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, 1996
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)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
As of September 5, 1996, 38,675,416 shares of the registrant's Common Stock,
no par value, were outstanding. Of these outstanding shares, 36,000,000 shares
were held by Robert Kopstein, Chairman of the Board, President and Chief
Executive Officer of the registrant.
OPTICAL CABLE CORPORATION
Form 10-Q Index
Nine Months Ended July 31, 1996
- --------------------------------------------------------------------------------
PAGE
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Condensed Balance Sheets - July 31, 1996 and
October 31, 1995..........................................2
Condensed Statements of Income - Three Months
and Nine Months Ended July 31, 1996 and 1995..............3
Condensed Statement of Changes in Stockholders'
Equity - Nine Months Ended July 31, 1996..................4
Condensed Statements of Cash Flows - Nine Months
Ended July 31, 1996 and 1995..............................5
Condensed Notes to Condensed Financial Statements........6-10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION....................11-14
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K...........................15
- -------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
OPTICAL CABLE CORPORATION
Condensed Balance Sheets
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
July 31, October 31,
ASSETS 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
Currents assets:
Cash and cash equivalents $ 3,081,597 $ 535,235
Trade accounts receivable, net of allowance for doubtful
accounts of $250,000 in 1996 and $200,000 in 1995 8,078,147 6,186,888
Other receivables 198,667 98,297
Due from employees 875 3,225
Inventories 8,352,095 6,033,042
Prepaid expenses 87,237 86,553
Deferred income taxes 186,563 -
- ------------------------------------------------------------------------------------------------------------------
Total current assets 19,985,181 12,943,240
Other assets - 201,237
Property and equipment, net 6,184,701 5,674,232
- ------------------------------------------------------------------------------------------------------------------
Total assets $ 26,169,882 $ 18,818,709
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------
Current liabilities:
Notes payable $ 1,115,000 $ 309,000
Accounts payable and accrued expenses 2,385,574 2,726,727
Accrued compensation and payroll taxes 736,292 831,197
Income taxes payable 828,806 -
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 5,065,672 3,866,924
Deferred income taxes 51,106 -
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 5,116,778 3,866,924
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock; no par value, authorized 50,000,000
shares; issued and outstanding 38,675,416 shares
at July 31, 1996 and 36,000,000 at October 31,
1995 18,594,116 596
Additional paid-in capital - 767,849
Retained earnings 2,458,988 14,183,340
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 21,053,104 14,951,785
Commitments and contingencies
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 26,169,882 $ 18,818,709
==================================================================================================================
See accompanying condensed notes to condensed financial statements.
2
OPTICAL CABLE CORPORATION
Condensed Statements of Income
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
July 31, July 31,
------------------ -------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 10,862,064 $ 8,697,155 $ 31,388,496 $ 26,329,977
Cost of goods sold 5,909,041 4,720,779 17,631,613 14,897,118
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit 4,953,023 3,976,376 13,756,883 11,432,859
Selling, general and administrative expenses 2,005,442 2,031,620 5,917,361 5,753,112
- ----------------------------------------------------------------------------------------------------------------------------------
Income from operations 2,947,581 1,944,756 7,839,522 5,679,747
Other income (expense):
Interest income 37,626 - 67,076 175
Interest expense (1,622) (67,120) (5,115) (363,224)
Other, net (353) (50) 108,971 25,486
- ----------------------------------------------------------------------------------------------------------------------------------
Other income (expense), net 35,651 (67,170) 170,932 (337,563)
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income tax expense 2,983,232 1,877,586 8,010,454 5,342,184
Income tax expense 1,124,409 - 1,308,349 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net imcome $ 1,858,823 $ 1,877,586 $ 6,702,105 $ 5,342,184
==================================================================================================================================
Pro forma income data:
Net income before pro forma income tax
provision, as reported $ 1,858,823 $ 6,702,105
Pro forma income tax provision - 1,746,513
- ----------------------------------------------------------------------------------------------------------------------------------
Pro forma net income $ 1,858,823 $ 4,955,592
==================================================================================================================================
Pro forma net income per share $ 0.05 $ 0.13
==================================================================================================================================
Pro forma weighted average shares outstanding 40,475,416 39,989,074
==================================================================================================================================
See accompanying condensed notes to condensed financial statements.
3
OPTICAL CABLE CORPORATION
Condensed Statement of Changes in Stockholders' Equity
Nine Months Ended July 31, 1996
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------
Additional Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
- ----------------------------------------------------------------------------------------------------------------
Balances, October 31, 1995 36,000,000 $ 596 767,849 14,183,340 14,951,785
Net income - five months
ended March 31, 1996 - - - 4,243,117 4,243,117
Issuance of common stock
for cash ($2.50 per
share, less issuance
costs of $1,139,326) 2,675,416 5,549,214 - - 5,549,214
Distributions to stockholder - - - (6,150,000) (6,150,000)
Recapitalization - 13,044,306 (767,849) (12,276,457) -
Net income - four months
ended July 31, 1996 - - - 2,458,988 2,458,988
- ----------------------------------------------------------------------------------------------------------------
Balances, July 31, 1996 38,675,416 $ 18,594,116 - 2,458,988 21,053,104
================================================================================================================
See accompanying condensed notes to condensed financial statements.
4
OPTICAL CABLE CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------
Nine Months Ended
July 31,
-----------------------
1996 1995
- -------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 6,702,105 $ 5,342,184
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 361,525 286,792
Bad debt expense 41,431 (9,055)
Deferred income taxes (135,457) -
Gain on sale of property and equipment - 381
(Increase) decrease in:
Trade accounts receivable (1,932,690) (1,672,639)
Other receivables (100,370) (17,977)
Due from employees 2,350 (3,111)
Inventories (2,319,053) 3,784,879
Prepaid expenses (684) (55,007)
Other assets 201,237 -
Increase (decrease) in:
Accrued interest payable - (8,458)
Accounts payable and accrued expenses (341,153) 1,117,280
Accrued compensation and payroll taxes (94,905) 302,040
Income taxes payable 828,806 -
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,213,142 9,067,309
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (871,994) (210,362)
Proceeds from sale of property and equipment - 20
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (871,994) (210,342)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in notes payable 806,000 (4,087,238)
Payments on long-term debt - (3,500,000)
Proceeds from issuance of common stock, net of issuance costs 5,549,214 -
Cash distributions to stockholder (6,150,000) (1,080,000)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 205,214 (8,667,238)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in cash 2,546,362 189,729
Cash and cash equivalents at beginning of period 535,235 105,720
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,081,597 $ 295,449
=====================================================================================================================
See accompanying condensed notes to condensed financial statements.
5
OPTICAL CABLE CORPORATION
Condensed Notes to Condensed Financial Statements
Nine Months Ended July 31, 1996
(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, 1996 are
not necessarily indicative of the results that may be expected for the
fiscal year ending October 31, 1996. 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, 1995.
(2) Recapitalization And Initial Public Offering
The Company's Board of Directors authorized the filing of a
registration statement for a public offering of the Company's common
stock. In connection with the public offering, the Board and the
previously sole stockholder approved an increase in the number of
authorized shares of common stock from 50,000 shares to 50,000,000
shares, a recapitalization involving an exchange of all outstanding $1
par value common stock (596 shares) on a 60,403-for-1 basis for no par
value common stock (36,000,000 shares) and the authorization of
1,000,000 shares of preferred stock, no par value, issuable in multiple
series.
On April 1, 1996, the Company completed a public offering of 2,675,416
shares of the Company's common stock from which it received net
proceeds of approximately $5.5 million.
At October 31, 1995, included in noncurrent other assets are deferred
costs related to the public offering in the amount of $201,237. These
deferred costs were charged against the gross proceeds of the public
offering.
Common Stock
In connection with the recapitalization, additional paid-in capital as
of March 31, 1996 has been reclassified to no par value common stock.
(Continued)
6
OPTICAL CABLE CORPORATION
Condensed Notes to Condensed Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(2) (Continued)
Undistributed Earnings
In connection with the recapitalization, the amount of the
undistributed taxable S Corporation earnings remaining as of March 31,
1996 has been reclassified to no par value common stock.
Distributions
Since November 1, 1995 and in connection with the termination of the
Company's status as an S Corporation, the Company has made
distributions to the previously sole stockholder representing a portion
of the undistributed taxable S Corporation earnings. The Company made
distributions totaling $6,150,000 to the previously sole stockholder
during the nine months ended July 31, 1996.
(3) Inventories
Inventories at July 31, 1996 and October 31, 1995 consist of the
following:
July 31, October 31,
1996 1995
-----------------------------------------------------------------------
Finished goods $ 2,882,084 $ 2,331,995
Work in process 2,284,707 1,594,193
Raw materials 3,141,076 2,067,949
Production supplies 44,228 38,905
-----------------------------------------------------------------------
$ 8,352,095 $ 6,033,042
=======================================================================
(4) Notes Payable
On March 1, 1996, the Company and its bank executed a loan commitment
letter renewing its $5 million revolving line of credit arrangement for
another year under substantially similar terms; however, the line of
credit as renewed does not contain the restrictive financial covenants
contained in the previous agreement.
(Continued)
7
OPTICAL CABLE CORPORATION
Condensed Notes to Condensed Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(5) Income Taxes
Through March 31, 1996, the Company was not subject to federal and
state income taxes since it had elected to be taxed as an S
Corporation. In connection with the closing of the Company's initial
public offering, the Company terminated its status as an S Corporation
effective March 31, 1996 and became subject to federal and state income
taxes. Accordingly, the statements of income include income taxes from
April 1, 1996 and for informational purposes, the statement of income
for the nine months ended July 31, 1996 includes a pro forma adjustment
for income taxes which would have been recorded if the Company had been
subject to income taxes for the entire period presented.
Income Tax Expense
Income tax expense for the nine months ended July 31, 1996 consists of:
Current Deferred Total
-----------------------------------------------------------------------
U.S. Federal $ 1,259,807 (114,047) 1,145,760
State 183,999 (21,410) 162,589
-----------------------------------------------------------------------
Totals $ 1,443,806 (135,457) 1,308,349
=======================================================================
Deferred Income Taxes
The Company recorded a $114,045 net benefit for deferred income taxes
upon termination of the Company's S Corporation status. The adjustment
reflects the net deferred income tax asset balance at March 31, 1996 in
accordance with the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, which requires an asset
and liability approach for the accounting and financial reporting of
income taxes.
(Continued)
8
OPTICAL CABLE CORPORATION
Condensed Notes to Condensed Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(5) (Continued)
The tax effects of temporary differences that give rise to significant
portions of the Company's net deferred tax asset as of July 31, 1996
are presented below:
Deferred tax assets:
Accounts receivable, due to allowance for doubtful accounts $ 94,900
Inventories, due to additional costs inventoried for tax
purposes pursuant to the Tax Reform Act of 1986 60,175
Self-insured health care costs, due to accrual for financial
reporting purposes 40,816
----------------------------------------------------------------------------------------------------
Total gross deferred tax assets 195,891
Less valuation allowance -
----------------------------------------------------------------------------------------------------
Net deferred tax assets 195,891
Deferred tax liabilities:
Plant and equipment, due to differences in depreciation and
capital gain recognition (51,106)
Prepaid expenses, due to deduction for tax purposes (9,328)
----------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities (60,434)
----------------------------------------------------------------------------------------------------
Net deferred tax asset, including current net tax asset of $186,563
and noncurrent net tax liability of $51,106 $ 135,457
====================================================================================================
Based on the Company's historical and current pretax earnings,
management believes that it is more likely than not that the recorded
deferred tax assets will be realized.
(6) Pro Forma Net Income Per Share
Pro forma net income per share was computed by dividing pro forma net
income by the pro forma weighted average number of common shares
outstanding during the period (as adjusted for the recapitalization)
and the number of shares (1,800,000) that the Company would have needed
to issue at the initial public offering price per share ($2.50) to pay
a $1 million cash distribution to the sole stockholder in December 1995
and a $3.5 million cash distribution to the previously sole stockholder
out of the proceeds of the initial public offering.
(Continued)
9
OPTICAL CABLE CORPORATION
Condensed Notes to Condensed Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(7) Stock Incentive Plan
The Company and its previously sole stockholder adopted on March 1,
1996 a stock incentive plan which is called the Optical Cable
Corporation 1996 Stock Incentive Plan (the "Plan"). The Plan is
intended to provide a means for selected key management employees to
increase their personal financial interest in the Company, thereby
stimulating the efforts of these employees and strengthening their
desire to remain with the Company through the use of stock incentives.
The Company has reserved 4,000,000 shares of Common Stock for issuance
pursuant to incentive awards under the Plan. Incentive awards may be in
the form of either incentive stock options, nonstatutory stock options,
stock appreciation rights, restricted stock or incentive stock.
The aggregate number of shares under option pursuant to the Plan is as
follows:
Number Option Price
of Shares Per Share
-----------------------------------------------------------------------
Options outstanding at October 31, 1995 - -
Granted 460,000 $ 2.50
Forfeited (16,000) $ 2.50
------------------------------------------------------
Options outstanding at July 31, 1996 444,000 $ 2.50
======================================================
(8) Stock Dividends
On May 14, 1996, the Board of Directors declared a 2-for-1 stock split
effected in the form of a one hundred percent (100%) stock dividend
paid on May 31, 1996 to stockholders of record at the close of business
on May 15, 1996. On June 5, 1996, the Board of Directors declared a
2-for-1 stock split effected in the form of a one hundred percent
(100%) stock dividend paid on June 21, 1996 to stockholders of record
at the close of business on June 6, 1996. All share and per share data
have been adjusted to reflect these stock dividends.
- --------------------------------------------------------------------------------
10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1996 AND 1995
Income Before Income Tax Expense
Income before income tax expense increased 58.9 percent to $3.0 million for the
three months ended July 31, 1996 compared to $1.9 million for the three months
ended July 31, 1995. This was primarily due to increased sales volume and a
reduction in interest expense of $65,000 as noted below.
Net Income
Net income of $1.9 million for third quarter 1996 was comparable to third
quarter 1995. This was a result of a $1.1 million increase in income before
income tax expense which was offset by the recording of income tax expense of
$1.1 million for third quarter 1996 as a result of the Company's termination of
its S Corporation status effective March 31, 1996.
Net Sales
Net sales consists of gross sales of products, less discounts, refunds and
returns. Net sales increased 24.9 percent to $10.9 million in third quarter 1996
from $8.7 million for the same period in 1995. This increase was attributable to
the Company's continued effort to reach a broader customer base throughout the
United States and internationally with increased advertising, trade show
attendance, and direct sales presence in more states. This effort resulted in
greater sales in all market segments and product types. Sales from orders less
than $50,000 increased 19.2 percent to $9.1 million in third quarter 1996 from
$7.6 million for the same period in 1995, and sales from orders $50,000 or more
increased 67.0 percent to $1.8 million from $1.1 million.
Gross Profit Margin
Cost of goods sold consists of the cost of materials, compensation costs and
overhead related to the Company's manufacturing operations, and warranty
expenses. The Company's gross profit margin (gross profit as a percentage of net
sales) decreased slightly to 45.6 percent in third quarter 1996 from 45.7
percent in third quarter 1995. This decrease was due primarily to a change in
the Company's product mix sold during the quarter.
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 18.5 percent in third quarter 1996
compared to 23.4 percent in third quarter 1995. This lower percentage was
primarily the result of the fact that net sales for third quarter 1996 increased
24.9 percent from the same period in 1995.
Interest Expense
The $65,000 reduction in interest expense in third quarter 1996 is due to the
Company generating adequate amounts of cash from operations to meet its cash
needs thereby requiring limited use of its revolving line of credit in third
quarter 1996.
(Continued)
11
NINE MONTHS ENDED JULY 31, 1996 AND 1995
Income Before Income Tax Expense
Income before income tax expense increased 49.9 percent to $8.0 million for the
nine months ended July 31, 1996 from $5.3 million for the nine months ended July
31, 1995. This increase was primarily due to increased sales volume, increased
gross profit margin and a reduction in interest expense of $358,000 as noted
below.
Net Income
Net income increased 25.5 percent to $6.7 million for the nine months ended July
31, 1996 from $5.3 million for the nine months ended July 31, 1995. This
increase was a result of a $2.7 million increase in income before income tax
expense which was offset by the recording of income tax expense of $1.3 million
for the nine months ended July 31, 1996 as a result of the Company's termination
of its S Corporation status effective March 31, 1996.
Net Sales
Net sales consists of gross sales of products, less discounts, refunds and
returns. Net sales increased 19.2 percent to $31.4 million for the nine months
ended July 31, 1996 from $26.3 million for the same period in 1995. This
increase was attributable to the Company's continued effort to reach a broader
customer base throughout the United States and internationally with increased
advertising, trade show attendance, and direct sales presence in more states.
This effort resulted in greater sales in all market segments and product types.
Additionally, net sales were favorably impacted by increases in both large and
small orders. Sales from orders less than $50,000 increased 18.3 percent to
$25.9 million for the nine months ended July 31, 1996 from $21.9 million for the
same period in 1995, and sales from orders $50,000 or more increased 24.0
percent to $5.5 million from $4.4 million.
Gross Profit Margin
Cost of goods sold consists of the cost of materials, compensation costs and
overhead related to the Company's manufacturing operations, and warranty
expenses. The Company's gross profit margin (gross profit as a percentage of net
sales) increased slightly to 43.8 percent for the nine months ended July 31,
1996 from 43.4 percent for the nine months ended July 31, 1995. This increase
was due primarily to a change in the Company's product mix sold during the
period.
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 18.9 percent for the nine months
ended July 31, 1996 compared to 21.9 percent for the nine months ended July 31,
1995. This lower percentage was primarily the result of the fact that net sales
for the nine months ended July 31, 1996 increased 19.2 percent from the nine
months ended July 31, 1995.
(Continued)
12
Interest Expense
The $358,000 reduction in interest expense for the nine months ended July 31,
1996 is due to the Company generating adequate amounts of cash from operations
to meet its cash needs thereby requiring limited use of its revolving line of
credit for the nine months ended July 31, 1996.
FINANCIAL CONDITION
Total assets at July 31, 1996 were $26.2 million, an increase of $7.4 million,
or 39.1 percent over October 31, 1995. This increase was primarily due to an
increase of $1.9 million in trade accounts receivable resulting from the
increased sales volume during the nine months ended July 31, 1996, an increase
of $2.3 million in inventory and an increase in cash and cash equivalents of
$2.5 million resulting from the initial public offering of the Company's common
stock.
Total stockholders' equity at July 31, 1996 increased $6.1 million from October
31, 1995 as a result of the initial public offering and net income for the nine
months ended July 31, 1996, less cash distributions totaling $6.2 million to the
Company's previously sole stockholder.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its cash requirements through cash flows from
operations along with short-term borrowings. On March 1, 1996, the Company and
its bank executed a loan commitment letter renewing its $5 million revolving
line of credit arrangement for another year under substantially similar terms;
however, the line of credit as renewed does not contain the restrictive
financial covenants contained in the previous agreement.
The Company's primary capital needs have been to (i) fund working capital
requirements, (ii) repay indebtedness, (iii) purchase property and equipment for
expansion and (iv) fund distributions to its previously sole stockholder
primarily to satisfy his tax liabilities resulting from S Corporation status.
The Company's primary sources of financing have been cash from operations, bank
borrowings and the initial public offering of the Company's common stock. The
Company believes that its cash flow from operations, available lines of credit
and the portion of the net proceeds from the public offering that the Company
intends to use for general corporate purposes will be adequate to fund its
operations for at least the next twelve months. The Company is not aware of any
trends, commitments or events that will result in or that are reasonably likely
to result in a material increase or decrease in liquidity thereafter. As of the
date hereof, the Company has no additional material sources of financing.
Cash flows from operations were approximately $3.2 million and $9.1 million for
the nine months ended July 31, 1996 and 1995, respectively. For the nine months
ended July 31, 1996, cash flows from operations were primarily provided by
operating income, offset by an increase in trade accounts receivable of $1.9
million and an increase in inventory of $2.3 million. Cash flows from operations
for the nine months ended July 31, 1995 were primarily provided by operating
income and a decrease in inventory of $3.8 million. In 1995, the Company reduced
its inventory of optical fiber because it had additional access to ready
supplies.
(Continued)
13
Net cash used in investing activities was primarily for expenditures related to
facilities and equipment and was $872,000 and $210,000 for the nine months ended
July 31, 1996 and 1995, respectively. In July 1996, the Company entered into a
contract for the expansion of its headquarters facilities totaling $3.2 million.
Construction is expected to be completed by the end of 1996.
Net cash provided by (used in) financing activities was $.2 million and $(8.7)
million for the nine months ended July 31, 1996 and 1995, respectively. The net
cash provided by financing activities for the nine months ended July 31, 1996
consisted of an increase in debt outstanding under the line of credit of $.8
million and net proceeds from the issuance of common stock of $5.5 million,
offset by $6.2 million in cash distributions to the Company's previously sole
stockholder. The net cash used in financing activities for the nine months ended
July 31, 1995 consisted primarily of a decrease in debt outstanding under the
line of credit of $4.1 million, payments on long-term debt of $3.5 million and
cash distributions to the Company's previously sole stockholder of $1.1 million.
14
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 nine
months ended July 31, 1996.
(27) Financial Data Schedule.
(b) Reports on Form 8-K filed during the three months ended July 31,
1996.
None.
15
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 5, 1996 /s/ Robert Kopstein
-----------------------------------
Robert Kopstein
Chairman of the Board, President and
Chief Executive Officer
Date: September 5, 1996 /s/ Kenneth W. Harber
-----------------------------------
Kenneth W. Harber
Vice President of Finance, Treasurer
and Secretary
(principal financial and accounting
officer)
5
1000
US
9-MOS
OCT-31-1996
NOV-01-1995
JUL-31-1996
1
$ 3,082
0
8,328
250
8,352
19,985
8,997
2,812
26,170
5,066
0
0
0
18,594
2,459
26,170
31,388
31,565
17,632
23,549
0
41
5
8,010
1,308
6,702
0
0
0
6,702
0.13
0.13
