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, 1999
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 (I.R.S. Employer
incorporation 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)
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 7, 1999, 37,570,786 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, 1999
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets - April 30, 1999 and October 31,
1998...................................................................................2
Condensed Statements of Income - Three Months and Six
Months Ended April 30, 1999 and 1998...................................................3
Condensed Statement of Changes in Stockholders' Equity -
Six Months Ended April 30, 1999........................................................4
Condensed Statements of Cash Flows - Six Months Ended
April 30, 1999 and 1998................................................................5
Condensed Notes to Condensed Financial Statements......................................6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................................9-14
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.........................................................16
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPTICAL CABLE CORPORATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1999 1998
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ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,019,196 $ 1,122,277
Trade accounts receivable, net of allowance for doubtful
accounts of $315,000 and $311,500 10,300,436 10,012,699
Other receivables 269,712 295,199
Due from employees 7,664 5,589
Inventories 9,539,857 9,967,012
Prepaid expenses 205,151 95,766
Deferred income taxes 228,504 212,738
------------ -----------
Total current assets 23,570,520 21,711,280
Property and equipment, net 10,844,374 11,083,921
Other assets, net 76,315 33,950
------------ -----------
Total assets $ 34,491,209 $ 32,829,151
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,784,466 $ 1,952,360
Income taxes payable 235,290 111,449
Accrued compensation and payroll taxes 469,184 656,028
------------ -----------
Total current liabilities 3,488,940 2,719,837
Deferred income taxes 199,654 118,121
------------ -----------
Total liabilities 3,688,594 2,837,958
------------ -----------
Stockholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares;
none issued and outstanding - -
Common stock, no par value, authorized 100,000,000 shares;
issued and outstanding 37,664,336 shares and 37,879,036
shares 7,083,637 9,786,281
Paid-in capital 252,863 150,359
Retained earnings 23,466,115 20,054,553
------------ -----------
Total stockholders' equity 30,802,615 29,991,193
Commitments and contingencies ------------ -----------
Total liabilities and stockholders' equity $ 34,491,209 $ 32,829,151
============ ===========
</TABLE>
See accompanying condensed notes to condensed financial statements.
2
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OPTICAL CABLE CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 12,434,733 $ 11,689,100 $ 23,276,672 $ 23,562,215
Cost of goods sold 6,724,181 6,612,485 12,843,933 13,416,692
------------ ------------ ------------ ------------
Gross profit 5,710,552 5,076,615 10,432,739 10,145,523
Selling, general and administrative expenses 2,697,198 2,444,208 5,206,970 4,727,434
------------ ------------ ------------ ------------
Income from operations 3,013,354 2,632,407 5,225,769 5,418,089
------------ ------------ ------------ ------------
Other income (expense):
Interest income 56,265 13,955 87,264 40,564
Interest expense - (195) - (195)
Other, net (9,354) 275 (3,105) (3,144)
------------ ------------ ------------ ------------
Other income, net 43,911 14,035 84,159 37,225
------------ ------------ ------------ ------------
Income before income tax expense 3,057,265 2,646,442 5,309,928 5,455,314
Income tax expense 1,093,938 933,994 1,898,366 1,919,894
------------ ------------ ------------ ------------
Net income $ 1,963,327 $ 1,712,448 $ 3,411,562 $ 3,535,420
============ ============ ============ ============
Net income per share:
Net income per common share $ 0.052 $ 0.045 $ 0.090 $ 0.092
============ ============ ============ ============
Net income per common share -
assuming dilution $ 0.052 $ 0.044 $ 0.090 $ 0.091
============ ============ ============ ============
</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, 1999
-------------------------------------------------------------------------
COMMON STOCK TOTAL
--------------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at October 31, 1998 37,879,036 $ 9,786,281 $ 150,359 $ 20,054,553 $ 29,991,193
Net income - - - 3,411,562 3,411,562
Exercise of employee stock
options ($2.50 per share) 65,700 164,250 - - 164,250
Tax benefit of disqualifying
dispositions of stock
options exercised - - 102,504 - 102,504
Repurchase of common stock
(at cost) (280,400) (2,866,894) - - (2,866,894)
------------ ------------ ------------ ------------ ------------
Balances at April 30, 1999 37,664,336 $ 7,083,637 $ 252,863 $ 23,466,115 $ 30,802,615
============ ============ ============ ============ ============
</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,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,411,562 $ 3,535,420
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 422,563 374,770
Bad debt expense (recovery) 3,500 (53,015)
Deferred income taxes 65,767 (58,019)
(Increase) decrease in:
Trade accounts receivable (291,237) 1,726,561
Other receivables 25,487 298,642
Due from employees (2,075) (3,050)
Income taxes refundable - (169,423)
Inventories 427,155 (1,254,993)
Prepaid expenses (109,385) (6,838)
Increase (decrease) in:
Accounts payable and accrued expenses 822,003 905,408
Income taxes payable 226,345 (460,864)
Accrued compensation and payroll taxes (186,844) (52,112)
------------ -----------
Net cash provided by operating activities 4,814,841 4,782,487
------------ -----------
Cash flows from investing activities:
Purchase of property and equipment (164,411) (454,577)
Cash surrender value of life insurance (50,867) -
------------ -----------
Net cash used in investing activities (215,278) (454,577)
------------ -----------
Cash flows from financing activities:
Repurchase of common stock (2,866,894) (4,983,200)
Proceeds from exercise of employee stock options 164,250 187,125
------------ -----------
Net cash used in financing activities (2,702,644) (4,796,075)
------------ -----------
Net increase (decrease) in cash and cash equivalents 1,896,919 (468,165)
Cash and cash equivalents at beginning of period 1,122,277 985,807
------------ -----------
Cash and cash equivalents at end of period $ 3,019,196 $ 517,642
============ ===========
</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, 1999
(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, 1999 are not necessarily
indicative of the results that may be expected for the fiscal year ending
October 31, 1999. 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, 1998.
(2) INVENTORIES
Inventories at April 30, 1999 and October 31, 1998 consist of the following:
<TABLE>
APRIL 30, OCTOBER 31,
1999 1998
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<S> <C>
Finished goods $ 4,370,518 $ 4,152,094
Work in process 2,245,610 1,896,858
Raw materials 2,862,062 3,873,824
Production supplies 61,667 44,236
------------- ------------
$ 9,539,857 $ 9,967,012
============= ============
</TABLE>
(3) NOTES PAYABLE
Under a loan agreement with its bank dated March 10, 1999, the Company has a
$5 million secured revolving line of credit available for general corporate
purposes and a $10 million secured line of credit available 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, 2001, unless
renewed or extended.
6
(Continued)
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(4) STOCKHOLDERS' EQUITY
During the six months ended April 30, 1999, the Company repurchased 280,400
shares of its common stock for $2,866,894.
(5) NET INCOME PER SHARE
Net income per common share excludes dilution and is computed by dividing
income by the weighted-average number of common shares outstanding for the
period. Net income per common share - assuming dilution 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 net income
of the entity. The following is a reconciliation of the numerators and
denominators of the net income per common share computations for the
periods presented:
<TABLE>
NET INCOME SHARES PER SHARE
THREE MONTHS ENDED APRIL 30, 1999 (NUMERATOR) (DENOMINATOR) AMOUNT
------------- ---------------- -------------
<S> <C> <C> <C>
Net income per common share $ 1,963,327 37,810,521 $ .052
============
Effect of dilutive stock options - 235,321
------------- -------------
Net income per common share - assuming dilution $ 1,963,327 38,045,842 $ .052
============= ============= ===========
THREE MONTHS ENDED APRIL 30, 1998
Net income per common share $ 1,712,448 38,359,633 $ .045
-----------
Effect of dilutive stock options - 303,518
------------- -------------
Net income per common share - assuming dilution $ 1,712,448 38,663,151 $ .044
============= ============= ===========
SIX MONTHS ENDED APRIL 30, 1999
Net income per common share $ 3,411,562 37,824,305 $ .090
===========
Effect of dilutive stock options - 259,695
------------- -------------
Net income per common share - assuming dilution $ 3,411,562 38,084,000 $ .090
============= ============= ===========
SIX MONTHS ENDED APRIL 30, 1998
Net income per common share $ 3,535,420 38,485,488 $ .092
===========
Effect of dilutive stock options - 292,728
------------- -------------
Net income per common share - assuming dilution $ 3,535,420 38,778,216 $ .091
============= ============= ===========
</TABLE>
7
(Continued)
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Stock options that could potentially dilute net income per common share in
the future that were not included in the computation of net income per
common share-assuming dilution because to do so would have been antidilutive
for the periods presented totaled 232,500 for the six months ended April 30,
1998. No such antidilutive stock options existed with respect to the net
income per common share-assuming dilution calculation for the six months
ended April 30, 1999.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
NET SALES
Net sales consists of gross sales of products, less discounts, refunds and
returns. Net sales increased 6.4 percent to $12.4 million in second quarter 1999
from $11.7 million for the same period in 1998. This increase was primarily
attributable to increased volume. Total cable meters shipped in second quarter
1999 increased 15.6 percent to 40.1 million from 34.7 million cable meters
shipped for the same period in 1998. This increase in cable meters shipped was a
result of a 5.2 million increase in multi mode cable meters shipped coupled with
a 200,000 increase in single mode cable meters shipped. Multi mode cable
generally has a higher selling price than single mode cable.
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 to 45.9
percent in second quarter 1999 from 43.4 percent in second quarter 1998. This
increase was primarily due to reduced raw fiber prices.
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 21.7 percent in second quarter 1999
compared to 20.9 percent in second quarter 1998. This higher percentage reflects
the fact that net sales for second quarter 1999 increased 6.4 percent compared
to second quarter 1998, while selling, general and administrative expenses
increased 10.4 percent. Selling, general and administrative expenses as a
percentage of net sales increased largely as a result of increased marketing
efforts.
INCOME BEFORE INCOME TAX EXPENSE
Income before income tax expense increased 15.5 percent to $3.0 million for the
three months ended April 30, 1999 compared to $2.6 million for the three months
ended April 30, 1998. This was primarily due to an increase in sales and gross
profit margin, offset by increased selling, general and administrative expenses.
INCOME TAX EXPENSE
Income tax expense increased 17.1 percent to $1,094,000 for the three months
ended April 30, 1999 compared to $934,000 for the same period in 1998 due to the
increase in income before income tax expense. The Company's effective tax rate
was 35.8 percent during the three months ended April 30, 1999 compared to 35.3
percent for the same period in 1998.
(Continued)
9
<PAGE>
NET INCOME
Net income for second quarter 1999 was $2.0 million compared to $1.7 million for
second quarter 1998. Despite an increase in income tax expense of $160,000, net
income increased $251,000 due to the increased sales and gross profit margin,
partially offset by increases in selling, general and administrative expenses.
SIX MONTHS ENDED APRIL 30, 1999 AND 1998
NET SALES
Net sales consists of gross sales of products, less discounts, refunds and
returns. Net sales decreased 1.2 percent to $23.3 million for the six months
ended April 30, 1999 from $23.6 million for the same period in 1998. This slight
decrease was attributable to the 8.7 percent decrease in net sales in first
quarter 1999 compared to the same period in 1998 attributable to decreased
volume and a change in product mix, offset by the 6.4 percent increase in net
sales in second quarter 1999 compared to the same period in 1998 as described
above.
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 to 44.8
percent for the six months ended April 30, 1999 from 43.1 percent for the six
months ended April 30, 1998. This increase was due to reduced raw fiber prices
partially offset by an increase in the ratio of net sales attributable to the
Company's distributors during the period as compared to total net sales. For the
six months ended April 30, 1999, net sales to distributors approximated 58
percent versus 52 percent for the same period in 1998. In addition, during the
six months ended April 30, 1999, sales from orders $50,000 or more approximated
16 percent compared to 27 percent for the six months ended April 30, 1998.
Discounts on large orders and on sales to distributors are generally greater
than for sales to the rest of the Company's 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 22.4 percent for the six months ended
April 30, 1999 compared to 20.1 percent for the six months ended April 30, 1998.
This higher percentage reflects the fact that net sales for the six months ended
April 30, 1999 decreased 1.2 percent compared to the same period in 1998, while
selling, general and administrative expenses increased 10.1 percent, due to
increased marketing efforts.
INCOME BEFORE INCOME TAX EXPENSE
Income before income tax expense decreased 2.7 percent to $5.3 million for the
six months ended April 30, 1999 compared to $5.5 million for the six months
ended April 30, 1998. This was primarily due to increased selling, general and
administrative expenses offset by the increased gross profit margin.
(Continued)
10
<PAGE>
INCOME TAX EXPENSE
Income tax expense decreased $22,000 to $1,898,000 for the six months ended
April 30, 1999 compared to $1,920,000 for the same period in 1998 consistent
with the slight decrease in income before income tax expense. The Company's
effective tax rate was 35.8 percent during the six months ended April 30, 1999
as compared to 35.2 percent for the same period in 1998.
NET INCOME
Net income for the six months ended April 30, 1999 was $3.4 million compared to
$3.5 million for the six months ended April 30, 1998. Despite a decline in
income tax expense of $22,000, net income decreased $124,000 due to the $145,000
decrease in income before income tax expense.
FINANCIAL CONDITION
Total assets at April 30, 1999 were $34.5 million, an increase of $1.7 million,
or 5.1 percent from October 31, 1998. This increase was primarily due to an
increase of $1.9 million in cash and cash equivalents, offset by decreases in
inventories of $430,000 and capital expenditures of $164,000.
Total stockholders' equity at April 30, 1999 increased $811,000, or 2.7 percent
from October 31, 1998 with net income retained, offset primarily by the
repurchase of common stock in the amount of $2.9 million, accounting for the
increase.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of fiscal years 1999 and 1998, the Company's primary
capital needs have been to fund working capital requirements and capital
expenditures as needed. The Company's primary source of financing has been cash
provided from operations. The Company maintains bank lines of credit; however,
there were no balances outstanding under the lines as of the end of fiscal year
1998 or the second quarter of fiscal year 1999.
Under a loan agreement with its bank dated March 10, 1999, the Company has a $5
million secured revolving line of credit available for general corporate
purposes and a $10 million secured line of credit available to fund potential
acquisitions, mergers and 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, 2001, unless renewed or extended. As of the date
hereof, the Company has no additional material sources of financing. 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.
Cash flows from operations were approximately $4.8 million for the six months
ended April 30, 1999 and 1998. Cash flows from operations for the six months
ended April 30, 1999 were primarily provided by operating income, a decrease in
inventory of $427,000 and an increase in accounts payable and accrued expenses
of $822,000, offset by an increase in trade accounts receivable of $291,000 and
income taxes paid of $1.6 million. For the six months ended April 30, 1998, cash
flows from operations were primarily provided by operating income, a decrease in
trade accounts receivable of $1.7 million and an increase in accounts payable
and accrued expenses of $905,000, offset by an increase in inventory of $1.3
million and income taxes paid of $2.6 million.
(Continued)
11
<PAGE>
Net cash used in investing activities was for expenditures related to facilities
and equipment and was $164,000 and $455,000 for the six months ended April 30,
1999 and 1998, respectively. As of April 30, 1999, there were no material
commitments for additional capital expenditures.
Net cash used in financing activities was $2.7 million and $4.8 million for the
six months ended April 30, 1999 and 1998, respectively. The net cash used in
financing activities is primarily related to the Company's common stock
repurchase program.
During the period from October 31, 1998 through April 30, 1999, the Company has
repurchased approximately $2.9 million of the Company's common stock in the open
market or in privately negotiated transactions. The repurchases were funded
through cash flows from operating activities. The Company intends to use excess
working capital and other sources as appropriate to finance the remaining share
repurchase program.
DERIVATIVES
The Company does not use derivatives or other off-balance sheet instruments such
as future contracts, forward obligations, interest rate swaps, or options.
YEAR 2000
The "Year 2000" issue will affect many computers and other electronic devices
that are not programmed to properly recognize a year that begins with "20"
instead of "19." Some devices may recognize dates on or after January 1, 2000 as
a date during the 1900s, or may not recognize the date at all. If not corrected,
many devices could fail or create erroneous results.
Since 1997, the Company has been actively assessing, planning and responding to
the risks to the Company created by the Year 2000 issue. In assessing the risks,
the Company has focused on both (i) its internal information technology ("IT")
and non-IT systems, including, but not limited to, computer hardware and
software, manufacturing equipment, printers, facsimile machines, and other
control and accounting devices, and (ii) its interfaces with third parties with
which the Company has material relationships, such as suppliers, customers and
financial institutions.
The Company has completed its assessment and response planning with respect to
its internal IT and non-IT systems. Additionally, the Company has completed its
planned remediation measures with respect to those internal systems. The
Company's remediation has included updating various computer hardware and
software and printers to be Year 2000 compliant. The Company has also determined
that the Year 2000 problem will not have a material adverse affect on its
manufacturing machinery. To date, the Company has expended less than $100,000 on
its remediation measures and believes substantial future remediation
expenditures with respect to its internal systems will not be necessary. With
respect to the Company's internal systems, the Company has completed its planned
remediation and testing and believes the Year 2000 issue will not have a
material adverse affect on the Company or its business. The Company does not
believe contingency plans are necessary for its internal systems at this time.
The Company has completed its assessment of potential Year 2000 problems which
may arise from failures of third parties to be Year 2000 compliant. However,
many of the Company's suppliers and customers are still engaged in executing
their Year 2000 readiness efforts and, as a result, the Company cannot fully
evaluate the Year 2000 risks to its supply chain and its distribution channels
at this time.
(Continued)
12
<PAGE>
The Company's assessment efforts included sending questionnaires to major third
party suppliers and reviewing responses, and taking other steps to assess risks
as deemed appropriate.
The Company has not been made aware of any Year 2000 issues of third parties
that are expected to be unresolved prior to December 31, 1999 and that would
have a material adverse effect on the Company. Nonetheless, the Company is
considering contingency plans, as appropriate, including relying on raw material
inventory on hand and identification of alternative suppliers. The Company will
continue to monitor the Year 2000 status of third parties with which it has
material relationships to minimize its risk from failures of such parties to be
Year 2000 compliant.
The most likely worst case scenario for the Company with respect to the Year
2000 problem is the failure of a supplier, including an energy supplier, to be
Year 2000 compliant such that its supply of needed products or services to the
Company's manufacturing facility is interrupted temporarily. This could result
in the Company not being able to produce fiber optic cable for a period of time,
which in turn could result in lost sales and gross profit.
While the Company believes that it is taking the necessary steps to resolve its
Year 2000 issues in a timely manner, there can be no assurance that the Company
will not have any Year 2000 problems. If any such problems occur, the Company
will work to solve them as quickly as possible. At present, the Company does not
expect that such problems related to the Company's internal IT and non-IT
systems will have a material adverse affect on its business. The failure,
however, of one or more of the Company's major suppliers, customers or financial
institutions to be Year 2000 compliant could have a material adverse effect on
the Company.
NEW ACCOUNTING STANDARDS
SFAS NO. 131
- ------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for the
way public business enterprises are to report information about operating
segments in annual financial statements and requires those enterprises to report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers.
SFAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated, unless it is impracticable to do so.
SFAS No. 131 need not be applied to interim financial statements in the initial
year of its application, but comparative information for interim periods in the
initial year of application shall be reported in financial statements for
interim periods in the second year of application. The Company adopted SFAS No.
131 as of November 1, 1998; however, interim disclosures are not required during
the initial year of application.
FORWARD LOOKING INFORMATION
This Form 10-Q may contain certain "forward-looking" information within the
meaning of the federal securities laws. The forward-looking information may
include, among other information, (i) statements
(Continued)
13
<PAGE>
concerning the Company's outlook for the future, (ii) statements of belief,
(iii) future plans, strategies or anticipated events, and (iv) similar
information and statements concerning matters that are not historical facts.
Such forward-looking information is subject to risks and uncertainties that may
cause actual events to differ materially from the expectations of the Company.
Factors that could cause or contribute to such differences include, but are not
limited to, the level of sales to key customers, actions by competitors,
fluctuations in the price of raw materials (including optical fiber), the
Company's dependence on a single manufacturing facility, the ability of the
Company to protect its proprietary manufacturing technology, the Company's
dependence on a limited number of suppliers, technological changes and
introductions of new competing products, and market and economic conditions in
the areas of the world in which the Company operates or markets its products.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following information is furnished for matters submitted to a vote of
security holders during the three months ended April 30, 1999:
(a) The Annual Meeting of Shareholders of Optical Cable Corporation was held on
March 9, 1999.
(b) The name of each director elected at the meeting follows:
Robert Kopstein
Luke J. Huybrechts
Kenneth W. Harber
Randall H. Frazier
John M. Holland
(c) A brief description of each matter voted upon at the meeting and the number
of votes cast for, against or withheld, as well as the number of abstentions and
broker non-votes, as to each such matter, including a separate tabulation with
respect to each nominee for office follows:
1. To elect the following five directors to serve for the terms of office
specified in the proxy statement and until their successors are duly elected and
qualified.
<TABLE>
<CAPTION>
VOTES VOTES BROKER
DIRECTOR VOTES FOR AGAINST ABSTAINING NON-VOTES
-------- ---------- ------- ---------- ---------
<S> <C> <C> <C> <C>
Robert Kopstein 37,192,381 - 14,484 656,071
Luke J. Huybrechts 37,192,381 - 14,484 656,071
Kenneth W. Harber 37,192,581 - 14,284 656,071
Randall H. Frazier 37,192,281 - 14,584 656,071
John M. Holland 37,192,581 - 14,284 656,071
</TABLE>
2. To ratify the selection of KPMG LLP as independent accountants for the
Company for the fiscal year 1999.
VOTES VOTES BROKER
VOTES FOR AGAINST ABSTAINING NON-VOTES
---------- ------- ---------- ---------
37,201,601 3,264 2,000 656,071
15
<PAGE>
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, 1999.
27 Financial Data Schedule.
(b) Reports on Form 8-K filed during the three months ended April 30, 1999. None
16
<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, 1999 /s/Robert Kopstein
------------------
Robert Kopstein
Chairman of the Board, President
and Chief Executive Officer
Date: June 11, 1999 /s/Kenneth W. Harber
--------------------
Kenneth W. Harber
Vice President of Finance,
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
OPTICAL CABLE CORPORATION
FINANCIAL DATA SCHEDULE
(Unaudited)
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTHS ENDED APRIL 30, 1999 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>
<CIK> 0001000230
<NAME> Optical Cable Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<EXCHANGE-RATE> 1
<CASH> 3,019
<SECURITIES> 0
<RECEIVABLES> 10,615
<ALLOWANCES> 315
<INVENTORY> 9,540
<CURRENT-ASSETS> 23,571
<PP&E> 15,615
<DEPRECIATION> 4,771
<TOTAL-ASSETS> 34,491
<CURRENT-LIABILITIES> 3,489
<BONDS> 0
0
0
<COMMON> 7,084
<OTHER-SE> 23,719
<TOTAL-LIABILITY-AND-EQUITY> 34,491
<SALES> 23,277
<TOTAL-REVENUES> 23,364
<CGS> 12,844
<TOTAL-COSTS> 18,051
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,310
<INCOME-TAX> 1,898
<INCOME-CONTINUING> 3,412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,412
<EPS-BASIC> .090
<EPS-DILUTED> .090
</TABLE>
