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 July 31, 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 September 9, 1999, 37,508,136 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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
Condensed Balance Sheets - July 31, 1999 and October 31,
<S> <C>
1998................................................................2
Condensed Statements of Income - Three Months and Nine
Months Ended July 31, 1999 and 1998.................................3
Condensed Statement of Changes in Stockholders' Equity -
Nine Months Ended July 31, 1999.....................................4
Condensed Statements of Cash Flows - Nine Months Ended
July 31, 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 6. EXHIBITS AND REPORTS ON FORM 8-K................................15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPTICAL CABLE CORPORATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1999 1998
---------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,010,866 $ 1,122,277
Trade accounts receivable, net of allowance for doubtful
accounts of $294,500 and $311,500 9,631,655 10,012,699
Other receivables 314,865 295,199
Due from employees 9,734 5,589
Inventories 8,380,239 9,967,012
Prepaid expenses 153,276 95,766
Deferred income taxes 130,530 212,738
----------- -----------
Total current assets 23,631,165 21,711,280
Property and equipment, net 10,707,154 11,083,921
Other assets, net 192,579 33,950
----------- -----------
Total assets $34,530,898 $32,829,151
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,945,713 $ 1,952,360
Income taxes payable 188,094 111,449
Accrued compensation and payroll taxes 541,847 656,028
----------- -----------
Total current liabilities 3,675,654 2,719,837
Deferred income taxes 197,004 118,121
----------- -----------
Total liabilities 3,872,658 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 37,503,586 shares and 37,879,036
shares 5,039,048 9,786,281
Paid-in capital 336,494 150,359
Retained earnings 25,282,698 20,054,553
----------- -----------
Total stockholders' equity 30,658,240 29,991,193
Commitments and contingencies
----------- -----------
Total liabilities and stockholders' equity $34,530,898 $32,829,151
=========== ===========
</TABLE>
See accompanying condensed notes to condensed financial statements.
2
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
---------------------------------- ----------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 12,602,659 $ 13,727,433 $ 35,879,331 $ 37,289,648
Cost of goods sold 7,178,532 8,056,752 20,022,465 21,473,444
------------ ------------ ------------ ------------
Gross profit 5,424,127 5,670,681 15,856,866 15,816,204
Selling, general and administrative
expenses 2,535,414 2,602,800 7,742,384 7,330,234
------------ ------------ ------------ ------------
Income from operations 2,888,713 3,067,881 8,114,482 8,485,970
------------ ------------ ------------ ------------
Other income (expense):
Interest income 45,467 6,185 132,731 46,749
Interest expense -- (122) -- (317)
Other, net (35,011) (1,167) (38,116) (4,311)
------------ ------------ ------------ ------------
Other income, net 10,456 4,896 94,615 42,121
------------ ------------ ------------ ------------
Income before income tax
expense 2,899,169 3,072,777 8,209,097 8,528,091
Income tax expense 1,082,586 1,081,403 2,980,952 3,001,297
------------ ------------ ------------ ------------
Net income $ 1,816,583 $ 1,991,374 $ 5,228,145 $ 5,526,794
============ ============ ============ ============
Net income per share -
Net income per common share $ 0.048 $ 0.052 $ 0.139 $ 0.144
============ ============ ============ ============
Net income per common share -
assuming dilution $ 0.048 $ 0.052 $ 0.138 $ 0.143
============ ============ ============ ============
</TABLE>
See accompanying condensed notes to condensed financial statements.
3
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JULY 31, 1999
------------------------------------------------------------------
COMMON STOCK TOTAL
----------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ------- -------- ------
<S> <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 -- -- -- 5,228,145 5,228,145
Exercise of employee stock
options ($2.50 per share) 78,950 197,375 -- -- 197,375
Tax benefit of disqualifying
dispositions of stock
options exercised -- -- 186,135 -- 186,135
Repurchase of common stock
(at cost) (454,400) (4,944,608) -- -- (4,944,608)
---------- ----------- -------- ----------- ------------
Balances at July 31, 1999 37,503,586 $ 5,039,048 $336,494 $25,282,698 $ 30,658,240
========== =========== ======== =========== ============
</TABLE>
See accompanying condensed notes to condensed financial statements.
4
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
----------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,228,145 $ 5,526,794
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 599,818 576,989
Bad debt expense 14,802 45,402
Deferred income taxes 161,091 (51,453)
(Increase) decrease in:
Trade accounts receivable 366,242 (851,869)
Other receivables (19,666) 383,299
Due from employees (4,145) (2,605)
Inventories 1,586,773 (2,074)
Prepaid expenses (57,510) (32,409)
Increase (decrease) in:
Accounts payable and accrued expenses 993,353 852,204
Income taxes payable 262,780 (58,840)
Accrued compensation and payroll taxes (114,181) (230,450)
----------- -----------
Net cash provided by operating activities 9,017,502 6,154,988
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (210,298) (562,504)
Cash surrender value of life insurance, (171,382) --
----------- -----------
Net cash used in investing activities (381,680) (562,504)
----------- -----------
Cash flows from financing activities:
Net change in notes payable -- 405,000
Repurchase of common stock (4,944,608) (6,781,824)
Proceeds from exercise of employee stock options 197,375 194,625
----------- -----------
Net cash used in financing activities (4,747,233) (6,182,199)
----------- -----------
Net increase (decrease) in cash and cash equivalents 3,888,589 (589,715)
Cash and cash equivalents at beginning of period 1,122,277 985,807
----------- -----------
Cash and cash equivalents at end of period $ 5,010,866 $ 396,092
=========== ===========
</TABLE>
See accompanying condensed notes to condensed financial statements.
5
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JULY 31, 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 nine months ended July 31, 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 July 31, 1999 and October 31, 1998 consist of the
following:
JULY 31, OCTOBER 31,
1999 1998
-------- -----------
Finished goods $4,025,237 $4,152,094
Work in process 1,678,286 1,896,858
Raw materials 2,610,741 3,873,824
Production supplies 65,975 44,236
---------- ----------
$8,380,239 $9,967,012
========== ==========
(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 and a $10 million
secured revolving line of credit. The Company's intention is that the
$5 million line of credit be available to fund general corporate
purposes and that the $10 million line of credit be available to fund
potential acquisitions 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.
(Continued)
6
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(4) STOCKHOLDERS' EQUITY
During the nine months ended July 31, 1999, the Company repurchased
454,400 shares of its common stock for $4,944,608.
(5) NET INCOME PER SHARE
Net income per common share excludes dilution and is computed by
dividing net 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>
<CAPTION>
NET INCOME SHARES PER SHARE
THREE MONTHS ENDED JULY 31, 1999 (NUMERATOR) (DENOMINATOR) AMOUNT
- -------------------------------- ------------ ------------- ------
<S> <C> <C> <C>
Net income per common share $1,816,583 37,740,010 $0.048
Effect of dilutive stock options -- 249,351 ======
---------- ----------
Net income per common share - assuming dilution $1,816,583 37,989,361 $0.048
========== ========== ======
THREE MONTHS ENDED JULY 31, 1998
- --------------------------------
Net income per common share $1,991,374 38,208,593 $0.052
Effect of dilutive stock options -- 258,690 ======
---------- ----------
Net income per common share - assuming dilution $1,991,374 38,467,283 $0.052
========== ========== ======
NINE MONTHS ENDED JULY 31, 1999
- --------------------------------
Net income per common share $5,228,145 37,740,010 $0.139
Effect of dilutive stock options -- 249,351 ======
---------- ----------
Net income per common share - assuming dilution $5,228,145 37,989,361 $0.138
========== ========== ======
NINE MONTHS ENDED JULY 31, 1998
- --------------------------------
Net income per common share $5,526,794 38,388,822 $0.144
Effect of dilutive stock options -- 289,737 ======
---------- ----------
Net income per common share - assuming dilution $5,526,794 38,678,559 $0.143
========== ========== ======
(Continued)
</TABLE>
7
<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 229,500 for the three
months and nine months ended July 31, 1998. No such antidilutive stock
options existed with respect to the net income per common share -
assuming dilution calculation for the three months and nine months
ended July 31, 1999.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1999 AND 1998
Net Sales
Net sales consists of gross sales of products, less discounts, refunds and
returns. Net sales decreased 8.2 percent to $12.6 million in third quarter 1999
from $13.7 million for the same period in 1998. This decrease was primarily
attributable to reduced selling price and decreased volume. Total cable meters
shipped in third quarter 1999 decreased 1.1 percent to 42.9 million from 43.4
million cable meters shipped for the same period in 1998. This decrease in cable
meters shipped was a result of a 1.2 million decrease in multi mode cable meters
shipped offset by a 726,000 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 43.0
percent in third quarter 1999 from 41.3 percent in third quarter 1998. This
increase was primarily due to reduced raw fiber prices and the ratio of net
sales attributable to the Company's distributors during the period. During third
quarter 1999, net sales to distributors approximated 69.0 percent versus 64.0
percent for the same period in 1998. During third quarter 1999, sales from
orders $50,000 or more approximated 9.1 percent compared to 18.0 percent for
third quarter 1998. Discounts on large orders and 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 20.1 percent in third quarter 1999
compared to 19.0 percent in third quarter 1998. Selling, general and
administrative expenses as a percentage of net sales increased largely as a
result of decreased net sales coupled with increased marketing efforts.
Income Before Income Tax Expense
Income before income tax expense decreased 0.6 percent to $2.9 million for the
three months ended July 31, 1999 compared to $3.1 million for the three months
ended July 31, 1998. This was primarily due to a decrease in sales partially
offset by an increase in gross profit margin and a decrease in selling, general
and administrative expenses.
Income Tax Expense
Income tax expense approximated $1.1 million for the three months ended July 31,
1999 and 1998. The Company's effective tax rate was 37.3 percent during the
three months ended July 31, 1999 compared to 35.2 percent for the same period in
1998.
(Continued)
9
<PAGE>
Net Income
Net income for third quarter 1999 was 1.8 million compared to $2.0 million for
third quarter 1998. Despite a decrease in net sales, net income remained
comparable largely due to an improved gross profit margin, partially offset by
increases in selling, general and administrative expenses as a percentage of net
sales.
NINE MONTHS ENDED JULY 31, 1999 AND 1998
Net Sales
Net sales consists of gross sales of products, less discounts, refunds
and returns. Net sales decreased 3.4 percent to $35.9 million for the nine
months ended July 31, 1999 from $37.3 million for the same period in 1998. This
slight decrease was primarily attributable to reduced selling price and a change
in product mix. Total cable meters shipped during the nine months ended July 31,
1999 increased 4.2 percent to 117.7 million from 112.9 million cable meters
shipped for the same period in 1998. This increase in cable meters shipped was a
result of a 634,000 increase in multi mode cable meters shipped and a 5.4
million increase in single mode cable meters shipped. Multi mode cable generally
has a higher selling price then 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 44.2
percent for the nine months ended July 31, 1999 from 42.4 percent for the nine
months ended July 31, 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
nine months ended July 31, 1999, net sales to distributors approximated 62.2
percent versus 57.0 percent for the same period in 1998. During the nine months
ended July 31, 1999, sales from orders $50,000 or more approximated 14.0 percent
compared to 18.0 percent for the nine months ended July 31, 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 21.6 percent for the nine months
ended July 31, 1999 compared to 19.7 percent for the nine months ended July 31,
1998. This higher percentage reflects the fact that net sales for the nine
months ended July 31, 1999 decreased 3.4 percent compared to the same period in
1998, while selling, general and administrative expenses increased 5.6 percent,
due to increased marketing efforts.
Income Before Income Tax Expense
Income before income tax expense decreased 3.7 percent to $8.2 million for the
nine months ended July 31, 1999 compared to $8.5 million for the nine months
ended July 31, 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 approximated $3.0 million for the nine months ended July 31,
1999 and 1998. The Company's effective tax rate was 36.3 percent during the nine
months ended July 31, 1999 as compared to 35.2 percent for the same period in
1998.
Net Income
Net income for the nine months ended July 31, 1999 was $5.2 million compared to
$5.5 million for the nine months ended July 31, 1998. Net income decreased
$299,000 due to the decrease in net sales of $1.4 million and an increase in
selling, general and administrative expenses, partially offset by the increased
gross profit margin.
FINANCIAL CONDITION
Total assets at July 31, 1999 were $34.5 million, an increase of $1.7 million,
or 5.2 percent from October 31, 1998. This increase was primarily due to an
increase of $3.9 million in cash and cash equivalents, offset by decreases in
inventories of $1.6 million and trade accounts receivable of $381,000.
Total stockholders' equity at July 31, 1999 increased $667,000, or 2.2 percent
from October 31, 1998 with net income retained, offset primarily by the
repurchase of common stock in the amount of $4.9 million, accounting for the
increase.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine 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 third 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 and a $10 million secured revolving
line of credit. The Company's intention is that the $5 million line of credit be
available to fund general corporate purposes and that the $10 million line of
credit be available to fund potential acquisitions 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 $9.0 million for the nine months
ended July 31, 1999 compared to $6.2 million for the nine months ended July 31,
1998. Cash flows from operations for the nine months ended July 31, 1999 were
primarily provided by net income, a decrease in inventory of $1.6 million and an
increase in accounts payable and accrued expenses of $1.0 million. For the nine
months ended July 31, 1998, cash flows from operations were primarily provided
by net income and an increase in accounts payable and accrued expenses of
$852,000.
For the nine months ended July 31, 1999, net cash used in investing activities
was for expenditures related to facilities and equipment of $210,000 and
increase in cash surrender value of life insurance of $171,000. For
(Continued)
11
<PAGE>
the nine months ended July 31, 1998, net cash used in investing activities was
for expenditures related to facilities and equipment and was $563,000. As of
July 31, 1999, there were no material commitments for additional capital
expenditures.
Net cash used in financing activities was $4.7 million and $6.2 million for the
nine months ended July 31, 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 July 31, 1999, the Company has
repurchased approximately $4.9 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 has repurchased
approximately $13.6 million of the Company's common stock in such transactions
since the inception of the share repurchase program in October 1997. 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.
(Continued)
12
<PAGE>
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. 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.
(Continued)
13
<PAGE>
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 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
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<S> <C>
(a) Exhibits required by Item 601 of Regulation S-K for the nine months ended July 31, 1999.
27 Financial Data Schedule.
(b) Reports on Form 8-K filed during the three months ended July 31, 1999.
None
</TABLE>
15
<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: September 14, 1999 /s/ Robert Kopstein
------------------------------------------
Robert Kopstein
Chairman of the Board, President and
Chief Executive Officer
Date: September 14, 1999 /s/ Kenneth W. Harber
------------------------------------------
Kenneth W. Harber
Vice President of Finance, Treasurer
and Secretary
(principal financial and accounting officer)
16
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
<ARTICLE> 5
<LEGEND>
OPTICAL CABLE CORPORATION
FINANCIAL DATA SCHEDULE
(Unaudited)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE NINE MONTHS ENDED JULY 31, 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> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-1-1998
<PERIOD-END> JUL-31-1999
<EXCHANGE-RATE> 1
<CASH> 5,011
<SECURITIES> 0
<RECEIVABLES> 9,926
<ALLOWANCES> 295
<INVENTORY> 8,380
<CURRENT-ASSETS> 23,631
<PP&E> 15,650
<DEPRECIATION> 4,943
<TOTAL-ASSETS> 34,531
<CURRENT-LIABILITIES> 3,676
<BONDS> 0
0
0
<COMMON> 5,039
<OTHER-SE> 25,619
<TOTAL-LIABILITY-AND-EQUITY> 34,531
<SALES> 35,879
<TOTAL-REVENUES> 36,012
<CGS> 20,022
<TOTAL-COSTS> 27,765
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,209
<INCOME-TAX> 2,981
<INCOME-CONTINUING> 5,228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,228
<EPS-BASIC> 0.139
<EPS-DILUTED> 0.138
</TABLE>
