UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
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 0-27022
OPTICAL CABLE CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1237042
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
5290 Concourse Drive
Roanoke, Virginia 24019
(Address of principal executive offices, including zip code)
(540) 265-0690
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (1) Yes X No (2) Yes X No
-- -- -- --
As of June 11, 1997, 38,675,416 shares of the registrant's Common Stock,
no par value, were outstanding. Of these outstanding shares, 36,000,000 shares
were held by Robert Kopstein, Chairman of the Board, President and Chief
Executive Officer of the registrant.
<PAGE>
OPTICAL CABLE CORPORATION
FORM 10-Q INDEX
SIX MONTHS ENDED APRIL 30, 1997
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets - April 30, 1997 and
October 31, 1996.........................................2
Condensed Statements of Income - Three Months
and Six Months Ended April 30, 1997 and 1996.............3
Condensed Statement of Changes in Stockholders'
Equity - Six Months Ended April 30, 1997.................4
Condensed Statements of Cash Flows - Six Months
Ended April 30, 1997 and 1996............................5
Condensed Notes to Condensed Financial Statements........6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................9-12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..........................13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
OPTICAL CABLE CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
APRIL 30, OCTOBER 31,
ASSETS 1997 1996
----- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 349,130 $ 1,677,739
Trade accounts receivable, net of allowance for doubtful
accounts of $243,000 at April 30, 1997 and $300,000
at October 31, 1996 7,868,481 9,368,476
Other receivables 449,037 354,041
Due from employees 4,125 1,475
Income taxes refundable 77,516 -
Inventories 10,257,219 10,261,437
Prepaid expenses 187,565 64,863
Deferred income taxes 168,349 155,304
------------- ---------------
Total current assets 19,361,422 21,883,335
Other assets, net 59,494 67,996
Property and equipment, net 11,524,756 9,175,871
------------- ---------------
Total assets $ 30,945,672 $ 31,127,202
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 359,000 $ 1,103,000
Accounts payable and accrued expenses 2,992,401 5,488,765
Accrued compensation and payroll taxes 586,068 676,725
Income taxes payable - 237,926
------------- ---------------
Total current liabilities 3,937,469 7,506,416
Deferred income taxes 43,760 49,227
------------- ---------------
Total liabilities 3,981,229 7,555,643
------------- ---------------
Stockholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares;
none issued and outstanding - -
Common stock, voting; no par value, authorized 50,000,000
shares; issued and outstanding 38,675,416 shares 18,594,116 18,594,116
Retained earnings 8,370,327 4,977,443
------------- ---------------
Total stockholders' equity 26,964,443 23,571,559
Commitments and contingencies
------------- ---------------
Total liabilities and stockholders' equity $ 30,945,672 $ 31,127,202
============= ===============
</TABLE>
See accompanying condensed notes to condensed financial statements.
2
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
--------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 10,645,571 $ 10,183,960 $ 23,136,882 $ 20,526,432
Cost of goods sold 6,352,983 6,087,121 13,492,629 11,722,572
--------------- ---------------- -------------- -----------------
Gross profit 4,292,588 4,096,839 9,644,253 8,803,860
Selling, general and administrative
expenses 2,258,486 1,973,115 4,397,062 3,911,919
--------------- ---------------- -------------- -----------------
Income from operations 2,034,102 2,123,724 5,247,191 4,891,941
Other income (expense):
Interest income 3,909 22,572 9,069 29,450
Interest expense (897) (3,493) (11,098) (3,493)
Other, net (1,308) 109,425 (5,486) 109,324
--------------- ---------------- -------------- -----------------
Other income (expense), net 1,704 128,504 (7,515) 135,281
--------------- ---------------- -------------- -----------------
Income before income tax expense 2,035,806 2,252,228 5,239,676 5,027,222
Income tax expense 723,283 183,940 1,846,792 183,940
--------------- ---------------- -------------- -----------------
Net income $ 1,312,523 $ 2,068,288 $ 3,392,884 $ 4,843,282
=============== ================ ============== =================
Pro forma income data:
Net income before pro forma income tax
provision, as reported $ 2,068,288 $ 4,843,282
Pro forma income tax provision 680,916 1,746,513
---------------- -----------------
Pro forma net income $ 1,387,372 $ 3,096,769
================ =================
Net income per share (pro forma for 1996) $ 0.034 $ 0.036 $ 0.088 $ 0.081
=============== ================ ============== =================
Weighted average shares outstanding
(pro forma for 1996) 38,675,416 38,692,284 38,675,416 38,246,142
=============== ================ ============== =================
</TABLE>
See accompanying condensed notes to condensed financial statements.
3
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1997
--------------------------------------------------------------------------------------
Common Stock Total
------------------------------------------ Retained Stockholders'
Shares Amount Earnings Equity
------ ------ -------- ------
<S> <C> <C> <C> <C>
Balances at October 31, 1996 38,675,416 $ 18,594,116 $ 4,977,443 $ 23,571,559
Net income - - 3,392,884 3,392,884
----------------- ---------------- ------------------ -------------------
Balances at April 30, 1997 38,675,416 $ 18,594,116 $ 8,370,327 $ 26,964,443
================= ================ ================== ===================
</TABLE>
See accompanying condensed notes to condensed financial statements.
4
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
-------------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,392,884 $ 4,843,282
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 346,648 256,952
Bad debt expense (recovery) (71,632) 43,893
Deferred income taxes (18,512) (135,457)
(Increase) decrease in:
Trade accounts receivable 1,571,627 (1,445,028)
Other receivables (94,996) (15,268)
Due from employees (2,650) 625
Income taxes refundable (77,516) -
Inventories 4,218 (688,561)
Prepaid expenses (122,702) (2,975)
Other assets - 201,237
Increase (decrease) in:
Accounts payable and accrued expenses (2,203,053) 624,394
Accrued compensation and payroll taxes (90,657) (320,033)
Income taxes payable (237,926) 319,397
----------------- ----------------
Net cash provided by operating activities 2,395,733 3,682,458
Cash flows from investing activities:
Purchase of property and equipment (2,980,342) (623,145)
----------------- ----------------
Net cash used in investing activities (2,980,342) (623,145)
Cash flows from financing activities:
Net change in notes payable (744,000) 1,039,000
Proceeds from issuance of common stock, net of
issuance costs - 5,608,958
Cash distributions to previously sole stockholder - (6,150,000)
----------------- ----------------
Net cash provided by (used in) financing activities (744,000) 497,958
----------------- ----------------
Net increase (decrease) in cash and cash equivalents (1,328,609) 3,557,271
Cash and cash equivalents at beginning of period 1,677,739 535,235
----------------- ----------------
Cash and cash equivalents at end of period $ 349,130 $ 4,092,506
================= ================
</TABLE>
See accompanying condensed notes to condensed financial statements.
5
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED APRIL 30, 1997
(Unaudited)
(1) GENERAL
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial reporting information and the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all material
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the six months ended April 30, 1997 are not necessarily indicative
of the results that may be expected for the fiscal year ending October
31, 1997. The unaudited condensed financial statements and condensed
notes are presented as permitted by Form 10-Q and do not contain
certain information included in the Company's annual financial
statements and notes. For further information, refer to the financial
statements and notes thereto included in the Company's annual report on
Form 10-K for the fiscal year ended October 31, 1996.
(a) Pro Forma Net Income Per Share
For the three months and six months ended April 30, 1996, pro
forma net income per share was computed by dividing pro forma net
income by the pro forma weighted average number of common shares
outstanding during the period and by deeming to be outstanding
the number of shares (1,800,000) the Company would have needed to
issue at the initial public offering price per share ($2.50) to
pay a $1 million cash distribution to the previously sole
stockholder in December 1995 and a $3.5 million cash distribution
to the previously sole stockholder out of the proceeds of the
initial public offering.
(b) Net Income Per Share
For the three months and six months ended April 30, 1997, net
income per share was computed by dividing net income by the
weighted average number of common shares outstanding during the
period. The calculation of weighted average shares outstanding
does not include the effect of common stock options since their
impact on the weighted average shares outstanding is less than
three percent.
(2) INVENTORIES
Inventories at April 30, 1997 and October 31, 1996 consist of
the following:
April 30, October 31,
1997 1996
----------- ------------
Finished goods $ 4,913,523 $ 2,465,659
Work in process 1,715,982 3,104,339
Raw materials 3,577,226 4,645,843
Production supplies 50,488 45,596
----------- ------------
$10,257,219 $10,261,437
=========== ============
(continued)
6
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(3) NOTES PAYABLE
On February 28, 1997, the Company and its bank executed a loan
commitment letter, which renewed its $5 million secured revolving line
of credit available for general corporate purposes and established a
$10 million secured line of credit to fund potential acquisitions,
mergers or joint ventures. The lines of credit bear interest at 1.50
percent above the monthly LIBOR rate and are equally and ratably
secured by the Company's accounts receivable, contract rights,
inventory, furniture and fixtures, machinery and equipment and general
intangibles. The lines of credit will expire on February 28, 1998,
unless renewed or extended.
(4) INCOME TAXES
Through March 31, 1996, the Company was not subject to federal
and state income taxes since it had elected to be taxed as an S
Corporation. In connection with the closing of the Company's initial
public offering, the Company terminated its status as an S Corporation
effective March 31, 1996 and became subject to federal and state income
taxes. Accordingly, the statements of income for the three months and
six months ended April 30, 1996 include income taxes from April 1,
1996, and, for informational purposes, a pro forma adjustment for
income taxes which would have been recorded if the Company had been
subject to income taxes for the entire periods presented.
(5) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the provisions of SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, on November 1, 1996. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this Statement did
not have a material impact on the Company's financial position, results
of operations, or liquidity.
(continued)
7
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(6) STOCK OPTION PLAN
Prior to November 1, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On November 1, 1996, the
Company adopted SFAS No. 123, Accounting for Stock-based Compensation,
which permits entities to recognize as expense over the vesting period
the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option
grants made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and will provide
the pro forma disclosure provisions of SFAS No. 123 in its annual
report for the fiscal year ending October 31, 1997.
(7) FUTURE ACCOUNTING CONSIDERATIONS
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, Earnings
per Share. SFAS No.128 establishes standards for computing and
presenting earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. SFAS No. 128
simplifies the standards for computing earnings per share previously
found in APB Opinion No. 15, Earnings per Share, and makes them
comparable to international EPS standards. It replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires
a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the
earnings of the entity.
SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. SFAS No. 128 requires restatement
of all prior-period EPS data presented. It is not anticipated that SFAS
No. 128 will have any material effect on current or prior period EPS
data presented by the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997 AND 1996
Net Sales
Net sales consists of gross sales of products, less discounts, refunds and
returns. Net sales increased 4.5 percent to $10.6 million in second quarter 1997
from $10.2 million for the same period in 1996. This increase was attributable
to the Company's continued effort to reach a broader customer base throughout
the United States and internationally with increased advertising, trade show
attendance, and direct sales presence in more states. The increase in net sales
for second quarter 1997 was lower than expected due to a slowdown in European
business resulting in a decline in international sales of approximately 6
percent.
Gross Profit Margin
Cost of goods sold consists of the cost of materials, compensation costs and
overhead related to the Company's manufacturing operations. The Company's gross
profit margin (gross profit as a percentage of net sales) increased slightly to
40.3 percent in second quarter 1997 from 40.2 percent in second quarter 1996.
During second quarter 1997, sales from orders $50,000 or more approximated 15
percent compared to 21 percent for second quarter 1996. Discounts on larger
orders are generally greater than for sales from orders less than $50,000. In
addition, during second quarter 1997, net sales to distributors approximated 73
percent versus 52 percent for the same period in 1996. Discounts on sales to
distributors are generally greater than for sales to the Company's other
customer bases.
Selling, General And Administrative Expenses
Selling, general and administrative expenses consist of the compensation costs
(including sales commissions) for sales and marketing personnel, travel
expenses, customer support expenses, trade show expenses, advertising, the
compensation cost for administration, finance and general management personnel,
as well as legal and accounting fees. Selling, general and administrative
expenses as a percentage of net sales were 21.2 percent in second quarter 1997
compared to 19.4 percent in second quarter 1996. This higher percentage was due
primarily to incurring approximately $174,000 of shareholder related expenses
during second quarter 1997, such as printing and distribution costs for the
annual report on Form 10-K and the proxy statement, and costs for the annual
meeting of shareholders, compared to approximately $2,000 expensed in second
quarter 1996.
Income Before Income Tax Expense
Income before income tax expense decreased 9.6 percent to $2.0 million for the
three months ended April 30, 1997 compared to $2.3 million for the three months
ended April 30, 1996. This was primarily due to increased selling, general and
administrative expenses.
Income Taxes
Through March 31, 1996, the Company was not subject to federal and state income
taxes since it had elected to be taxed as an S Corporation. In connection with
the Company's initial public offering, the Company terminated its status as an S
Corporation effective March 31, 1996 and became subject to federal and state
income taxes. Accordingly, the statement of income for the three months ended
April 30, 1997 includes income taxes, at an effective rate of 35.5 percent, and,
(Continued)
9
<PAGE>
the statement of income for the three months ended April 30, 1996 includes
income taxes from April 1, 1996, and, for informational purposes, a pro forma
adjustment for income taxes, at an effective tax rate of 38.4 percent, which
would have been recorded if the Company had been subject to income taxes for the
entire period presented. The lower effective tax rate in second quarter 1997 is
due primarily to the benefit of the Company's foreign sales corporation.
Net Income
Net income for second quarter 1997 was $1.3 million compared to $2.1 million for
second quarter 1996. Net income decreased due to the decrease in income before
income tax expense and to income tax expense of $723,000 for second quarter 1997
compared to $184,000 for second quarter 1996 as a result of the Company's
termination of its S Corporation status effective March 31, 1996.
Net income for second quarter 1997 decreased $75,000, or 5.4 percent from pro
forma net income for second quarter 1996. This decrease resulted from the
decrease in income before income tax expense of $216,000, offset by the $141,000
decrease in income tax expense in second quarter 1997 from pro forma income tax
provision for the same period in 1996.
SIX MONTHS ENDED APRIL 30, 1997 AND 1996
Net Sales
Net sales consists of gross sales of products, less discounts, refunds and
returns. Net sales increased 12.7 percent to $23.1 million for the six months
ended April 30, 1997 from $20.5 million for the same period in 1996. This
increase was attributable to the Company's continued effort to reach a broader
customer base throughout the United States and internationally with increased
advertising, trade show attendance, and direct sales presence in more states.
This effort resulted in greater sales in all market segments and product types.
Gross Profit Margin
Cost of goods sold consists of the cost of materials, compensation costs and
overhead related to the Company's manufacturing operations. The Company's gross
profit margin (gross profit as a percentage of net sales) decreased to 41.7
percent for the six months ended April 30, 1997 from 42.9 percent for the six
months ended April 30, 1996. This decrease was due to the Company's product mix
sold and the ratio of net sales attributable to the Company's distributors
during the period. During the six months ended April 30, 1997, sales from orders
$50,000 or more approximated 21 percent compared to 18 percent for the six
months ended April 30, 1996. Discounts on large orders are generally greater
than for sales from orders less than $50,000. In addition, for the six months
ended April 30, 1997, net sales to distributors approximated 62 percent versus
49 percent for the same period in 1996. Discounts on sales to distributors are
generally greater than for sales to the Company's other customer base.
Selling, General And Administrative Expenses
Selling, general and administrative expenses consist of the compensation costs
(including sales commissions) for sales and marketing personnel, travel
expenses, customer support expenses, trade show expenses, advertising, the
compensation cost for administration, finance and general management personnel,
as well as legal and accounting fees. Selling, general and administrative
expenses as a percentage of net sales were 19.0 percent for the six months ended
April 30, 1997 compared to 19.1 percent for the six months ended April 30, 1996.
This lower percentage was primarily the result of the fact that net sales for
the six months ended April 30, 1997 increased at a
(Continued)
10
<PAGE>
faster rate than selling, general and administrative expenses compared to the
six months ended April 30, 1996. The ratio of selling, general and
administrative expenses as a percentage of net sales was also impacted due to
incurring approximately $224,000 of shareholder related expenses during the six
months ended April 30, 1997, such as printing and distribution costs for the
annual report on Form 10-K and the proxy statement, and costs for the annual
meeting of shareholders, compared to approximately $2,000 expensed for the six
months ended April 30, 1996.
Income Before Income Tax Expense
Income before income tax expense increased 4.2 percent to $5.2 million for the
six months ended April 30, 1997 compared to $5.0 million for the six months
ended April 30, 1996. This was primarily due to increased sales volume.
Income Taxes
Through March 31, 1996, the Company was not subject to federal and state income
taxes since it had elected to be taxed as an S Corporation. In connection with
the Company's initial public offering, the Company terminated its status as an S
Corporation effective March 31, 1996 and became subject to federal and state
income taxes. Accordingly, the statement of income for the six months ended
April 30, 1997 includes income taxes, at an effective tax rate of 35.2 percent,
and the statement of income for the six months ended April 30, 1996 includes
income taxes from April 1, 1996, and, for informational purposes, a pro forma
adjustment for income taxes, at an effective tax rate of 38.4 percent, which
would have been recorded if the Company had been subject to income taxes for the
entire period presented. The lower effective tax rate for the six months ended
April 30, 1997 is due primarily to the benefit of the Company's foreign sales
corporation.
Net Income
Net income for the six months ended April 30, 1997 was $3.4 million compared to
$4.8 million for the six months ended April 30, 1996. Despite an increase in
income before income tax expense, net income decreased due to income tax expense
of $1.8 million for the six months ended April 30, 1997 as a result of the
Company's termination of its S Corporation status effective March 31, 1996.
Net income for the six months ended April 30, 1997 increased $296,000, or 9.6
percent over pro forma net income for the six months ended April 30, 1996. This
increase resulted from the increase in income before income tax expense of
$212,000, and by the $84,000 decrease in income tax expense for the six months
ended April 30, 1997 from pro forma income tax provision for the same period in
1996.
FINANCIAL CONDITION
Total assets at April 30, 1997 were $31.0 million, a decrease of $182,000, or
0.6 percent over October 31, 1996. This decrease was primarily due to a decrease
of $1.5 million in trade accounts receivable resulting from the decreased sales
volume during the quarter as compared to fourth quarter 1996, and a $2.3 million
increase in property and equipment, net, due to the Company's expansion of its
headquarters facilities. The expansion was funded primarily through the $1.3
million decrease in cash and cash equivalents.
Total stockholders' equity at April 30, 1997 increased $3.4 million, or 14.4
percent from October 31, 1996 with net income retained accounting for the
increase.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been to (i) fund working capital
requirements, (ii) repay indebtedness, (iii) purchase property and equipment for
expansion and (iv) fund distributions to its previously sole stockholder
primarily to satisfy his tax liabilities resulting from
(Continued)
11
<PAGE>
S Corporation status. The Company's primary sources of financing have been cash
from operations, bank borrowings and proceeds from the initial public offering
of the Company's common stock. The Company believes that its cash flow from
operations and available lines of credit will be adequate to fund its operations
for at least the next twelve months.
On February 28, 1997, the Company and its bank executed a loan commitment
letter, which renewed its $5 million secured revolving line of credit available
for general corporate purposes and established a $10 million secured line of
credit to fund potential acquisitions, mergers or joint ventures. The lines of
credit are equally and ratably secured by the Company's accounts receivable,
contract rights, inventory, furniture and fixture, machinery and equipment and
general intangibles. The lines of credit will expire on February 28, 1998,
unless renewed or extended. As of the date hereof, the Company has no additional
material sources of financing.
Cash flows from operations were approximately $2.4 million and $3.7 million for
the six months ended April 30, 1997 and 1996, respectively. For the six months
ended April 30, 1997, cash flows from operations were primarily provided by
operating income and a decrease in trade accounts receivable of $1.6 million,
offset by a decrease in accounts payable and accrued expenses of $2.2 million
and income taxes paid of $2.2 million. Cash flows from operations for the six
months ended April 30, 1996 were primarily provided by operating income, offset
by an increase in trade accounts receivable of $1.4 million and an increase in
inventory of $689,000.
Net cash used in investing activities was for expenditures related to facilities
and equipment and was $3.0 million and $623,000 for the six months ended April
30, 1997 and 1996, respectively. The Company's expansion of its headquarters
facilities is complete, and as of April 30, 1997, there were no material
commitments for additional capital expenditures.
Net cash provided by (used in) financing activities was $(744,000) and $498,000
for the six months ended April 30, 1997 and 1996, respectively. The net cash
used in financing activities for the six months ended April 30, 1997 consisted
of repayment of debt outstanding under the Company's line of credit of $744,000
compared to an increase of $1.0 million for the six months ended April 30, 1996.
The net cash provided by financing activities for the six months ended April 30,
1996 also included net proceeds from the issuance of common stock of $5.6
million, offset by $6.2 million in cash distributions to the Company's
previously sole stockholder for payment of his income taxes with respect to the
taxable income of the Company prior to the termination of the Company's S
Corporation status.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K for the six
months ended April 30, 1997.
(27) Financial Data Schedule.
(b) Reports on Form 8-K filed during the three months ended April
30, 1997.
None.
13
<PAGE>
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.
OPTICAL CABLE CORPORATION
(Registrant)
Date: June 11, 1997 /s/Robert Kopstein
--------------------------------------
Robert Kopstein
Chairman of the Board, President and
Chief Executive Officer
Date: June 11, 1997 /s/Kenneth W. Harber
-------------------------------------
Kenneth W. Harber
Vice President of Finance, Treasurer
and Secretary
(principal financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
Amounts inapplicable or not disclosed as a separate line on the Balance Sheet or
Statement of Income are reported as 0 herein.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 349
<SECURITIES> 0
<RECEIVABLES> 8,111
<ALLOWANCES> 243
<INVENTORY> 10,257
<CURRENT-ASSETS> 19,361
<PP&E> 14,843
<DEPRECIATION> 3,318
<TOTAL-ASSETS> 30,946
<CURRENT-LIABILITIES> 3,937
<BONDS> 0
0
0
<COMMON> 18,594
<OTHER-SE> 8,370
<TOTAL-LIABILITY-AND-EQUITY> 30,975
<SALES> 23,137
<TOTAL-REVENUES> 23,146
<CGS> 13,493
<TOTAL-COSTS> 17,890
<OTHER-EXPENSES> 5
<LOSS-PROVISION> (72)
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 5,240
<INCOME-TAX> 1,847
<INCOME-CONTINUING> 3,393
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,393
<EPS-PRIMARY> 0.088
<EPS-DILUTED> 0.088
</TABLE>
