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, 2000
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 6, 2000, 37,571,371 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, 2000
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - April 30, 2000 and October 31,
1999.............................................................2
Condensed Statements of Income - Three Months and Six
Months Ended April 30, 2000 and 1999.............................3
Condensed Statement of Changes in Stockholders' Equity -
Six Months Ended April 30, 2000..................................4
Condensed Statements of Cash Flows - Six Months Ended
April 30, 2000 and 1999..........................................5
Condensed Notes to Condensed Financial Statements................6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 9-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk........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
SIGNATURES
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OPTICAL CABLE CORPORATION
Condensed Balance Sheets
(Unaudited)
April 30, October 31,
Assets 2000 1999
-------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 391,493 $ 6,816,678
Trading securities 12,410,112 ----
Trade accounts receivable, net of allowance for doubtful accounts
of $214,000 at April 30, 2000 and $316,000 at October 31, 1999 10,473,227 10,230,717
Income taxes refundable 558,947 ----
Other receivables 302,764 280,219
Due from employees 2,247 8,100
Note receivable 89,300 61,100
Inventories 8,836,407 8,754,423
Prepaid expenses 153,961 106,536
Deferred income taxes 203,258 206,652
-------------- --------------
Total current assets 33,421,716 26,464,425
Note receivable, noncurrent 4,305 32,505
Other assets, net 217,182 188,328
Property and equipment, net 11,127,987 10,826,331
-------------- --------------
Total assets $ 44,771,190 $ 37,511,589
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 3,486,038 $ 3,370,244
Accrued compensation and payroll taxes 532,738 692,678
Notes payable 494,174 ----
Payable to investment broker 591,818 ----
Income taxes payable ---- 421,803
-------------- --------------
Total current liabilities 5,104,768 4,484,725
Deferred income taxes 191,377 179,789
-------------- --------------
Total liabilities 5,296,145 4,664,514
-------------- --------------
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 37,570,371 shares at April 30, 2000
and 37,414,271 shares at October 31, 1999 4,755,399 4,128,316
Paid-in capital 1,629,891 359,566
Retained earnings 33,089,755 28,359,193
-------------- --------------
Total stockholders' equity 39,475,045 32,847,075
Commitments and contingencies -------------- --------------
Total liabilities and stockholders' equity $ 44,771,190 $ 37,511,589
============== ==============
</TABLE>
See accompanying condensed notes to condensed financial statements.
2
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<TABLE>
<CAPTION>
OPTICAL CABLE CORPORATION
Condensed Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ------------ ----------- ------------
<S> <C> <C> <C>
Net sales $ 13,028,310 $ 12,434,733 $ 24,374,545 $ 23,276,672
Cost of goods sold 7,119,218 6,724,181 13,260,338 12,843,933
----------- ------------ ----------- ------------
Gross profit 5,909,092 5,710,552 11,114,207 10,432,739
Selling, general and administrative expenses 3,132,224 2,697,198 5,731,487 5,206,970
----------- ------------ ----------- ------------
Income from operations 2,776,868 3,013,354 5,382,720 5,225,769
----------- ------------ ----------- ------------
Other income (expense):
Gains on trading securities, net 1,298,051 ---- 1,747,732 ----
Interest income 83,491 53,265 163,881 87,264
Other, net 4,607 (9,354) 7,081 (3,105)
----------- ------------ ----------- ------------
Other income, net 1,386,149 43,911 1,918,694 84,159
----------- ------------ ----------- ------------
Income before income tax expense 4,163,017 3,057,265 7,301,414 5,309,928
Income tax expense 1,465,575 1,093,938 2,570,852 1,898,366
----------- ------------ ----------- ------------
Net income $ 2,697,442 $ 1,963,327 $ 4,730,562 $ 3,411,562
=========== ============ =========== ============
Net income per share:
Net income per common share $ 0.072 $ 0.052 $ 0.126 $ 0.090
=========== ============ =========== ============
Net income per common share -
assuming dilution $ 0.071 $ 0.052 $ 0.125 $ 0.090
=========== ============ =========== ============
</TABLE>
See accompanying condensed notes to condensed financial statements.
3
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<TABLE>
<CAPTION>
OPTICAL CABLE CORPORATION
Condensed Statement of Changes in Stockholders' Equity
(Unaudited)
Six Months Ended April 30, 2000
--------------------------------------------------------------------------
Common Stock Total
--------------------------- Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
----------- ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at October 31, 1999 37,414,271 $ 4,128,316 $ 359,566 $ 28,359,193 $ 32,847,075
Exercise of employee stock
options ($3.965 weighted-
average price per share) 154,600 613,020 ---- ---- 613,020
Restricted stock award
($9.375 per share) 1,500 14,063 ---- ---- 14,063
Tax benefit of disqualifying
disposition of stock options
exercised ---- ---- 1,270,325 ---- 1,270,325
Net income ---- ---- ---- 4,730,562 4,730,562
----------- ----------- ----------- ------------ -------------
Balances at April 30, 2000 37,570,371 $ 4,755,399 $ 1,629,891 $ 33,089,755 $ 39,475,045
=========== =========== =========== ============ =============
</TABLE>
See accompanying condensed notes to condensed financial statements.
4
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<TABLE>
<CAPTION>
OPTICAL CABLE CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
Six Months Ended
April 30,
----------------------------
2000 1999
------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,730,562 $ 3,411,562
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 377,501 422,563
Bad debt expense (recovery) (38,926) 3,500
Deferred income tax expense 14,982 65,767
Stock-based compensation expense 14,063 ----
Unrealized loss on trading securities, net 1,141,036 ----
(Increase) decrease in:
Trading securities (13,551,148) ----
Trade accounts receivable (203,584) (291,237)
Other receivables (22,545) 25,487
Due from employees 5,853 (2,075)
Inventories (81,984) 427,155
Prepaid expenses (47,425) (109,385)
Increase (decrease) in:
Accounts payable and accrued expenses 203,115 822,003
Accrued compensation and payroll taxes (159,940) (186,844)
Income taxes payable 289,575 226,345
Payable to investment broker 591,818 ----
------------ -----------
Net cash (used in) provided by operating activities (6,737,047) 4,814,841
------------ -----------
Cash flows from investing activities:
Purchase of property and equipment (757,976) (164,411)
Cash surrender value of life insurance (37,356) (50,867)
------------ -----------
Net cash used in investing activities (795,332) (215,278)
------------ -----------
Cash flows from financing activities:
Repurchase of common stock ---- (2,866,894)
Proceeds from notes payable, net 494,174 ----
Proceeds from exercise of employee stock options 613,020 164,250
------------ -----------
Net cash provided by (used in) financing activities 1,107,194 (2,702,644)
------------ -----------
Net increase (decrease) in cash and cash equivalents (6,425,185) 1,896,919
Cash and cash equivalents at beginning of period 6,816,678 1,122,277
------------ -----------
Cash and cash equivalents at end of period $ 391,493 $ 3,019,196
============ ===========
</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, 2000
(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, 2000 are
not necessarily indicative of the results that may be expected for the
fiscal year ending October 31, 2000. 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, 1999.
(2) Trading Securities
Trading securities are recorded at fair value, which is based on quoted
market prices. Purchases and sales of trading securities are recognized
on a trade-date basis, the date the order to buy or sell is executed.
The Company's trading securities are bought and held principally for the
purpose of selling them in the near term. Unrealized holding gains and
losses for trading securities are included in net income. The amount of
net unrealized holding loss that has been included in net income for the
six months ended April 30, 2000 was $1,141,036. As of April 30, 2000,
the Company's trading securities consist of shares in a stock index
mutual fund concentrated in the technology sector.
(3) Inventories
Inventories at April 30, 2000 and October 31, 1999 consist of the
following:
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
------------ -----------
<S> <C> <C>
Finished goods $ 2,421,666 $ 2,976,426
Work in process 3,321,279 2,306,209
Raw materials 3,032,570 3,416,046
Production supplies 60,892 55,742
------------ -----------
$ 8,836,407 $ 8,754,423
============ ===========
</TABLE>
(4) 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
(Continued)
6
<PAGE>
OPTICAL CABLE CORPORATION
Condensed Notes to Condensed Financial Statements
(Unaudited)
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. While the
lines of credit do not require a compensating balance that legally
restricts the use of cash amounts, at the bank's request, the Company
has agreed to maintain an unrestricted target cash balance of $125,000.
(5) Net Income Per Share
Net income per common share excludes dilution and is computed by
dividing income available to common stockholders 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 April 30, 2000 (Numerator) (Denominator) Amount
--------------------------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income per common share $ 2,697,442 37,541,285 $ 0.072
==========
Effect of dilutive stock options ---- 301,151
------------ --------------
Net income per common share - assuming dilution $ 2,697,442 37,842,436 $ 0.071
============ ============== ==========
Net Income Shares Per Share
Three Months Ended April 30, 1999 (Numerator) (Denominator) Amount
--------------------------------- ------------ -------------- ----------
Net income per common share $ 1,963,327 37,824,305 $ 0.052
==========
Effect of dilutive stock options ---- 259,695
------------ --------------
Net income per common share - assuming dilution $ 1,963,327 38,084,000 $ 0.052
============ ============== ==========
Net Income Shares Per Share
Six Months Ended April 30, 2000 (Numerator) (Denominator) Amount
------------------------------- ------------ -------------- ----------
Net income per common share $ 4,730,562 37,496,082 $ 0.126
==========
Effect of dilutive stock options ---- 304,694
------------ --------------
Net income per common share - assuming dilution $ 4,730,562 37,800,776 $ 0.125
============ ============== ==========
</TABLE>
(Continued)
7
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<TABLE>
<CAPTION>
OPTICAL CABLE CORPORATION
Condensed Notes to Condensed Financial Statements
(Unaudited)
Net Income Shares Per Share
Six Months Ended April 30, 1999 (Numerator) (Denominator) Amount
------------------------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income per common share $ 3,411,562 37,824,305 $ 0.090
==========
Effect of dilutive stock options ---- 259,695
------------ --------------
Net income per common share - assuming dilution $ 3,411,562 38,084,000 $ 0.090
============ ============== ==========
</TABLE>
Subsequent to April 30, 2000 and through June 6, 2000, stock options
totaling 1,000 shares of common stock were exercised.
(6) Segment Information
On November 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 131, "Disclosure 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
condensed financial statements of interim periods.
The Company has a single reportable segment for purposes of segment
reporting pursuant to SFAS No. 131.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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, an adverse price change in trading securities held by the
Company, technological changes and introductions of new competing products,
changes in market demand, productivity, weather, and market and economic
conditions in the areas of the world in which the Company operates and markets
its products.
Results of Operations
Three Months Ended April 30, 2000 and 1999
Net Sales
Net sales consist of gross sales of products, less discounts, refunds and
returns. Net sales increased 4.8 percent to $13.0 million in second quarter 2000
from $12.4 million for the same period in 1999. This increase was primarily
attributable to increased sales volume. Total cable meters shipped in second
quarter 2000 increased 8.9 percent to 43.7 million from 40.1 million cable
meters shipped for the same period in 1999. This increase in cable meters
shipped was a result of a 990,000 increase in multimode cable meters shipped
coupled with a 2.6 million increase in single-mode cable meters shipped.
Multimode cable generally has a higher selling price than single-mode cable.
Management believes that there is a trend in the marketplace of an accelerated
pace of fiber deployment, particularly of the type sold by the Company. Such a
trend could positively affect net sales in the future.
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) remained relatively
constant at 45.4 percent in second quarter 2000 and 45.9 percent in second
quarter 1999.
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 24.0 percent in second quarter 2000
compared to 21.7 percent in second quarter 1999. This higher percentage reflects
the fact that net sales for second quarter 2000 increased 4.8 percent compared
to second quarter 1999, while selling, general and administrative expenses
increased 16.1 percent. Selling, general and administrative expenses as a
percentage of net sales increased largely as a result of an increase in the
Company's sales force and the expansion of marketing efforts towards both
distributors and end users.
(Continued)
9
<PAGE>
Other Income
Other income increased $1.3 million to $1.4 million for the three months ended
April 30, 2000, compared to $44,000 for the same period in 1999. During fiscal
year 2000, the Company began investing in trading securities and has recognized
related gains on trading securities, net, of $1.3 million in other income for
the three months ended April 30, 2000. Although the Company actively purchases
and sells trading securities in order to realize such gains, it should not be
expected that these gains will be recurring.
Income Before Income Tax Expense
Income before income tax expense increased 36.2 percent to $4.2 million for the
three months ended April 30, 2000 compared to $3.1 million for the three months
ended April 30, 1999. This increase was primarily due to gains on trading
securities, net, and an increase in sales volume, offset by increased selling,
general and administrative expenses.
Income Tax Expense
Income tax expense increased $372,000 to $1.5 million for the three months ended
April 30, 2000 compared to $1.1 million for the same period in 1999 due to the
increase in income before income tax expense. The Company's effective tax rate
was 35.2 percent during the three months ended April 30, 2000 compared to 35.8
percent for the same period in 1999.
Net Income
Net income for second quarter 2000 was $2.7 million compared to $2.0 million for
second quarter 1999. Net income increased $734,000 due to the $1.1 million
increase in income before tax expense, offset by the increase in income tax
expense of $372,000. This increase in net income can be attributed to the $1.3
million in other income of net recognized gains on trading securities.
Six Months Ended April 30, 2000 and 1999
Net Sales
Net sales consist of gross sales of products, less discounts, refunds and
returns. Net sales increased 4.7 percent to $24.4 million for the six months
ended April 30, 2000 from $23.3 million for the same period in 1999. This
increase was attributable to the 4.7 percent increase in net sales in first
quarter 2000 compared to the same period in 1999, which, in turn, was due to
increased sales volume, and to the 4.8 percent increase in net sales in second
quarter 2000 compared to the same period in 1999 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) remained relatively
constant at 45.6 percent for the six months ended April 30, 2000 and 44.8
percent for the six months ended April 30, 1999.
(Continued)
10
<PAGE>
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 23.5 percent for the six months ended
April 30, 2000 compared to 22.4 percent for the six months ended April 30, 1999.
This higher percentage reflects the fact that net sales for the six months ended
April 30, 2000 increased 4.7 percent compared to the same period in 1999, while
selling, general and administrative expenses increased 10.1 percent, due to
increased marketing efforts.
Other Income
Other income increased $1.8 million to $1.9 million for the six months ended
April 30, 2000, compared to $84,000 for the same period in 1999. During fiscal
year 2000, the Company began investing in trading securities and has recognized
related gains on trading securities, net, of $1.7 million in other income for
the six months ended April 30, 2000. Although the Company actively purchases and
sells trading securities in order to realize such gains, it should not be
expected that these gains will be recurring.
Income Before Income Tax Expense
Income before income tax expense increased 37.5 percent to $7.3 million for the
six months ended April 30, 2000 compared to $5.3 million for the six months
ended April 30, 1999. This was primarily due to gains on trading securities,
net, and an increase in sales volume, offset by increased selling, general and
administrative expenses.
Income Tax Expense
Income tax expense increased $672,000 to $2.6 million for the six months ended
April 30, 2000 compared to $1.9 million for the same period in 1999, consistent
with the increase in income before income tax expense. The Company's effective
tax rate was 35.2 percent during the six months ended April 30, 2000 compared to
35.8 percent for the same period in 1999.
Net Income
Net income for the six months ended April 30, 2000 was $4.7 million compared to
$3.4 million for the six months ended April 30, 1999. Net income increased $1.3
million due to the $2.0 million increase in income before income tax expense,
offset by the increase in income tax expense of $672,000. This increase in net
income can be attributed to the $1.7 million in other income of net recognized
gains on trading securities.
Financial Condition
Total assets at April 30, 2000 were $44.8 million, an increase of $7.3 million,
or 19.4 percent from October 31, 1999. This increase was primarily due to the
Company investing its cash and cash equivalents on hand at October 31, 1999 as
well as cash flows from operating income generated during the six-month period
ended April 30, 2000 in trading securities. In addition, realized gains from
these trading activities were reinvested during the six-month period ended April
30, 2000. As a result, cash and cash equivalents have decreased $6.4 million and
trading securities have increased $12.4 million.
Total stockholders' equity at April 30, 2000 increased $6.6 million, or 20.2
percent from October 31, 1999. Net income retained and an increase in paid-in
capital of $1.3 million resulting from the tax benefit of disqualifying
disposition of stock options exercised accounted for the majority of this
increase. During the six months ended
(Continued)
11
<PAGE>
April 30, 2000, employees realized gains on the premature disposition of stock
options exercised of approximately $3.4 million. The $1.3 million tax benefit to
the Company of those gains has been reflected as an increase in paid-in capital.
Liquidity and Capital Resources
During the first six months of fiscal years 2000 and 1999, 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; however, the Company does maintain bank lines of
credit as described below. As of April 30, 2000, there was a balance of
approximately $494,000 outstanding under these lines of credit for working
capital purposes. There was no balance outstanding under the lines as of the end
of fiscal year 1999 or the end of the first quarter of fiscal year 2000.
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 used in operations were approximately $6.7 million for the six months
ended April 30, 2000. Cash flows from operations were approximately $4.8 million
for the six months ended April 30, 1999. For the six months ended April 30,
2000, cash flows used in operations were primarily due to the purchase of
approximately $13.6 million in trading securities, partially offset by cash
provided by operating income, realized net gains on trading securities of $2.9
million and an increase in payable to investment broker of $592,000. 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.
Net cash used in investing activities was mainly for expenditures related to
facilities and equipment and was $758,000 and $164,000 for the six months ended
April 30, 2000 and 1999, respectively. As of April 30, 2000, there were no
material commitments for additional capital expenditures.
Net cash provided by financing activities was $1.1 million for the six months
ended April 30, 2000 and related to proceeds from the exercise of employee stock
options and proceeds from notes payable. Net cash used in financing activities
was $2.7 million for the six months ended April 30, 1999 and primarily related
to the Company's common stock repurchase program.
The Company's Board of Directors has authorized the repurchase of up to $20
million of the Company's common stock in the open market or in privately
negotiated transactions. Through April 30, 2000, the Company has repurchased
approximately $14.9 million of its common stock in such transactions since the
inception of the Company's share repurchase program in October 1997. The
repurchases were funded through cash flows from operations. The Company may use
excess working capital and other sources as appropriate to finance the remaining
share repurchase program.
(Continued)
12
<PAGE>
Derivatives
The Company does not use derivatives or other off-balance sheet instruments such
as future contracts, forward obligations, interest rate swaps, or options.
Future Accounting Considerations
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133." SFAS No. 137 defers the effective
date of SFAS No. 133 to apply to all fiscal quarters of all fiscal years
beginning after June 15, 2000. It is not anticipated that SFAS No. 133 will have
a material effect on the financial position, results of operations or liquidity
of the Company.
As of April 30, 2000, there are no other new accounting standards issued, but
not yet adopted by the Company, which are expected to be applicable to the
Company's financial position, operating results or financial statement
disclosures.
13
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company does not engage in derivative financial instruments or derivative
commodity instruments. As of April 30, 2000, the Company's financial instruments
are not exposed to significant market risk due to interest rate risk, foreign
currency exchange risk or commodity price risk. However, as of April 30, 2000,
the Company's trading securities, which consist of shares in a stock index
mutual fund concentrated in the technology industry sector, are exposed to
equity price risk. As of April 30, 2000, the Company's trading securities have
experienced an 8.4 percent decline in value since the date of purchase. It is
reasonably possible that the price of these trading securities, valued at
approximately $12.4 million as of April 30, 2000, could continue to experience
an adverse change in the near term. For illustration purposes, assuming a 30
percent adverse change in the fund's equity price, the Company's trading
securities would decrease in value by approximately $3.7 million, based on the
value of the Company's portfolio as of April 30, 2000. This assumption is not
necessarily indicative of future performance and actual results may differ
materially.
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, 2000:
(a) The Annual Meeting of Shareholders of Optical Cable Corporation was
held on March 14, 2000.
(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> <C> <C>
Robert Kopstein 32,843,119 - 9,984 -
Luke J. Huybrechts 32,842,919 - 10,184 -
Kenneth W. Harber 32,842,919 - 10,184 -
Randall H. Frazier 32,842,669 - 10,434 -
John M. Holland 32,842,919 - 10,184 -
</TABLE>
2. To ratify the selection of KPMG LLP as independent accountants
for the Company for the fiscal year 2000.
<TABLE>
<CAPTION>
Votes Votes Broker
Votes for against abstaining non-votes
------------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
32,850,079 766 2,258 -------
</TABLE>
15
<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, 2000.
27 Financial Data Schedule.
(b) Reports on Form 8-K filed during the three months ended April 30,
2000.
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 14, 2000 /s/Robert Kopstein
--------------------
Robert Kopstein
Chairman of the Board, President and
Chief Executive Officer
Date: June 14, 2000 /s/Kenneth W. Harber
--------------------
Kenneth W. Harber
Vice President of Finance, Treasurer
and Secretary
(principal financial and accounting
officer)
17
<PAGE>
INDEX TO ATTACHED EXHIBITS
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule.
18
