Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 17, 2010
OPTICAL CABLE CORPORATION
(Exact name of registrant as specified in its charter)
| Virginia | 000-27022 | 54-1237042 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
| 5290 Concourse Drive Roanoke, VA |
24019 | |||
| (Address of principal executive offices) | (Zip Code) | |||
(540) 265-0690
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Table of Contents
Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
Item 2.02. Results of Operations and Financial Condition
On March 17, 2010, Optical Cable Corporation issued a press release announcing its first quarter of fiscal year 2010 financial results. On March 18, 2010, Optical Cable Corporation held a conference call to discuss the financial results for its first quarter of fiscal year 2010. The press release is attached hereto as Exhibit 99.1 and the transcript for the conference call is attached as Exhibit 99.2.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits
The following are filed as Exhibits to this Report.
| Exhibit No. |
Description of Exhibit | |
| 99.1 | Press release issued March 17, 2010 (FILED HEREWITH) | |
| 99.2 | Transcript of conference call on March 18, 2010 (FILED HEREWITH) | |
Table of Contents
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 hereunto duly authorized.
| OPTICAL CABLE CORPORATION | ||
| By: | /s/ TRACY G. SMITH | |
| Name: | Tracy G. Smith | |
| Title: | Senior Vice President and Chief Financial Officer | |
Dated: March 23, 2010
Table of Contents
OPTICAL CABLE CORPORATION
Current report on Form 8-K
| Exhibit No. |
Description of Exhibit | |
| 99.1 | Press release issued March 17, 2010 (FILED HEREWITH) | |
| 99.2 | Transcript of conference call on March 18, 2010 (FILED HEREWITH) | |
Exhibit 99.1
|
OPTICAL CABLE CORPORATION 5290 Concourse Drive Roanoke, VA 24019 (Nasdaq GM: OCCF) www.occfiber.com |
AT THE COMPANY:
| Neil Wilkin | Tracy Smith | |
| President & CEO | Senior Vice President & CFO | |
| (540) 265-0690 | (540) 265-0690 | |
| investorrelations@occfiber.com | investorrelations@occfiber.com |
AT JOELE FRANK, WILKINSON BRIMMER KATCHER:
| Andrew Siegel | Aaron Palash | |
| (212) 355-4449 ext. 127 | (212) 355-4449 ext. 103 | |
| asiegel@joelefrank.com | apalash@joelefrank.com |
FOR IMMEDIATE RELEASE
OPTICAL CABLE CORPORATION REPORTS
FISCAL FIRST QUARTER 2010 FINANCIAL RESULTS
ROANOKE, VA, March 17, 2010 — Optical Cable Corporation (Nasdaq GM: OCCF) (“OCC”) today announced financial results for its fiscal first quarter ended January 31, 2010.
First Quarter 2010 Financial Results
OCC reported improved results of operations during the first quarter of fiscal year 2010, when compared to the same period last year. The Company recorded a net loss attributable to OCC of $316,000, or $0.05 per basic and diluted share, for the first quarter of fiscal year 2010, compared to a net loss of $742,000, or $0.12 per basic and diluted share, for the same period last year.
The improvement in results is attributable to gross profit margin improvement and cost reduction initiatives started last year, partially offset by costs associated with adding military and harsh environment connectivity products to OCC’s product offering following the Company’s acquisition of Applied Optical Systems, Inc. (“AOS”) on October 31, 2009.
Excluding the impact of the AOS acquisition, the Company believes it would have recorded net income before taxes in the first quarter of fiscal year 2010. Additionally, during the first quarter of fiscal year 2010, OCC recorded a loss before income taxes of $364,000 associated with a business in which OCC acquired a controlling interest on August 1, 2008.
Optical Cable Corp. – First Quarter 2010 Earnings Release
Page 2 of 6
OCC’s consolidated net sales for each of the first quarters of fiscal years 2010 and 2009 were approximately $15.0 million. Net sales increased in the Company’s specialty markets (partially as a result of the acquisition of AOS) during the first quarter of fiscal year 2010 compared to the same period last year, but this increase was offset by decreases in net sales in the Company’s commercial markets.
Gross profit increased 14.9% to $5.5 million in the first quarter of fiscal 2010, compared to $4.8 million in the first quarter of fiscal 2009. Gross profit margin for the first quarter of fiscal 2010 increased to 36.7% compared to 32.0% for the same period last year, due to improved gross profit margins on fiber optic cable products.
Management's Comments
Neil Wilkin, President and Chief Executive Officer of OCC, said “Our improving results of operations reflect our efforts to reduce costs and achieve profitable growth. We are pleased that we maintained our strong balance sheet in the first quarter while delivering positive EBITDA (earnings before interest, taxes, depreciation and amortization).”
“While we continue to expect challenging financial conditions through the first half of 2010, OCC is in an enviable position in our industry. We have taken steps to grow our business organically and through acquisitions—and now OCC provides the comprehensive suite of products needed by our customers. We are confident that OCC is well-positioned for further growth and shareholder value creation as the economy improves,” stated Mr. Wilkin.
Company Information
Optical Cable Corporation is a leading manufacturer of a broad range of fiber optic and copper data communications cabling and connectivity solutions primarily for the enterprise market, offering an integrated suite of high quality, warranted products which operate as a system solution or seamlessly integrate with other providers’ offerings. OCC’s product offerings include designs for uses ranging from commercial, enterprise network, datacenter, residential and campus installations to customized products for specialty applications and harsh environments, including military, industrial, mining and broadcast applications. OCC products include fiber optic and copper cabling, fiber optic and copper connectors, specialty fiber optic and copper connectors, fiber optic and copper patch cords, pre-terminated fiber optic and copper cable assemblies, racks, cabinets, datacom enclosures, patch panels, face plates, multi-media boxes and other cable and connectivity management accessories, and are designed to meet the most demanding needs of end-users, delivering a high degree of reliability and outstanding performance characteristics.
OCC is internationally recognized for pioneering the design and production of fiber optic cables for the most demanding military field applications, as well as of fiber optic cables suitable for both indoor and outdoor use, and creating a broad product offering built on the evolution of these fundamental technologies. OCC also is internationally recognized for its role in establishing copper connectivity data communications standards, through its innovative and patented technologies.
Optical Cable Corp. – First Quarter 2010 Earnings Release
Page 3 of 6
Founded in 1983, OCC is headquartered in Roanoke, Virginia with offices, manufacturing and warehouse facilities located in each of Roanoke, Virginia, near Asheville, North Carolina and near Dallas, Texas. OCC primarily manufactures its high quality fiber optic cables at its Roanoke facility which is ISO 9001:2008 registered and MIL-STD-790F certified, its high quality enterprise connectivity products at its Asheville facility which is ISO 9001:2008 registered, and its high quality military and harsh environment connectivity products and systems at its Dallas facility which is MIL-STD-790F certified.
Optical Cable Corporation, OCC, Superior Modular Products, SMP Data Communications, Applied Optical Systems, and associated logos are trademarks of Optical Cable Corporation.
Further information about OCC is available on the Internet at www.occfiber.com.
FORWARD-LOOKING INFORMATION
This news release by Optical Cable Corporation and its subsidiaries (collectively, the “Company” or “OCC”) 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, anticipation or expectation, (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 variables, uncertainties, contingencies and risks that may cause actual events to differ materially from the Company’s expectations. Additionally, such variables, uncertainties, contingencies and risks may adversely affect the Company and the Company’s future results of operation and future financial condition. Factors that could cause or contribute to such differences from the Company’s expectations or could adversely affect the Company, include, but are not limited to: the level of sales to key customers, including distributors; timing of certain projects and purchases by key customers; the economic conditions affecting network service providers; corporate and/or government spending on information technology; actions by competitors; fluctuations in the price of raw materials (including optical fiber, copper, gold and other precious metals, and plastics and other materials affected by petroleum product pricing); fluctuations in transportation costs; the Company’s dependence on customized equipment for the manufacture of its products and a limited number of production facilities; the Company’s ability to protect its proprietary manufacturing technology; the Company’s ability to replace royalty income as existing patented and licensed products expire by developing and licensing new products; market conditions influencing prices or pricing; the Company’s dependence on a limited number of suppliers; the loss of or conflict with one or more key suppliers or customers; an adverse outcome in litigation, claims and other actions, and potential litigation, claims and other actions against the Company; an adverse outcome in regulatory reviews and audits and potential regulatory reviews and audits; adverse changes in state tax laws and/or positions taken by state taxing authorities affecting the Company; technological changes and introductions of new competing products; changes in end-user preferences for competing technologies, relative to the Company’s product offering; economic
Optical Cable Corp. – First Quarter 2010 Earnings Release
Page 4 of 6
conditions that affect the telecommunications sector, certain technology sectors or the economy as a whole; changes in demand of our products from certain competitors for which we provide private label connectivity products; terrorist attacks or acts of war, and any current or potential future military conflicts; changes in the level of military spending by the United States government; ability to retain key personnel; inability to recruit needed personnel; poor labor relations; the inability to successfully integrate the operations of the Company’s new subsidiaries; the impact of changes in accounting policies, including those by the Securities and Exchange Commission and the Public Company Accounting Oversight Board; the Company’s ability to continue to successfully comply with, and the cost of compliance with, the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 or any revisions to that act which apply to the Company; the impact of changes and potential changes in federal laws and regulations adversely affecting our business and/or which result in increases in our direct and indirect costs as we comply with such laws and regulations; impact of future consolidation among competitors and/or among customers adversely affecting the Company’s position with its customers and/or its market position; actions by customers adversely affecting the Company in reaction to the expansion of its product offering in any manner, including, but not limited to, by offering products that compete with its customers, and/or by entering into alliances with, making investments in or with, and/or acquiring parties that compete with and/or have conflicts with customers of the Company; adverse reactions by customers, vendors or other service providers to unsolicited proposals regarding the management of the Company, and the additional costs of considering and possibly defending the Company’s position on such unsolicited proposals; impact of weather or natural disasters in the areas of the world in which the Company operates and markets its products; the Company’s ability to secure financing to fund working capital needs; economic downturns and/or changes in market demand, exchange rates, productivity, or market and economic conditions in the areas of the world in which the Company operates and markets its products, and the Company’s success in managing the risks involved in the foregoing. The Company cautions readers that the foregoing list of important factors is not exclusive and the Company incorporates by reference those factors included in current reports on Form 8-K, in the annual report on Form 10-K for the fiscal year ended October 31, 2009, and/or in the Company’s other filings.
(Financial Tables Follow)
Optical Cable Corp. – First Quarter 2010 Earnings Release
Page 5 of 6
OPTICAL CABLE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(thousands, except per share data)
(unaudited)
| Three Months Ended January 31, |
||||||||
| 2010 | 2009 | |||||||
| Net sales |
$ | 15,007 | $ | 14,958 | ||||
| Cost of goods sold |
9,506 | 10,170 | ||||||
| Gross profit |
5,501 | 4,788 | ||||||
| Selling, general and administrative expenses |
6,049 | 5,810 | ||||||
| Royalty income, net |
(246 | ) | (162 | ) | ||||
| Amortization of intangible assets |
147 | 210 | ||||||
| Loss from operations |
(449 | ) | (1,070 | ) | ||||
| Interest expense, net |
(145 | ) | (166 | ) | ||||
| Other, net |
(7 | ) | 24 | |||||
| Other expense, net |
(152 | ) | (142 | ) | ||||
| Loss before income taxes |
(601 | ) | (1,212 | ) | ||||
| Income tax benefit |
(222 | ) | (470 | ) | ||||
| Net loss |
$ | (379 | ) | $ | (742 | ) | ||
| Net loss attributable to noncontrolling interest |
(63 | ) | — | |||||
| Net loss attributable to OCC |
$ | (316 | ) | $ | (742 | ) | ||
| Net loss attributable to OCC per share: |
||||||||
| Basic and diluted |
$ | (0.05 | ) | $ | (0.12 | ) | ||
| Weighted average shares outstanding: |
||||||||
| Basic and diluted |
5,860 | 6,131 | ||||||
—MORE—
Optical Cable Corp. – First Quarter 2010 Earnings Release
Page 6 of 6
OPTICAL CABLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(thousands)
(unaudited)
| January 31, 2010 |
October 31, 2009 | ||||||
| Cash and cash equivalents |
$ | 1,121 | $ | 1,948 | |||
| Trade accounts receivable, net |
8,805 | 9,533 | |||||
| Inventories |
13,626 | 12,306 | |||||
| Other current assets |
4,925 | 3,915 | |||||
| Total current assets |
28,477 | 27,702 | |||||
| Non-current assets |
22,067 | 22,625 | |||||
| Total assets |
$ | 50,544 | $ | 50,327 | |||
| Current liabilities |
$ | 7,564 | $ | 7,632 | |||
| Non-current liabilities |
9,906 | 9,438 | |||||
| Total liabilities |
17,470 | 17,070 | |||||
| Total shareholders’ equity attributable to OCC |
33,137 | 33,257 | |||||
| Noncontrolling interest |
(63 | ) | — | ||||
| Total shareholders’ equity |
33,074 | 33,257 | |||||
| Total liabilities and shareholders’ equity |
$ | 50,544 | $ | 50,327 | |||
###
Exhibit 99.2
FINAL TRANSCRIPT
Conference Call Transcript
OCCF - Q1 2010 Optical Cable Earnings Conference Call
Event Date/Time: Mar 18, 2010 / 09:00AM ET
CORPORATE PARTICIPANTS
Neil Wilkin
Optical Cable Corporation - Chairman, President & CEO
Tracy Smith
Optical Cable Corporation – SVP & CFO
Andrew Siegel
Joele Frank, Wilkinson Brimmer Katcher - IR
PRESENTATION
Operator
Good morning. My name is Brandy and I will be your conference operator today. At this time, I would like to welcome everyone to the Optical Cable Corporation First Quarter 2010 Earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session.
(Operator Instructions)
Mr. Siegel, you may begin your conference.
Andrew Siegel - Joele Frank, Wilkinson Brimmer Katcher - IR
Thank you. Good morning, and thank you all, for participating in Optical Cable Corporation’s first quarter of fiscal year 2010 conference call. By this time, everyone should have a copy of the earnings press release. If you don’t have a copy, please visit occfiber.com. On the call today with us is Neil Wilkin, Chairman, President and Chief Executive Officer of OCC.
Before we begin, I’d like to remind everyone that this call may contain forward-looking statements that involve risks and uncertainties. The actual future results of Optical Cable Corporation may differ materially due to a number of factors including, but not limited to, those factors set forth in detail in the “forward-looking statements” section of yesterday’s press release. These cautionary statements apply to the content of the internet webcast on occfiber.com, as well as today’s call. Now I’d like to turn the call over to Neil Wilkin. Neil, please begin.
Neil Wilkin - Optical Cable Corporation - Chairman, President & CEO
Thank you, Andrew, and good morning everyone. Joining me today at OCC’s offices in Roanoke is Tracy Smith, our Senior Vice President and Chief Financial Officer. I would like to begin the call today with a few opening remarks. I will then have Tracy review the first quarter results for the three-month period ended January 31, 2010 in some additional detail. After Tracy’s remarks, we will answer as many of your questions as we can.
I would like to note that during the Q&A session we will—as we normally do—take questions from analysts and institutional investors only. Additionally, however, we answer questions that individual investors may submit, but prior to today’s call. As a reminder, when we do offer an opportunity for shareholders to submit questions in advance of our earnings call, we include instructions regarding the submissions in our press release announcing the date and time of the call. And we did that in our most recent press release in anticipation of this call.
OCC reported improved results of operations during the first quarter of fiscal year 2010 when compared to the same period last year. The Company recorded a net loss attributable to OCC of $316,000 [sic], or $0.05 per basic and diluted share, for the first quarter of fiscal year 2010, compared to a net loss of $742,000, or $0.12 per basic and diluted share, for the same period last year.
The improvement in results was attributable to gross profit margin improvements and cost reduction initiatives started last year, partially offset by costs associated with adding the military and harsh environment connectivity products to OCC’s product offering as part of the acquisition of Applied Optical Systems (or AOS) on October 31, 2009.
Excluding the impact of the AOS acquisition, we believe we would have recorded net income before taxes in the first quarter of fiscal year 2010. Additionally, during the first quarter of fiscal year 2010, OCC recorded a loss before income taxes of $364,000 associated with a business in which OCC acquired a controlling interest on August 1, 2008.
The acquisition of AOS added a product set to OCC’s offering that is highly desired by customers in a number of our targeted markets—a product set that we refer to as applied interconnect systems. As we have seen before, after an acquisition there is an expected period of integration growing pains that we go through before we begin to see the benefits to OCC expected from such an acquisition. And we’ve seen that in Q1 2010 with AOS.
We are pleased that we’ve maintained our strong balance sheet in the first quarter while delivering positive earnings before interest, taxes, depreciation and amortization. And while we continue to expect challenging financial conditions through the first half of 2010, we are in an enviable position in our industry. We have taken steps to grow our business organically and through acquisitions, and we now provide the comprehensive suite of products our customers need.
We are confident OCC is well-positioned for future growth and shareholder value creation as the economy improves. And, as we’ve said before, typically our industry tends to be a lagging indicator of how things are going in the economy. So we tend to improve after the economy is already into recovery.
And now I’ll turn the call over to Tracy Smith, our Chief Financial Officer, who will review some specifics regarding our first quarter of fiscal year 2010. Tracy?
Tracy Smith - Optical Cable Corporation - - SVP &CFO
Thank you, Neil.
Consolidated net sales for each of the first quarters of fiscal years 2010 and 2009 were $15 million. We experienced an increase in our net sales during the first quarter of fiscal year 2010 in our specialty markets, compared to the same period last year, but this increase was offset by decreases in net sales in our commercial markets.
Net sales to customers located outside of the United States increased 12.2% [sic] in the first quarter of fiscal year 2010 compared to the same period last year, while net sales to customers located in the United States decreased 4.1%. The increase in net sales to customers located outside of the United States is primarily due to the fact that we recognized net sales of approximately $1.4 million as the result of a large international order in the first quarter of fiscal year 2010, that did not occur in the first quarter of fiscal year 2009.
Gross profit increased 14.9% to $5.5 million in the first quarter of fiscal year 2010, compared to $4.8 million for the same period last year. Gross profit margin increased to 36.7% for the first quarter of fiscal year 2010, compared to 32% for the first quarter of fiscal year 2009. The primary reason for the increase is that the gross profit margin percentage associated with the sale of fiber optic cable sales increased to 43.3% for the first quarter of fiscal year 2010, compared to 36.2% for the same period last year due to an increase in net sales related to higher margin products. The increase in our gross profit margin associated with the sale of fiber optic cable sales was partially offset by the decrease in gross profit margin associated with the sales of enterprise connectivity products of 19% compared to 19.8% for the same period last year and the gross profit margin associated with our applied interconnect systems products, resulting from the acquisition of AOS on October 31, 2009, of 19.5% during the first quarter of fiscal year 2010.
SG&A expenses increased to $6 million in the first quarter of fiscal year 2010 from $5.8 million for the same period last year. SG&A expenses as a percentage of net sales were 40.3% in the first quarter of fiscal year 2010, compared to 38.8% in the first quarter of fiscal year 2009. Excluding the acquisition of AOS, our SG&A expenses would have decreased in the first quarter of fiscal year 2010, when compared to the same period last year, as a result of cost reduction initiatives.
We reported a net loss attributable to OCC of $316,000, or $0.05 per basic and diluted share, in the first quarter of fiscal year 2010, compared to a net loss of $742,000 or $0.12 per basic and diluted share, for the first quarter of fiscal year 2009. Contributing to the net loss during the first quarter of fiscal year 2010 were SG&A expenses associated with the acquisition of AOS and pre-tax losses of $364,000 associated with the SG&A expenses of the business in which OCC acquired a controlling interest on August 1, 2008.
Our revolving loan was modified on February 16, 2010 and now provides up to $3 million for our working capital needs. The revolving loan, as modified, expires on May 31, 2010; however, we are engaged in active discussions with our current lender and other financial institutions to replace just our revolving loan or our total Credit Facilities with a revolving loan or new credit facilities with terms we believe will be appropriate for our current financing needs.
And with that, I’ll turn the call back over to Neil.
Neil Wilkin - Optical Cable Corporation - Chairman, President & CEO
Thanks, Tracy. Before we take your questions, I’d like to remind you that our Annual Meeting of Shareholders is scheduled for Tuesday, March 30th in Roanoke, Virginia. Proxy cards and proxy materials were mailed to our shareholders during the first week of March, and proxy materials are also available on our website at www.occfiber.com/proxy.
And now we are happy to answer as many of your questions as we can. Operator, please indicate the instructions for participants to call in their questions.
QUESTION AND ANSWER
Operator
(Operator Instructions)
At this time there are no questions. I’ll turn it back over to Neil.
Neil Wilkin - Optical Cable Corporation - Chairman, President & CEO
Thank you. Well, I appreciate those that are participating in the call. And usually we have a few questions. Hopefully we will on our next call. One thing that I wanted to add before we go today is that Tracy had mentioned that our bank line is — we’re in the process of looking at new bank lines. We are very confident that we’re going to be able to restore our revolver — based on some commitments we already have and some other banks we’re already talking to — up to the $6 million line. While obviously we can’t guarantee it, that’s fully our expectation, and what we have been looking at. Normally, that revolver is not a line that we use extensively, but we did want to have that $6 million revolver to provide us with cushion in the event that we ever would need that.
So we’re very comfortable and very pleased with what our balance sheet is, and we’re also very comfortable with what our financing resources are going to be after we’ve renewed the line. Our current bank is very interested in continuing to work with us. But we’ve kind of gotten above their legal lending ability. And that was triggered when one of the banks that they had participate on the loan behind the scenes, and that we didn’t really have any involvement with, decided that they really didn’t want to do this sort of participation anymore. So I really don’t think that, from my view, this renegotiation and work that we’re doing in our bank line has any negative, has negative implications on the Company’s business or how the banks are viewing us.”
If there’s still no questions, we’ll go ahead and wrap up. I’ll pause for one moment to see if the operator has any. Okay.
Operator
There are no questions at this time.
Neil Wilkin - Optical Cable Corporation - - Chairman, President & CEO
Hearing none, I appreciate all of you participating on the call, and all of you that listen to our calls by web after the fact. And we appreciate your support and interest in Optical Cable Corporation. Look forward to talking to you next quarter.
Operator
This concludes Optical Cable Corporation’s first quarter 2010 earnings conference call. You may now disconnect.