutting initiatives we instituted this year significantly lowered our cost structure.  In comparison to the first quarter of 2009, our SG&A expenses declined 18% and R&D expenses declined 21% during the second quarter.  A number of these reductions occurred during the quarter, and their impact is not fully reflected in our second quarter results.  In addition, we incurred severance costs of approximately $100,000 during the second quarter.

Although our sales continued to be weak during the second quarter, sales in the Laboratory Products segment increased by 14% in comparison to the first quarter of 2009.  We believe economic conditions have stabilized in this segment and anticipate slight growth over the balance of the year.  In our Air Monitoring segment, we believe sales will increase as we approach the end of the U.S. Government’s fiscal year, which historically results in higher bookings.  In addition, we expect to receive significant orders for MINICAMS® systems during the second half of 2009 in connection with projects that are currently underway.

In the second quarter we completed a number of prototype, beta versions of our innovative new process Total Organic Carbon analyzer and ion-CCD based miniaturized mass spectrometer.  During the second half of the year, we will incorporate changes as required from our beta testing and expect to have production-ready commercial models in place by year-end.  We believe that revenues from these new products will help to reduce our reliance on the current markets we serve and enhance future growth.

Despite the challenges of the current economy, our financial position remains strong.  At the end of the second quarter, our cash and investments totaled $3,757,000, up $323,000 from year-end, with no bank debt.  We believe that we are structured to generate positive earnings at our current level of business and are confident in our ability to produce improved results once economic conditions in our industry improve.

Results of Operations (dollars in 000’s)

Revenues

	Three Months Ended													Six Months Ended
	June 30,													June 30,
(dollars in 000’s)	2009		% of Rev.			2008		% of Rev.			Increase (Decrease)			2009		% of Rev.			2008		% of Rev.			Increase (Decrease)
Sales by Segment:
Laboratory Products	$	3,684		75.6	%	$	6,040		75.1	%	$	(2,356	)	$	6,911		72.8	%	$	11,590		75.4	%	$	(4,679	)
Air-Monitoring Systems		1,192		24.4	%		2,004		24.9	%		(812	)		2,586		27.2	%		3,781		24.6	%		(1,195	)
Total	$	4,876		100.0	%	$	8,044		100.0	%	$	(3,168	)	$	9,497		100.0	%	$	15,371		100.0	%	$	(5,874	)

Total revenue declined $3,168,000, or 39.4%, for the three months ended June 30, 2009 compared to the same period in 2008, with sales down substantially in both of our operating segments.

In the Laboratory Products segment, domestic product sales decreased 50% compared to the second quarter of 2008 as customers continued to conserve cash due to economic conditions.  The decline in international product sales during the second quarter was somewhat lower at 38%.  Increased sales in China and Taiwan partially offset larger declines in Europe, Latin America and the Asia Pacific region.  Service revenues remained largely unchanged from last year.  While down from last year, sales in this segment increased 14% from the first quarter, leading us to believe that economic conditions affecting this segment have stabilized.  We anticipate slight growth in the sales of these products over the balance of the year.

In the Air-Monitoring Systems segment, sales declined due to very sluggish orders from the U.S. Government for MINICAMS®.  Sales are historically weak in this segment during the second quarter but should improve over the balance of the year as we approach the end of the U.S. Government’s fiscal year.  In addition, we expect to receive significant orders for MINICAMS® systems during the second half of 2009 in connection with projects that are currently underway.

On a year to date basis, our overall revenue declined $5,874,000, or 38.2%, compared to the six months ended June 30, 2008.  Laboratory Products segment sales decreased 40.4% and Air-Monitoring Systems segment sales declined 31.6% during this period. Domestic product sales in the Laboratory Products segment declined 50% compared to the first six months of 2008, while international sales declined 38% during that same period.  International sales declined in Europe, Latin America and the Asia Pacific region but remained consistent with last year’s levels in China and Taiwan.

Gross Profit

	Three Months Ended June 30,								Six Months Ended June 30,
	2009				2008				2009				2008
(dollars in 000’s)	$		%		$		%		$		%		$		%
Gross Profit by Segment:
Laboratory Products	$	1,614	43.8	%	$	2,682	44.4	%	$	3,039	44.0	%	$	5,184	44.7	%
Air-Monitoring Systems		758	63.6	%		1,207	60.2	%		1,504	58.2	%		2,152	56.9	%
Total	$	2,372	48.6	%	$	3,889	48.3	%	$	4,543	47.8	%	$	7,336	47.7	%

Overall gross profit for the three months ended June 30, 2009 decreased $1,517,000, or 39.0%, compared to the second quarter of 2008 because of lower sales volume.  Margins in our Laboratory Products segment were down slightly because of unfavorable manufacturing variances associated with our decreased production levels, while margins in our Air-Monitoring Systems segment increased due to a higher composition of service revenues in the overall sales mix.

On a year to date basis, gross profit decreased $2,793,000, or 38.1%, in 2009 compared to last year because of lower sales volume.   However, gross profit margins were largely unchanged from last year. 

Operating Expenses

	Three Months Ended June 30,										Six Months Ended June 30,
	2009					2008					2009					2008
(dollars in 000’s)	$		% of Rev.			$		% of Rev.			$		% of Rev.			$		% of Rev.
SG&A Expenses by Segment:
Laboratory Products	$	1,204		32.7	%	$	1,839		30.4	%	$	2,670		38.6	%	$	3,528		30.4	%
Air-Monitoring Systems		425		35.7	%		623		31.1	%		935		36.2	%		1,233		32.6	%
Total	$	1,629		33.4	%	$	2,462		30.6	%	$	3,605		38.0	%	$	4,761		31.0	%
R&D Expenses by Segment:
Laboratory Products	$	389		10.6	%	$	523		8.7	%	$	924		13.4	%	$	992		8.6	%
Air-Monitoring Systems		357		29.9	%		434		21.7	%		768		29.7	%		873		23.1	%
Total	$	746		15.3	%	$	957		11.9	%	$	1,692		17.8	%	$	1,865		12.1	%

Selling, general and administrative ("SG&A") expenses for the three months ended June 30, 2009 decreased $833,000, or 33.8%, compared to the same period of the prior year due largely to cost cutting measures we implemented in response to the economic downturn.  These cost reduction efforts lowered salary and benefit expenses, travel and entertainment, consulting fees and Board-related expenses.  In the Laboratory Products segment, SG&A expenses also declined because of lower sales commissions.  We anticipate continued lower SG&A expenses in comparison to last year as our cost savings measures remain in effect.

For the six months ended June 30, 2009, SG&A expenses decreased $1,156,000, or 24.3%, compared to the same period of the prior year.  The decline in Laboratory Products related SG&A expenses was attributable to decreased sales commissions, lower wage-related expenses, travel expenses, consulting fees, insurance costs and reduced Board-related expenses.  SG&A expenses in the Air-Monitoring Systems segment were down because of lower wage related expenses and reduced legal fees.

During the second quarter of 2009, research and development ("R&D") expenses decreased by $211,000, or 22.0%, compared to the same period of last year.  The decline in Laboratory Products related R&D expenses during the second quarter was attributable to lower expenses related to compensation, contract labor, consulting and supplies.   R&D expenses in the Air-Monitoring Systems segment were down because of lower wage-related and supplies expenses.  Our cost control measures reduced R&D expenses during the second quarter and we anticipate lower R&D expenses compared to last year in the coming quarters.

R&D expenses for the six months ended June 30, 2009 decreased by $173,000, or 9.3%, compared to the same period of the prior year.  The decline in Laboratory Products related R&D expenses during the second quarter was partially offset by higher R&D expenses in the first quarter of 2009 attributable the completion of beta units for our new process TOC analyzer.  R&D expenses in the Air-Monitoring Systems declined in both quarters compared to the same periods last year.

Operating Income (Loss)

	Three Months Ended June 30,											Six Months Ended June 30,
	2009						2008					2009						2008
(dollars in 000’s)	$			% of Rev.			$		% of Rev.			$			% of Rev.			$		% of Rev.
Operating (Loss) Income by Segment
Laboratory Products	$	21			0.6	%	$	320		5.3	%	$	(555	)		-8.0	%	$	664		5.7	%
Air-Monitoring Systems		(24	)		-2.0	%		150		7.5	%		(199	)		-7.7	%		46		1.2	%
Total	$	(3	)		-0.1	%	$	470		5.8	%	$	(754	)		-7.9	%	$	710		4.6	%

We essentially broke even for the second quarter of 2009, generating an operating loss of $3,000 compared to operating income of $470,000 for the three months ended June 30, 2008.  On a year to date basis, we incurred an operating loss of $754,000 compared to operating income of $710,000 during the first six months of 2008.  This decrease in earnings was primarily attributable to a large decrease in sales and gross profit, partially offset by decreases in SG&A and R&D expenses during the second quarter.

Other Income, Net

During the three months ended June 30, 2009 we recorded $16,000 of other income, compared to a loss of $216,000 in the second quarter of 2008, when we recognized a loss on our investment holdings.  Because of turbulent financial markets last year, we recorded a loss on our preferred stock and corporate bond holdings.    

During the six months ended June 30, 2009 we recognized $27,000 of other income.  Due to the second quarter of 2008 investment loss noted above, we incurred a net loss in other income of $136,000 for the six months ended June 30, 2008.  

Liquidity and Capital Resources

Net cash flow provided by operating activities for the six months ended June 30, 2009 totaled $603,000 compared to $349,000 during the comparable period of 2008.  Despite our year to date loss, we generated positive cash flow from operations because of reduced working capital, which resulted primarily from collections on our accounts receivable.  The combination of lower sales and positive collections caused our accounts receivable to decline by $1,868,000.  This positive cash flow was partially offset by decreases in our current liabilities; the most significant was primarily attributable to reduced income taxes payable.

Net cash flow provided by investing activities totaled $109,000 through the first six months of 2009, compared to $849,000 for the same period in 2008.  Our net investment activity was minimal in 2009, while we liquidated a substantial portion of our investment holdings in 2008.  Purchases of property, plant and equipment decreased to $37,000 in 2009, down $143,000 from last year as we continue to minimize capital equipment purchases.  We have no material commitments for capital expenditures as of June 30, 2009.

Net cash flow used in financing activities for the six months ended June 30, 2009, totaled $192,000, compared to $476,000 for the same period of the prior year.  This decrease was primarily attributable to reduced purchases of treasury stock in 2009 compared to 2008.  In addition, our purchases of treasury stock in 2008 reduced our shares outstanding, which lowered our dividend payments.  During the third quarter of 2009, we expect to reinstate purchases of our stock in the open market pursuant to the 2008 plan authorized by our Board of Directors.  We have authority to purchase approximately 37,000 additional shares under this plan and additional shares may be authorized for repurchase.

Cash, cash equivalents and short-term investments totaled $3,757,000 as of June 30, 2009, compared to $3,434,000 at the end of 2008. Despite the year to date loss we have incurred, our cash position has increased $323,000 from year-end.  We believe our cash holdings and expected cash flows from operations should be sufficient to meet expected working capital, capital expenditure and R&D requirements for the short term. As the economy improves, we anticipate that cash flows from operations will generate sufficient cash flow to meet our long term liquidity needs.  In view of our current financial position and anticipated liquidity, we plan to discontinue our bank line of credit that we initiated in May of 2008.  We have made no borrowings under this line of credit and have no short term plans which are likely to require external financing.

Because interest rates are historically low, we have established an investment committee consisting of two independent directors and our CEO/CFO to evaluate alternative investment options for excess funds to improve our returns.  These investments may include less than investment grade bonds or other securities that the committee feels are likely to increase in value and/or provide a higher interest return.  Though we have not currently invested in any such instruments, future investments made by the Investment Committee could subject us to a higher risk of loss than our current insured or government-backed investments.

Our Board of Directors declared a cash dividend on May 14, 2009 of $0.05 per common share payable on May 29, 2009 to shareholders of record at the close of business on May 14, 2009. The quarterly dividend was declared in connection with the Board's decision in 2006 to establish an annual cash dividend of $0.20 per share, payable at $0.05 per quarter. The payment of future cash dividends under the policy is subject to the approval of our Board of Directors.

Critical Accounting Policies

Please reference Part II-Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2008.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4T.  Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that the information we are required to disclose in reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.  During the period from April 1, 2009 to June 30, 2009, an evaluation under the supervision and with the participation of management, including the Chief Executive Officer/CFO (our principal executive officer and principal financial officer), of the effectiveness of our disclosure controls and procedures was conducted.  Based on that evaluation, the Chief Executive Officer/CFO has concluded that, as of June 30, 2009, our disclosure controls and procedures are effective.

Subsequent to the date of his evaluation, there have been no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Our management, including the Chief Executive Officer/CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Part II- Other Information

Item 1. Legal Proceedings

In the normal course of our business, we are subject to legal proceedings brought against us.  There have been no material developments to the legal proceedings described in Part I, Item 3, "Legal Proceedings" in our Annual Report on Form 10-K for the year-ended December 31, 2008, and there are no new reportable legal proceedings for the quarter ended June 30, 2009. 

Item 1A. Risk Factors

There have been no material changes in the risk factors described in Part I, Item 1A, “Risk Factors”, of our Annual Report on Form 10-K for the year ended December 31, 2008.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to a Vote of Security Holders

None.

Item 5.  Other Information

On August 7, 2009, the Board of Directors amended the Company’s Employee Stock Purchase Plan to further clarify a modification implemented in 2008 regarding the calculation of the purchase price. The Plan is open to all employees, including Executive Officers.

Item 6. Exhibits

10.1*	Employee Stock Purchase Plan as amended August 7, 2009.
31*	Principal Executive Officer and Principal Financial Officer certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *	Principal Executive Officer and Principal Financial Officer certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*  Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	O. I. CORPORATION
	(Registrant)
Date:  August 11, 2009	BY:	/s/ J. Bruce Lancaster
		Chief Executive Officer and Chief Financial Officer (Principal Executive and Principal Financial Officer)

EXHIBIT INDEX

EXHIBIT
NUMBER	EXHIBIT TITLE
10.1*	Employee Stock Purchase Plan as amended August 7, 2009.
31*	Principal Executive Officer and Principal Financial Officer certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *	Principal Executive Officer and Principal Financial Officer certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*  Filed herewith

EX-10.1

EXHIBIT 10.1

O.I. CORPORATION

EMPLOYEE STOCK PURCHASE PLAN

1.           PURPOSE.This Employee Stock Purchase Plan (the “Plan”) is intended to encourage ownership of the common stock, par value $0.10 per share (the “Common Stock”), of O.I. Corporation (the “Company”) by eligible employees of the Company so that the employees may acquire or increase their proprietary interest in the Company.  The Plan is intended to facilitate this objective (i) by providing a procedure for regular payroll deductions to allow for the purchase of shares of Common Stock on a quarterly basis and (ii) by allowing eligible employees to purchase such shares without payment of any brokerage fees or commissions.  Subject to adjustment pursuant to Paragraph 10 hereof, 200,000 shares of Common Stock are authorized for distribution under this Plan.

2.           ADMINISTRATION AND INTERPRETATION.  The Plan shall be administered by a committee (the “Committee”) consisting of not less than three members of the Board of Directors of the Company (the “Board”) appointed by and serving at the pleasure of the Board.  All members of the Committee shall be “disinterested persons” within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934.  The Board may from time to time appoint members of the Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Committee.  The Committee may prescribe, amend, and rescind rules and regulations for administration of the Plan and shall have full power and authority to construe and interpret the Plan, and any determination by the Committee under any provision of the Plan shall be final and conclusive for all purposes.  A majority of the members of the Committee shall constitute a quorum and the acts of a majority of the members present at a meeting or the acts of a majority of the members evidenced in writing shall be the acts of the Committee.  The Committee may correct any defect or any omission or reconcile any inconsistency in the Plan in the manner and to the extent it shall deem desirable.  The day-to-day administration of the Plan may be carried out by such officers and employees of the Company as shall be designated from time to time by the Committee.

Neither the Committee nor the members thereof shall be liable for any act, omission, interpretation, construction, or determination made in connection with the Plan in good faith, and the members of the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage, or expense (including counsel fees) arising therefrom to the full extent permitted by law, the Company’s Articles of Incorporation and the Company’s Bylaws.  The members of the Committee shall be named as insured parties under any directors and officers liability insurance coverage which may be in effect from time to time.

3.           TERM OF THE PLAN.  The Plan will become effective as of January 1, 1989, and will remain in effect until December 31, 2018 (except for completion of payroll deductions, return of excess deductions, and delivery of stock certificates) unless earlier terminated pursuant to Section 9 hereof or by action of the Board.

4.           ELIGIBILITY.  Any person who is a full-time employee of the Company is eligible to participate in the Plan.  Part-time, temporary, contract, and seasonal workers are not eligible.  A part-time employee is one whose customary employment is 20 hours or less per week.  A temporary employee is one whose customary employment is not more than 5 months in any calendar year.

5.           PARTICIPATION.  Participation in the Plan is optional.  An eligible employee may participate in the Plan with respect to any calendar quarter.  Participation in the Plan in one calendar quarter does not require participation during any other calendar quarter.  In order to participate in the Plan, an eligible employee must submit a subscription contract to purchase shares of Common Stock, on a form to be provided by the Committee, on or before the 15th day of the month preceding the first calendar quarter of participation, provided that subscription contracts relating to the calendar quarter commencing January 1, 1989 may be submitted at any time on or before December 30, 1988.  No subscription contract will be accepted from an employee who is not on the payroll on the 15th day of the month preceding the first calendar quarter covered by such employee’s subscription contract.  To participate in the Plan with respect to any calendar quarter, an employee must be an eligible employee on the first day of such quarter.  An employee participating in the Plan may terminate his or her participation by giving written notice of such termination to the Committee on or prior to the 15th day of the last month of any calendar quarter, and such termination will be effective as of the last day of such quarter.  Any employee who terminates participation in the Plan may later participate in the Plan by following the procedure set forth above with respect to initial participation in the Plan.

6.           PAYROLL DEDUCTIONS.  Except as provided below in this Section 6, subscriptions will be payable by means of payroll deductions only, and no subscriber may satisfy his or her subscription by the payment of a lump sum of cash.  Notwithstanding the foregoing, if a participant’s employment with the Company is terminated on or after the first day of any calendar quarter, such participant may continue to participate in the Plan with respect to such quarter if, and only if, such participant makes a cash payment in an amount equal to the difference between the amount of pay actually deducted from such participant’s pay for such quarter and the subscription amount for such quarter.

Each subscriber will authorize pursuant to a subscription contract, a deduction from his or her pay with respect to each calendar quarter in a dollar amount not to exceed 10% of such subscriber’s pay prior to deduction of withholdings, taxes, and any elective salary reduction amounts deducted pursuant to Section 401(k) or Section 125 of the Internal Revenue Code of 1986, as amended (“Gross Pay”) for the first calendar quarter covered by such subscription contract.  Such dollar amount will be reduced from time to time, without any specific authorization from the participant, to the extent necessary to prevent the dollar amount deducted from such participant’s pay for any calendar quarter to exceed 10% of such participant’s Gross Pay for such quarter.  A participant’s quarterly deduction amount will be deducted from the pay of such subscriber in equal installments for each of the payroll periods within each calendar quarter.  A Participant may increase the dollar amount (up to 10% of such subscriber’s then current quarterly Gross Pay) or decrease the dollar amount of his or her subscription for any calendar quarter by giving written notice to the Administrative Committee on or prior to the 15th day of the month preceding such calendar quarter, and such adjusted dollar amount will be deducted from the pay of such subscriber for each calendar quarter thereafter until such subscriber subsequently increases or decreases such dollar amount in the manner set forth above or such subscriber terminates his or her participation in the Plan in the manner set forth in Section 5 hereof.

All subscription amounts shall be held by the Plan in a segregated non-interest bearing account until applied as provided in Section 7 below.

7.           PURCHASE AND DISTRIBUTION OF COMMON STOCK.  The Company may satisfy the subscriptions to purchase Common Stock with respect to any calendar quarter with shares of Common Stock issued by the Company or purchased on the open market or from third parties in privately negotiated purchases (or any combination of the foregoing).  Any such purchases of Common Stock on the open market or from third parties in privately negotiated purchases with respect to a calendar quarter will be made by the Committee as nearly as possible to the last business day of such calendar quarter as the Committee, in its sole discretion, shall determine.  Any commissions payable with respect to purchases of Common Stock on the open market or from third parties in privately negotiated transactions shall be paid by the Company from funds other than the subscription amounts received from the participants in the Plan.  At the end of each calendar quarter, the Committee shall use any subscription amounts for such quarter which have not been used to purchase shares of Common Stock on the open market or from third parties in privately negotiated transactions to purchase shares of Common Stock from the Company.  The Company shall issue and sell shares of Common Stock for such purpose at the Current Market Price (defined below).  The aggregate number of shares of Common Stock which are purchased by the Plan on the open market, from third parties in privately negotiated transactions and from the Company with respect to any quarter shall be distributed to the employees participating in the Plan with respect to such quarter on a pro rata basis based on the dollar amount of the subscription of each participant for such quarter, except that, in the event such pro ration results in a fractional share being distributable with respect to any participant, such fractional share shall not be distributed with respect to such quarter but shall be distributed to such participant in any later quarter in which such fractional share, when added together with fractional shares otherwise distributable for other quarters, equals a whole share.  In the event a participant in the Plan has credited to his account a fractional share at the time of the termination of his participation in the Plan, the Company shall pay such participant an amount in cash, in lieu of such fractional share, equal to the Current Market Price multiplied by the fraction represented by such fractional share.  Certificates representing the shares of Common Stock being distributed with respect to any quarter will be delivered to the participants as soon as reasonably practicable following the end of such quarter.

As used herein, (i) “Current Market Price” of a share of Common Stock means the average of the closing price of the Company’s Common Stock as traded on the NASDAQ Stock Exchange for the last five days on which the NASDAQ is open for business during the fiscal quarter; (ii) “Closing Price” for any day means the last sales price on such day, regular way, or in case no such sale takes place on such day, the opening price for that day; and (iii) “Trading Day” means a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a day on which banking institutions in New York City generally are open.

8.           WITHHOLDING TAX.  The Company will withhold from each subscriber’s paycheck an amount necessary to comply with the withholding requirements of the Internal Revenue Code of 1986, as amended from time to time.

9.           TERMINATION UPON CERTAIN MERGERS OR CONSOLIDATIONS.  In the event of the merger or consolidation of the Company with, or into, another corporation as a result of which the Company is not the surviving corporation, then the Plan will terminate as of the last day of the month preceding the month in which the Board of Directors of the Company approves the merger or consolidation.  In the event such termination date is the last day of a calendar quarter, the provisions of Section 7 hereof shall apply in full force and effect with respect to such quarter.  In the event such termination date is not the last day of a calendar  quarter, all subscription amounts held by the Plan on behalf of participants shall be returned to the participants in accordance with their respective subscription contributions for the quarter in which such termination occurs.

10.           ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.  Subject to any required action by the shareholders of the Company, the number of shares subject to a subscription agreement, and the price per share thereof, will be proportionately adjusted for any increase or decrease in the number of issued shares of Company Common Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend or stock split or any other increase or decrease in the number of such shares affected without receipt of consideration by the Company.

11.           PREEMPTION BY APPLICABLE LAWS AND REGULATIONS.  Anything in the Plan or any agreement entered into pursuant to the Plan to the contrary notwithstanding, if, at any time specified herein or therein for the making of any determination or the making of any issuance or other distribution of Common Stock, any law, regulation, or requirement of any governmental authority having jurisdiction in the premises shall require either the Company or the employee (or the employee’s beneficiary), as the case may be, to take any action in connection with any such determination, issuance, or distribution, such determination, issuance, or distribution, as the case may be, shall be deferred until such action shall have been taken.

12.           AMENDMENT.  The Board of Directors of the Company may at any time amend the Plan, except that no amendment may make any change with respect to subscriptions for the then current calendar quarter if the change would adversely affect the rights of any participant.  In addition, the Board will not, without shareholder approval, make any change that will materially increase the benefits accruing to participants under the Plan, materially increase the number of shares of Common Stock which may be distributed under the Plan or materially modify the requirements as to eligibility for a participation in the Plan.

13.           MISCELLANEOUS

a. No Employment Contract.  Nothing contained in the Plan shall be construed as conferring upon any employee the right to continue in the employ of the Company or any affiliate of the Company.

b. No Rights as Shareholder.  An employee shall have no rights as a shareholder with respect to Common Stock covered by the employee’s subscription agreement until the date of the issuance of such Common Stock to the employee pursuant thereto.  No adjustment will be made for dividends or other distributions or rights for which the record date is prior to the date of such issuance.

c. No Right to Corporate Assets.  Nothing contained in the Plan shall be construed as giving an employee, the employee’s beneficiaries, or any other person any equity or interest of any kind on any assets of the Company or an affiliate of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company or an affiliate of the Company and any such person.

d. No Restriction on Corporation Action.  Nothing contained in the Plan shall be construed to prevent the Company or any affiliate of the Company from taking any action that is deemed by the Company or such affiliate of the Company to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan.  No employee, beneficiary, or other person shall have any claim against the Company or any affiliate of the Company as a result of any such action.

e. Non-assignability.  Neither an employee nor an employee’s beneficiary shall have the power or right to sell, exchange, pledge, transfer, assign, or otherwise encumber or dispose of such employee’s or beneficiary’s interest arising under the Plan nor shall such interest be subject to seizure for the payment of any employee’s beneficiary’s debts, judgments, alimony or separate maintenance or be transferable by operation of law in the event of an employee’s or beneficiary’s bankruptcy or insolvency, and to the extent any such interest arising under the Plan is awarded to a spouse pursuant to any divorce proceeding, such interest shall be deemed to be terminated and forfeited notwithstanding any vesting provisions or other terms herein or in the agreement evidencing such award.

f. Application of Funds.  The proceeds received by the Company from the sale of Common Stock pursuant to the Plan will be used for its general business purposes.

g. Governing Law; Construction.  All rights and obligations under the Plan shall be governed by, and the Plan shall be construed in accordance with, the laws of the State of Texas without regard to the principles of conflicts of laws.  Titles and headings to Sections herein are for purposes of reference only and shall in no way limit, define, or otherwise affect the meaning or interpretation of any provisions of the Plan.

14.           MATCHING CONTRIBUTIONS.  The Company shall include in the compensation of each participating employee, who has been a full-time employee of the Company for at least one year, an additional amount, equal to 15% of the amount contributed by each participating employee, through payroll deductions, which amount shall be applied for additional stock purchases through the Plan.  Effective January 1, 2009, this matching contribution will increase to 25%.

EX-31

Exhibit 31

CERTIFICATIONS

I, J. Bruce Lancaster, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of O.I. Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.   I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have:

a.   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b.   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

c.   evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.   I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors:

a.   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 11, 2009	/s/ J. Bruce Lancaster
	J. Bruce Lancaster
	Chief Executive Officer and Chief Financial Officer (Principal Executive and Principal Financial Officer)

EX-32

EXHIBIT 32

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of O.I. Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Bruce Lancaster, Chief Executive Officer/CFO certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J. Bruce Lancaster

Name: J. Bruce Lancaster

Title: Chief Executive Officer and Principal Financial Officer

Date: August 11, 2009

This certification is made solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and not for any other purpose.

A signed original of this written statement required by Section 906 has been provided to O.I. Corporation and will be retained by O.I. Corporation and furnished to the Securities and Exchange Commission or its staff upon request.