ROANOKE, Va., Jan. 27, 2020 /PRNewswire/ -- Optical Cable
Corporation (Nasdaq GM: OCC) ("OCC®" or the "Company")
today announced financial results for fiscal year 2019 and its
fourth quarter ended October 31,
2019.
Fiscal Year 2019 Financial Results
Consolidated net sales for fiscal year 2019 were $71.3 million compared to record net sales of
$87.8 million for fiscal year 2018, a
decrease of 18.8%. By comparison, the Company's consolidated
net sales for fiscal year 2017 were $64.1
million.
Net sales decreased in fiscal year 2019 as a result of a number
of large orders from one customer in the wireless carrier market in
fiscal year 2018 that did not recur at the same levels in fiscal
year 2019. Net sales to this customer decreased $19.9 million in fiscal year 2019.
OCC's consolidated net sales to all other customers during
fiscal year 2019 increased 5.7% compared to the prior year
(excluding the wireless carrier market from both years), with an
increase in OCC's other specialty markets, partially offset by a
decrease in its enterprise market.
OCC reported gross profit of $18.3
million in fiscal year 2019 compared to gross profit of
$27.9 million in fiscal year 2018, a
decrease of 34.3%. Gross profit margin, or gross profit as a
percentage of net sales, was 25.7% in fiscal year 2019 compared to
31.7% for fiscal year 2018.
During fiscal year 2019, the Company experienced significant
reduction in gross profit margins, primarily as a result of
unintended throughput constraints and inefficiencies experienced in
the Roanoke production facility
impacting gross profits—particularly in the first quarter of the
year. These throughput constraints and inefficiencies
resulted from the expansion, training, and restructuring of the
Company's manufacturing workforce and from process changes during
fiscal year 2018—initiatives intended to ultimately increase
throughput and efficiency in order to meet increased product demand
over the short- and long-term.
OCC focused on cost control and correcting the impact of these
unintended throughput constraints and inefficiencies during fiscal
year 2019—achieving improvements after the first quarter of fiscal
year 2019. OCC's efforts to control costs and correct
unintended inefficiencies are ongoing, and the Company believes the
benefits of some of the cost reductions and changes that have been
made, and continue to be made, will be fully realized in fiscal
year 2020.
SG&A expenses decreased 10.3% to $23.4 million during fiscal year 2019 from
$26.1 million for fiscal year
2018. The decrease in SG&A expenses during fiscal year
2019 compared to last year was primarily the result of decreases in
employee related costs including employee incentives and
share-based compensation expense.
OCC recorded a net loss of $5.7
million, or $0.77 per basic
and diluted share, for fiscal year 2019, compared to net income of
$1.1 million, or $0.14 per basic and diluted share, for fiscal
year 2018.
Over 58% of OCC's fiscal year 2019 net loss occurred in the
first quarter of fiscal year 2019—with OCC achieving improvements
after the first quarter as a result of efforts to control costs and
improve production throughput and
efficiencies.
Fourth Quarter 2019 Financial Results
Consolidated net sales were $18.2
million in the fourth quarter of fiscal year 2019, a
decrease of 10.0% compared to net sales of $20.3 million in the fourth quarter of fiscal
year 2018. The year-over-year decrease in net sales reflects
a number of large orders from one customer in the wireless carrier
market in the fourth quarter of fiscal year 2018 that did not recur
at the same levels in the fourth quarter of fiscal year 2019.
Net sales to this customer decreased $2.6
million in the fourth quarter of fiscal 2019, as compared to
the prior year period.
OCC's consolidated net sales to all other customers during the
fourth quarter of fiscal year 2019 increased 3.5% compared to the
same period in fiscal year 2018 (excluding the wireless carrier
market from both periods), with an increase in OCC's other
specialty markets, partially offset by a decrease in its enterprise
market.
Gross profit was $4.9 million in
the fourth quarter of fiscal year 2019 compared to gross profit of
$6.7 million in the same period last
year, a decrease of 25.8%. Gross profit margin was 27.1% in
the fourth quarter of fiscal year 2019 compared to 32.9% for the
same period in fiscal year 2018.
SG&A expenses decreased 19.7% to $5.5
million during the fourth quarter of fiscal year 2019,
compared to $6.8 million for the
fourth quarter of fiscal year 2018. The decrease in SG&A
expenses was primarily the result of decreases in employee related
costs including employee incentives and share-based compensation
expense.
For the fourth quarter of fiscal year 2019, OCC recorded a net
loss of $657,000, or $0.09 per basic and diluted share, compared to a
net loss of $350,000, or $0.05 per basic and diluted share, for the fourth
quarter of fiscal year 2018.
Credit Agreement Modified
OCC's Credit Agreement with Pinnacle Bank was modified on
January 22, 2020, subsequent to the
Company's fiscal year end. The Credit Agreement was modified
to (i) reduce the aggregate outstanding balance under the Credit
Agreement by $200,000 on or before
April 15, 2020 by reducing the
outstanding principal balances on the term loans; (ii) provide that
all outstanding and future advances under the Revolver accrue
interest at an interest rate of prime lending rate plus 0.50%,
effective January 22, 2020, (iii)
suspend the current ratio financial covenant for the fiscal quarter
ended October 31, 2019, (iv) suspend
the fixed charge coverage ratio for the fiscal year ended
October 31, 2019, and (v) provide
that OCC engage in good faith to negotiate a letter of intent or
similar expression of interest to refinance the Revolver by
March 31, 2020 and enter into a
financing commitment letter, similar equity commitment or
combination thereof relating to the financing by May 1, 2020 with closing planned on or before
June 30, 2020.
Management's Comments
Neil Wilkin, President and Chief
Executive Officer of OCC, said, "During fiscal year 2019, the OCC
team again demonstrated its ability to adjust course in a
challenging environment. We achieved 5.7% growth in total net
sales in our core targeted markets—excluding the volatile wireless
carrier market—demonstrating our strong market position and the
strength of our comprehensive product offerings. The OCC team
took aggressive actions to correct the impact of unintended
throughput constraints and inefficiencies that occurred in fiscal
year 2019—most significantly impacting the first quarter—resulting
from production process changes made necessary by record demand for
OCC's products during fiscal year 2018. Our efforts resulted
in gross profit improvements and other SG&A expense reductions
beginning in the second quarter of fiscal year 2019, and we expect
additional cost savings to be realized in fiscal year 2020."
Mr. Wilkin concluded, "OCC is uniquely positioned in the fiber
optic and copper cabling and connectivity industry with core
strengths and capabilities that enable us to grow and successfully
compete against our larger competitors. We begin 2020 with a
continued focus on driving top-line growth and working with urgency
to further increase operational efficiency, reduce costs and
realize the benefit of our operating leverage on the Company's
bottom line."
Conference Call Information
As previously announced, OCC will host a conference call today,
January 27, 2020, at 10:00 a.m. Eastern Time. Individuals wishing to
participate in the conference call should call (866) 610-1072 in
the U.S. or (973) 935-2840 internationally, passcode 6073147. For
interested individuals unable to join the call, a replay will be
available through Monday, February 10,
2020 by dialing (800) 585-8367 or (404) 537-3406, passcode
6073147. The call will also be broadcast live over the
internet and can be accessed by visiting the investor relations
section of the Company's website at www.occfiber.com.
Company Information
Optical Cable Corporation ("OCC®") is a leading
manufacturer of a broad range of fiber optic and copper data
communication cabling and connectivity solutions primarily for the
enterprise market and various harsh environment and specialty
markets (collectively, the non-carrier markets) and also the
wireless carrier market, offering integrated suites of high quality
products which operate as a system solution or seamlessly integrate
with other providers' offerings.
OCC® is internationally recognized for pioneering
innovative fiber optic and copper communications technologies,
including fiber optic cable designs for the most demanding
environments and applications, copper connectivity designs to meet
the highest data communication industry standards, as well as a
broad product offering built on the evolution of these fundamental
technologies.
OCC uses its expertise to deliver cabling and connectivity
products and integrated solutions that are best suited to the
performance requirements of each end-user's application. And,
OCC's solutions offerings cover a broad range of applications—from
commercial, enterprise network, datacenter, residential and campus
installations to customized products for specialty applications and
harsh environments, including military, industrial, mining,
petrochemical and broadcast applications, as well as for the
wireless carrier market.
Founded in 1983, OCC is headquartered in Roanoke, Virginia with offices, manufacturing
and warehouse facilities located in Roanoke, Virginia, near Asheville, North Carolina and near
Dallas, Texas. OCC's
facilities are ISO 9001:2015 registered and its Roanoke and Dallas facilities are MIL-STD-790G
certified.
Optical Cable Corporation™, OCC®,
Procyon®, Superior Modular Products™, SMP Data
Communications™, Applied Optical Systems™, and associated logos are
trademarks of Optical Cable Corporation.
Further information about OCC® is available 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 our
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 known and unknown variables, uncertainties,
contingencies and risks that may cause actual events or results to
differ materially from our expectations, and such known and unknown
variables, uncertainties, contingencies and risks may also
adversely affect Optical Cable Corporation and its subsidiaries,
the Company's future results of operations and future financial
condition, and/or the future equity value of the Company. A
partial list of such variables, uncertainties, contingencies and
risks that could cause or contribute to such differences from our
expectations or that could otherwise adversely affect Optical Cable
Corporation and its subsidiaries is set forth in Optical Cable
Corporation's quarterly and annual reports filed with the
Securities and Exchange Commission ("SEC") under the heading
"Forward-Looking Information." OCC's quarterly and annual
reports are available to the public on the SEC's website at
http://www.sec.gov. In providing forward-looking information,
the Company expressly disclaims any obligation to update this
information, whether as a result of new information, future events
or otherwise except as required by applicable laws and
regulations.
(Financial Tables Follow)
OPTICAL CABLE
CORPORATION
|
Condensed
CONSOLIDATED Statements OF OPERATIONS
|
(thousands, except
per share data)
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
Fiscal Year
Ended
|
|
October
31,
|
|
October
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Net sales
|
$
18,250
|
|
$
20,273
|
|
$
71,324
|
|
$
87,828
|
Cost of goods
sold
|
13,308
|
|
13,612
|
|
53,019
|
|
59,955
|
|
|
|
|
|
|
|
|
Gross
profit
|
4,942
|
|
6,661
|
|
18,305
|
|
27,873
|
|
|
|
|
|
|
|
|
SG&A
expenses
|
5,466
|
|
6,802
|
|
23,434
|
|
26,131
|
Royalty income,
net
|
(5)
|
|
(3)
|
|
(6)
|
|
(33)
|
Amortization of
intangible assets
|
10
|
|
9
|
|
39
|
|
35
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
(529)
|
|
(147)
|
|
(5,162)
|
|
1,740
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(139)
|
|
(133)
|
|
(521)
|
|
(608)
|
Other, net
|
15
|
|
(81)
|
|
8
|
|
(80)
|
Other expense,
net
|
(124)
|
|
(214)
|
|
(513)
|
|
(688)
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
(653)
|
|
(361)
|
|
(5,675)
|
|
1,052
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
4
|
|
(11)
|
|
(6)
|
|
(17)
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(657)
|
|
$
(350)
|
|
$
(5,669)
|
|
$
1,069
|
|
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
Basic and diluted
|
$
(0.09)
|
|
$
(0.05)
|
|
$
(0.77)
|
|
$
0.14
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic and diluted
|
7,319
|
|
6,667
|
|
7,387
|
|
7,593
|
OPTICAL CABLE
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEET DATA
|
(thousands)
|
(unaudited)
|
|
|
|
|
|
October
31,
|
|
October
31,
|
|
2019
|
|
2018
|
Cash
|
$
537
|
|
$
177
|
Trade accounts
receivable, net
|
10,348
|
|
12,833
|
Inventories
|
18,096
|
|
17,475
|
Other current
assets
|
399
|
|
562
|
Total current
assets
|
29,380
|
|
31,047
|
Non-current
assets
|
10,727
|
|
12,051
|
Total assets
|
$
40,107
|
|
$
43,098
|
|
|
|
|
Current
liabilities
|
$
13,627
|
|
$
7,028
|
Non-current
liabilities
|
5,241
|
|
9,259
|
Total liabilities
|
18,868
|
|
16,287
|
Total shareholders'
equity
|
21,239
|
|
26,811
|
Total liabilities and
shareholders' equity
|
$
40,107
|
|
$
43,098
|
AT THE
COMPANY:
|
|
|
|
Neil
Wilkin
|
Tracy
Smith
|
Chairman, 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.
8627
|
(212) 355-4449 ext.
8603
|
occ-jfwbk@joelefrank.com
|
occ-jfwbk@joelefrank.com
|
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SOURCE Optical Cable Corporation