Optical Cable Corporation Reports Financial Results for Fourth Quarter And Fiscal Year End 2001
December 28, 2001 6:45:00 PM ET
ROANOKE, Va., Dec. 28 /PRNewswire/ -- Optical Cable Corporation OCCF today announced financial results for its fiscal fourth quarter and year ended October 31, 2001.
Despite record net sales for fiscal year 2001 of $60.4 million, the Company reported a net loss for fiscal year 2001 of $6.7 million, or $ 0.12 per diluted share, compared to net income of $8.3 million, or $0.15 per diluted share for fiscal year 2000. The net loss for the fourth quarter of fiscal 2001 was $3.8 million, or $0.07 per diluted share, compared to net income of $1.1 million, or $0.02 per diluted share for the same period in fiscal 2000.
The net loss for fiscal year 2001 included certain unusual charges that are not expected to recur. These included realized losses on trading securities of $11.4 million attributable to prior investment policies (of which $1.7 million was realized during the fourth quarter), a $0.9 million accrual for an anticipated settlement with the Equal Employment Opportunity Commission (EEOC) for alleged prior discriminatory practices (all of which was recorded in the fourth quarter), and a $0.4 million write-off of deferred costs related to the aborted securities offering which had been anticipated for fiscal 2001 (all of which was recorded in the fourth quarter). During the fourth quarter of fiscal 2001, the Company also expensed approximately $1.2 million for slow-moving and impaired inventory, about $0.8 million of which was a result of increasing its allowance for slow-moving and impaired inventory, with the remainder related to write-offs of such inventory. Bad debt expense for fiscal 2001 totaled $1.1 million (of which $0.5 million was booked in the fourth quarter as an increase in the allowance for doubtful accounts). The Company's inventory allowance and allowance for doubtful accounts at the end of fiscal 2001 totaled $1.1 million and $0.6 million, respectively. Although the Company realized substantial losses on trading securities during fiscal year 2001 that resulted in a capital loss for income tax purposes, that income tax loss is unusable in the current tax year and must be carried forward. Since the Company anticipates that it will not realize future capital gains necessary to use this tax loss carryforward, the Company has established a valuation allowance against its deferred tax asset that resulted in an increase in income tax expense of approximately $4.1 million for fiscal year 2001 (of which $0.7 million relates to the fourth quarter) in excess of what income tax expense would have been if the amount of capital losses for tax purposes were expected to be used.
"We have taken affirmative steps to refocus the Company. In October 2001, we liquidated all remaining trading securities in accordance with a policy to invest excess funds only in money market funds or other similar non-volatile securities. But for the realized losses on trading securities, the Company would have reported a substantial profit for fiscal 2001. In December 2001, the Board of Directors, upon recommendation by the Special Committee to the Board, removed Mr. Robert Kopstein as the Company's Chairman, President and Chief Executive Officer, allowing the Company to better concentrate on its business," according to Mr. Neil Wilkin, acting President and Chief Financial Officer.
"Historically, the Company has been quite strong financially, however, we are evaluating potential improvements to past practices with the hope of growing sales and improving profitability," added Mr. Wilkin.
Commenting on the adjustments during the fourth quarter of fiscal 2001, Mr. Wilkin stated, "The Company made what it believes to be prudent adjustments to its balance sheet in light of the current economic environment."
Net sales for fiscal year 2001 increased 3.8% to $60.4 million, compared to $58.2 million for fiscal year 2000, in line with previous guidance. While the Company had record net sales for the year, the Company experienced a decrease in net sales during the second half of the fiscal year as a result of the impact of weak economic conditions on market demand and pricing, when industries the Company serves reduced or delayed capital spending. Net sales for the fourth quarter of fiscal year 2001 decreased 30.5% to $11.9 million, compared to $17.2 million for the fourth quarter of fiscal 2000, in line with previous guidance. Also affecting net sales for fiscal 2001 is the fact that while the Company experienced a relatively stable demand for cable containing multimode fiber (which typically has a higher relative sales price), it experienced an increase in demand for cable containing single-mode fiber (which typically has a lower relative sales price).
The gross margin for fiscal 2001 was 40.4% compared to 47.0% for fiscal 2000. The gross margin in the fourth quarter was 21.8% compared to 49.9% in the fourth quarter of fiscal year 2000 and 43.3% in the third quarter of fiscal 2001. Approximately $1.2 million of the decline in the gross margin was attributable to the increase in the allowance for, and write-off of, slow- moving and impaired inventory during the fourth quarter of fiscal 2001. Although the Company's gross margins have declined, the Company does not believe the gross margins experienced in the fourth quarter of fiscal 2001 are indicative of future results.
As a percentage of net sales, selling, general and administrative (SG&A) expenses increased to 28.4% for fiscal 2001, compared to 25.8% for fiscal 2000, and to 47.2% in the fourth quarter of fiscal 2001, compared to 33.4% for the same period last year. SG&A expenses were adversely affected by non- recurring charges for the anticipated settlement of the EEOC lawsuit and the write-off of deferred securities offering costs during the fourth quarter of fiscal 2001. SG&A expenses were also adversely affected by the Company's higher legal expenses during the fourth quarter of fiscal 2001.
Optical Cable Corporation manufactures and markets a broad range of fiber optic cables for "high bandwidth" transmission of data, video, and audio communications over short to moderate distances. Optical Cable Corporation's cables can be used both indoors and outdoors and utilize a tight-buffer coating process that protects the optical fiber.
Further information on Optical Cable Corporation is available through our website on the World Wide Web at www.occfiber.com .
Note: This news release 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 Optical Cable Corporation's (the "Company") 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; the economic conditions affecting network service providers; the slowdown in corporate spending on information technology; 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; market conditions influencing prices or pricing; the Company's dependence on a limited number of suppliers; an adverse outcome in litigation, claims and other actions, and potential litigation, claims and other actions against the Company, including, but not limited to, the recently filed shareholder litigation and other claims related to the former President and Chief Executive Officer; the effect of sales of the Company's common stock by the various brokerage firms to whom the former President and Chief Executive Officer pledged substantially all of his personally-held unregistered shares of the Company to secure substantial personal margin loans; technological changes and introductions of new competing products; the current recession; terrorist attacks or acts of war, particularly given the acts of terrorism against the United States on September 11, 2001 and subsequent military responses by the United States; changes in market demand; exchange rates; productivity; weather; and market and economic conditions in the areas of the world in which the Company operates and markets its products. OPTICAL CABLE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
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