<PAGE>
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From ________________ to ________________
COMMISSION FILE NUMBER 0-27748
OCAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4544569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14538 KESWICK STREET
VAN NUYS, CALIFORNIA 91405
(Address of principal executive offices)
(818) 782-0711
(Registrant's telephone number, including area code)
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 periods 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 [ ]
The number of outstanding shares of the Registrant's Common Stock,
par value $.001 per share, was 5,681,000 at November 9, 1998.
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
_______________________________
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
______________________ _____________________
1998 1997 1998 1997
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net sales $ 6,620 $ 6,457 $ 19,155 $ 18,334
Cost of goods sold 4,644 4,665 13,885 13,208
_________ _________ _________ _________
Gross margin 1,976 1,792 5,270 5,126
Selling, general and administrative expenses 1,202 1,082 3,581 3,299
_________ _________ _________ _________
Operating income 774 710 1,689 1,827
Interest expense 29 49 86 155
Interest income (58) (65) (154) (192)
_________ _________ _________ _________
Income before income taxes 803 726 1,757 1,864
Provision for income taxes 269 239 622 689
_________ _________ _________ _________
Net income $ 534 $ 487 $ 1,135 $ 1,175
========= ========= ========= =========
Basic and diluted earnings per share $ 0.09 $ 0.08 $ 0.20 $ 0.20
========= ========= ========= =========
Weighted average shares - basic and diluted 5,681 5,765 5,684 5,775
========= ========= ========= =========
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
OCAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
September 30, December 31,
1998 1997
_________ _________
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,278 $ 4,529
Accounts receivable, net 3,739 2,751
Inventories 7,436 7,760
Prepaid expenses and other current assets 102 201
Prepaid income taxes 61 253
Deferred income taxes 232 275
_________ _________
Total current assets 17,848 15,769
Property and equipment, net 2,068 1,819
Other assets 7 47
_________ _________
TOTAL ASSETS $ 19,923 $ 17,635
========= =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,910 $ 922
Accrued expenses 914 677
Current maturities of notes payable - stockholders 1,757 --
_________ _________
Total current liabilities 4,581 1,599
Long-term notes payable - stockholders -- 1,757
Deferred income taxes 263 287
_________ _________
Total liabilities 4,844 3,643
STOCKHOLDERS' EQUITY
Preferred stock -- --
Common stock 6 6
Additional paid-in capital 10,429 10,486
Retained earnings 4,644 3,509
Treasury stock -- (9)
_________ _________
Total stockholders' equity 15,079 13,992
_________ _________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,923 $ 17,635
========= =========
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
OCAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(in thousands)
(Unaudited)
<CAPTION>
1998 1997
_________ _________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,135 $ 1,175
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 304 235
Deferred income taxes 19 133
Changes in assets and liabilities:
Accounts receivable, net (988) (564)
Inventories 324 (1,135)
Prepaid expenses and other 139 72
Accounts payable 988 1,311
Accrued expenses 237 330
Prepaid income taxes 192 (383)
_________ _________
Net cash provided by operating activities 2,350 1,174
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (553) (447)
_________ _________
Net cash used in investing activities (553) (447)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (48) (61)
Distribution of S corporation retained earnings
to prior S corporation stockholders -- (300)
Repayment of notes payable - stockholders -- (1,500)
_________ _________
Net cash used in financing activities (48) (1,861)
_________ _________
Net increase (decrease) in cash and cash equivalents 1,749 (1,134)
Cash and cash equivalents at beginning of period 4,529 6,619
_________ _________
Cash and cash equivalents at end of period $ 6,278 $ 5,485
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 73 $ 163
Income taxes $ 428 $ 908
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
OCAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying condensed consolidated financial statements of Ocal, Inc. and
its subsidiaries (collectively, "Ocal" or the "Company") are unaudited and have
been prepared in conformity with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the accompanying financial statements reflect all
adjustments (of a normal recurring nature) necessary to provide a fair
statement of the results for the interim periods presented. The interim
financial statements should be read in conjunction with the financial
statements and related notes included in the Company's 1997 Annual Report on
Form 10-K and the Company's other Securities and Exchange Commission filings.
The results of operations for the three and nine months ended September 30,
1998 are not necessarily indicative of the results of operations that may
be expected for the full year ending December 31, 1998.
2. COMPUTATION OF NET INCOME PER SHARE
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
128. This Statement requires the presentation of basic and diluted earnings per
share. Basic earnings per share is computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares outstanding during
the period, increased by the effect of dilutive stock options and warrants. All
earnings per share amounts presented have been recalculated to comply with SFAS
No. 128's requirements, which did not change amounts previously reported.
The following table presents the calculation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
____________________ ____________________
1998 1997 1998 1997
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Numerator: Net income for basic
and diluted earnings per share $ 534 $ 487 $ 1,135 $ 1,175
Denominator:
Weighted average shares 5,681 5,765 5,684 5,775
Effect of dilutive securities:
Warrants -- -- -- --
Stock options -- -- -- --
_______ _______ _______ _______
Dilutive potential common shares -- -- -- --
Denominator for basic and
diluted earnings per share 5,681 5,765 5,684 5,775
======= ======= ======= =======
Basic and diluted earnings per share $ 0.09 $ 0.08 $ 0.20 $ 0.20
======= ======= ======= =======
</TABLE>
3. INVENTORIES
Inventories consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
___________ ____________
(Unaudited)
<S> <C> <C>
Raw materials $ 3,773 $ 3,344
Finished goods 3,663 4,416
_______ _______
$ 7,436 $ 7,760
======= =======
</TABLE>
4. EVENTS SUBSEQUENT TO SEPTEMBER 30, 1998
On October 6, 1998, the Company entered into a definitive merger agreement
with Thomas & Betts Corporation ("T&B"), a leading producer of connectors and
components for worldwide electrical and electronic markets. Under the terms
of the merger agreement, T&B will acquire all of the outstanding shares of
the Company's common stock for approximately $20.3 million ($3.54 per share)
in cash, subject to reduction under certain circumstances if and to the
extent the Company's stockholders' equity at the end of the month prior to
the consummation of the transaction is less than $15,029,000 (the Company's
stockholders' equity at August 31, 1998). The consummation of the transaction
is subject to, among other things, approval by the Company's stockholders at
a Special Meeting of Stockholders to be called by the Company.
By letter dated October 14, 1998, the United States Environmental Protection
Agency ("USEPA") issued a general notice letter to Occidental Coating Company
("Occidental"), a subsidiary of the Company, with respect to the Casmalia
Disposal Site in Santa Barbara County, California ("Casmalia"). This letter
notified Occidental that it was considered by USEPA to be a potentially
responsible party with respect to Casmalia by virtue of the fact that it
allegedly generated hazardous waste that was disposed of at the site. The
letter further advised that Occidental was considered a "DE MINIMIS"
generator, and that DE MINIMIS generators could expect to settle their
liability with respect to Casmalia for a payment in the range of $75,000 to
$750,000. USEPA anticipates that the proposed settlement will be offered to
the DE MINIMIS generators during the fourth quarter of 1998, after which such
generators will have sixty (60) days to review and approve the offer. The
Company is currently reviewing the validity of the claim and, based on
conversations with USEPA, believes that it will be able to settle near the
lower end of the range (i.e., approximately $120,000). Although the
settlement costs could be significant in relation to the Company's results of
operations in the period in which they are incurred, they are not expected to
have a material adverse effect on the Company's liquidity or consolidated
financial position.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 which involve risks and
uncertainties. The actual results of Ocal, Inc. (together with its wholly-
owned subsidiaries, "Ocal" or the "Company") could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including, without limitation, competitive pressures on product
pricing, potential delays in implementing planned reductions in material and
factory labor costs, competition from other manufacturers of PVC-coated
conduit and from manufacturers of alternative conduit products, nominal
growth in the Company's industry, dependence on key personnel, control by the
Company's majority stockholder, and cyclicality of plant expansion activities
by the Company's end users, as well as the factors set forth in the Company's
1997 Annual Report on Form 10-K, under the caption "Risk Factors" in the
Company's IPO Prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) on March 12, 1996, and in the Company's other
Securities and Exchange Commission filings.
RESULTS OF OPERATIONS
_____________________
Ocal, founded in 1965, is a leading manufacturer of high-quality,
competitively priced polyvinyl chloride (PVC) coated rigid steel conduit,
elbows, and fittings. The Company's products are primarily used in the new
construction and maintenance of plants operating in highly corrosive
environments and provide the maximum protection and durability commercially
available for electrical wiring systems.
OVERVIEW
On March 18, 1996, the Company completed an initial public offering ("IPO")
of its stock. Concurrent with the closing of the IPO, all of the outstanding
capital stock of OCAL, Incorporated ("Ocal Alabama"), Occidental Coating
Company, Ocal Data Company, and Ocal Transport Co. was acquired by the
Company through capital contributions by the respective stockholders in
exchange for an aggregate of 3,250,000 shares of the Company's common stock
(the "Reorganization"). As part of this Reorganization, Ocal Alabama declared
a $4,600,000 distribution to its former stockholders, which represented
estimated undistributed S corporation retained earnings. Of this
distribution, $1,600,000 was paid by the Company in cash in March 1996 and
the remainder of the distribution was in the form of $3,000,000 of interest-
bearing notes payable. Upon completion of the final tax return for Ocal
Alabama, an additional $300,000 distribution was declared and paid in cash to
the former stockholders in February 1997. In September of 1997, $1,500,000
principal amount of the notes was repaid in cash and at September 30, 1998,
$1,500,000 principal amount of the notes (which is due on March 18, 1999)
remained outstanding.
On October 6, 1998, the Company entered into a definitive merger agreement
with Thomas & Betts Corporation ("T&B"), a leading producer of connectors and
components for worldwide electrical and electronic markets. Under the terms
of the merger agreement, T&B will acquire all of the outstanding shares of
the Company's common stock for approximately $20.3 million ($3.54 per share)
in cash, subject to reduction under certain circumstances if and to the
extent the Company's stockholders' equity at the end of the month prior to
the consummation of the transaction is less than $15,029,000 (the Company's
stockholders' equity at August 31, 1998). The consummation of the transaction
is subject to, among other things, approval by the Company's stockholders at
a Special Meeting of Stockholders to be called by the Company.
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
______________________________________________
NET SALES. The Company's net sales for the third quarter of 1998 were
$6,620,000, which represented an increase of $163,000 (2.5%) compared to net
sales in the third quarter of 1997. The increase in net sales was due to an
increase in volume shipments of approximately 4% and a sales mix which
included more shipments of larger-sized pipe, partially offset by average
selling prices which were approximately 2% lower than the year-ago period.
GROSS MARGIN. The Company's gross margin for the third quarter of 1998 was
$1,976,000, which represented an increase of $184,000 (10.3%) compared to
gross margin for the same period of 1997. The Company's gross margin as a
percentage of sales increased to 29.8% in the third quarter of 1998 from
27.8% in the same period of the prior year, due to certain non-recurring
reductions in the cost of materials used in the production process.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses for the third
quarter of 1998 were $1,202,000, which represented an increase of $120,000
(11.1%) compared to the same period of 1997. As a percentage of net sales,
SG&A expenses were 18.2% for the third quarter of 1998 compared to 16.8% for
the same period of 1997. The increase was due primarily to approximately
$78,000 of expenses related to the Company's merger transaction with T&B. In
addition, during the third quarter of 1997, the Company received
approximately $28,000 in insurance refunds relating to legal expenses
incurred during 1996.
INTEREST EXPENSE. Interest expense for the third quarter of 1998 was $29,000,
which represented a decrease of $20,000 (40.8%) compared to the third quarter
of 1997. The decrease was due to the repayment of $1,500,000 principal amount
of notes payable due to former stockholders of Ocal Alabama on September 18,
1997.
INTEREST INCOME. Interest income for the third quarter of 1998 was $58,000,
which represented a decrease of $7,000 (10.8%) compared to the third quarter
of 1997. The decrease was due to lower average investment balances, resulting
from the repayment of $1,500,000 principal amount of notes payable due to
former stockholders of Ocal Alabama on September 18, 1997.
INCOME TAX EXPENSE. The Company's effective income tax rate for the third
quarter of 1998 was 33.5%, compared to 32.9% in the same period of the prior
year. The Company uses provisional tax rates for the first half of the year.
After completion of the tax return for the prior year, which occurs during
the third quarter of the year, the Company adjusts third quarter tax expense
to reflect differences that resulted from use of provisional, rather than
actual, tax rates.
NET INCOME. Net income for the third quarter of 1998 was $534,000, which
represented an increase of $47,000 (9.7%) compared to the same period of the
prior year. The increase was due primarily to increased gross margin, caused
by material cost savings achieved by reconditioning pipe and reduced prices
on fittings purchases, partially offset by increased selling, general and
administrative expenses relating primarily to legal and professional fees in
connection with the Company's merger transaction with T&B Corporation.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
_____________________________________________
NET SALES. The Company's net sales for the nine months ended September 30,
1998 were $19,155,000, which represented an increase of $821,000 (4.5%)
compared to net sales in the same period of 1997. The increase in net sales
was due to an increase in volume shipments of approximately 6%, with average
selling prices, including the effects of price concessions on opening orders,
down approximately 2% from the year-ago period.
GROSS MARGIN. The Company's gross margin for the nine months ended September
30, 1998 was $5,270,000, which represented an increase of $144,000 (2.8%)
compared to the gross margin for the same period of 1997. The Company's gross
margin as a percentage of sales decreased to 27.5% for the first nine months
of 1998 from 28.0% in the same period of the prior year, primarily due to
competitive pricing. Material costs as a percentage of sales were up just
slightly (0.8% of sales) during the nine months ended September 30, 1998
compared to the year-ago period, due to certain non-recurring reductions in
the cost of materials used in the production process that were achieved in
the third quarter, which substantially offset earlier material price
increases.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses for the nine
months ended September 30, 1998 were $3,581,000, which represented an
increase of $282,000 (8.5%) compared to the same period of 1997. As a
percentage of net sales, SG&A expenses were 18.7% for the nine months ended
September 30, 1998 compared to 18.0% for the same period of 1997. The
increase was due primarily to higher legal and professional fees, which
included third quarter 1998 expenses of approximately $78,000 related to the
Company's merger transaction with T&B, and second quarter 1998 expenses of
approximately $50,000 related to the settlement of a lawsuit. In addition,
during the first nine months of 1997, the Company received approximately
$80,000 in insurance refunds relating to legal expenses incurred during 1996.
Furthermore, sales commissions for the nine months ended September 30, 1998
were higher than the same period of the prior year due to the higher level of
sales.
INTEREST EXPENSE. Interest expense for the nine months ended September 30,
1998 was $86,000, which represented a decrease of $69,000 (44.5%) compared to
the same period of 1997. The decrease was due to the repayment of $1,500,000
principal amount of notes payable due to former stockholders of Ocal Alabama
on September 18, 1997.
INTEREST INCOME. Interest income for the nine months ended September 30, 1998
was $154,000, which represented a decrease of $38,000 (19.8%) compared to the
same period of 1997. The decrease was due to lower average investment
balances, resulting from the repayment of $1,500,000 principal amount of
notes payable due to former stockholders of Ocal Alabama on September 18,
1997.
INCOME TAX EXPENSE. The Company's effective income tax rate for the nine
months ended September 30, 1998 was 35.4%, compared to 37.0% in the same
period of the prior year. The decrease was due to a lower effective state
income tax rate in 1998.
NET INCOME. Net income for the nine months ended September 30, 1998 was
$1,135,000, which represented a decrease of $40,000 (3.4%) compared to the
same period of the prior year. The decrease was due primarily to increased
selling, general and administrative expenses, partially offset by an increase
in gross margin and reductions in interest and income tax expenses.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
At September 30, 1998, the Company's debt totaled $1,757,000, which consisted
of $1,500,000 in notes payable to former stockholders of Ocal Alabama and
$257,000 of notes payable to the Company's major stockholder. These notes are
due on March 18, 1999.
The Company has a revolving bank line of credit, which provides for maximum
borrowings of $6,500,000 (subject to certain specified percentages of the
Company's accounts receivable and inventories). Interest is payable, at the
Company's option, at either the bank's prime interest rate or LIBOR plus
2.0%. At September 30, 1998, the Company had $22,000 outstanding under a
standby letter of credit, and no borrowings outstanding under the bank line
of credit. The amount of unused credit available under the bank line of
credit, based upon the Company's collateral at September 30, 1998, was
$5,182,000.
The Company believes that, in the event the Company's merger transaction with
T&B is not consummated, cash provided by operating activities, existing cash
and cash equivalents, and available credit will be sufficient to fund future
operating and capital cash needs for at least the next 12 to 18 months.
At September 30, 1998, working capital was $13,267,000, compared to
$14,170,000 at December 31, 1997, a decrease of $903,000 (6.4%). The decrease
resulted from the reclassification of $1,757,000 principal amount of long-
term notes payable to former stockholders of Ocal Alabama and the Company's
major stockholder, which are now due in the current period, and reductions in
inventory and prepaid expenses of $615,000, offset by an increase of $988,000
in accounts receivable, and an increase in cash (net of increases in accounts
payable and accrued liabilities) of $524,000. The Company's days' sales
outstanding in receivables has increased from approximately 49 days at
December 31, 1997 to approximately 52 days at September 30, 1998.
The Company generated net cash from operating activities of $2,350,000 for
the nine months ended September 30, 1998, compared to $1,174,000 in the same
period of 1997. The primary sources of operating cash for the nine months
ended September 30, 1998 were the Company's net income, increases in accounts
payable and accrued expenses and a reduction in inventory, partially offset
by an increase in accounts receivable. During the comparable period of 1997,
the primary sources of operating cash were the Company's net income and
increases in accounts payable and accrued expenses, offset by increases in
inventory, accounts receivable and prepaid income taxes.
Net cash used in investing activities consists of capital expenditures of
$553,000 for the nine months ended September 30, 1998, compared to $447,000
in the same period of 1997. The capital expenditures for both periods were
for upgrading and expansion of the Company's manufacturing equipment to
further automate production processes.
Net cash used by financing activities was $48,000 for the nine months ended
September 30, 1998, compared to $1,861,000 in the same period of 1997. During
the first quarter of 1998, the Company repurchased 20,000 shares of treasury
stock at a cost of $48,000 under the Company's stock repurchase program. The
Company's Board of Directors suspended the stock repurchase program during
the second quarter of 1998. During the nine months ended September 30,1997,
the Company repaid $1,500,000 principal amount of notes payable to former
stockholders of Ocal Alabama which matured on September 18, 1997, paid
$300,000 of previously undistributed S corporation earnings after the
finalization of Ocal Alabama's March 18, 1996 tax return in February of 1997,
and repurchased 20,000 shares of its common stock at a cost of $61,000.
ENVIRONMENTAL CONTINGENCIES
___________________________
During preliminary environmental testing conducted on T&B's behalf in
connection with its acquisition of the Company, certain contaminants were
discovered in and about the soils, surface water and ground water at the
Company's Mobile, Alabama plant. A review of Company records indicated that
these materials should not be present as a result of Company processes, and
the contaminants may possibly have migrated onto Company property from off-
site property or as a result of operations of predecessor owners or
operators. Following the discovery of these materials, the Company engaged an
environmental consulting firm to perform environmental investigations at the
Mobile plant to further determine the scope of the problem. The matter has
been reported to the Alabama Department of Environmental Management ("ADEM"),
and ADEM has required the Company to provide an assessment plan for further
environmental investigations. ADEM has granted the Company an extension to
December 15, 1998 for submitting the assessment plan. ADEM will then review
the plan and determine whether any corrective actions will be required.
In a meeting between the Company's environmental consulting firm and ADEM
held on September 3, 1998, ADEM indicated that there would be no requirement
to address any of the on-site soil contamination. The Company believes, based
upon the opinion of the consulting firm, that ADEM is unlikely to require
active remediation of the ground water, and that ADEM will probably require
only monitoring of any surface or ground water. However, in the event that
ADEM were to require active remediation of the ground water at the Company's
Mobile facility, the estimated cost to the Company of implementing the
remediation would be approximately $200,000 to $400,000 incurred over a two
to three year period, based on the estimates provided to the Company by its
environmental consulting firm. Any remediation costs would be funded out of
cash and cash equivalents.
By letter dated October 14, 1998, the United States Environmental Protection
Agency ("USEPA") issued a general notice letter to Occidental Coating Company
("Occidental"), a subsidiary of the Company, with respect to the Casmalia
Disposal Site in Santa Barbara County, California ("Casmalia"). This letter
notified Occidental that it was considered by USEPA to be a potentially
responsible party with respect to Casmalia by virtue of the fact that it
allegedly generated hazardous waste that was disposed of at the site. The
letter further advised that Occidental was considered a "DE MINIMIS"
generator, and that DE MINIMIS generators could expect to settle their
liability with respect to Casmalia for a payment in the range of $75,000 to
$750,000. USEPA anticipates that the proposed settlement will be offered to
the DE MINIMIS generators during the fourth quarter of 1998, after which such
generators will have sixty (60) days to review and approve the offer. The
Company is currently reviewing the validity of the claim and believes, based
on conversations with USEPA, that it will be able to settle near the lower
end of the range (i.e., approximately $120,000). Although the settlement
costs could be significant in relation to the Company's results of operations
in the period in which they are incurred, they are not expected to have a
material adverse effect on the Company's liquidity or consolidated financial
position. The Company will pay any settlement costs out of cash and cash
equivalents.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently the subject of proceedings before the Alabama
Department of Environmental Management and the U.S. Environmental Protection
Agency relating to certain environmental matters. These matters are discussed
above under "Notes to Condensed Consolidated Financial Statements - Note 4"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Environmental Contingencies."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
<PAGE>
SIGNATURE
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.
OCAL, INC.
(Registrant)
Date: November 13, 1998 By: /s/ Ilan Bender
______________________
Ilan Bender
Chief Executive Officer
and President
By: /s/ David J. Kelly
______________________
David J. Kelly
Controller
(Principal Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,278
<SECURITIES> 0
<RECEIVABLES> 3,739
<ALLOWANCES> 0
<INVENTORY> 7,436
<CURRENT-ASSETS> 17,848
<PP&E> 2,068
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,923
<CURRENT-LIABILITIES> 4,581
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 15,073
<TOTAL-LIABILITY-AND-EQUITY> 19,923
<SALES> 19,155
<TOTAL-REVENUES> 19,155
<CGS> 13,885
<TOTAL-COSTS> 13,885
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 86
<INCOME-PRETAX> 1,757
<INCOME-TAX> 622
<INCOME-CONTINUING> 1,135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,135
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
