Optical Cable Corporation reports results of operations for third quarter 2002

Fiber Optics Weekly Update, Sept 27, 2002

Optical Cable Corporation announced results for its third quarter ended July 31, 2002 and receipt of a notification from Nasdaq stating that the company is in compliance with Nasdaq National Market listing requirements.

Financial Results for Third Quarter 2002

The company reported a net loss of $755,000 or $0.11 per basic and diluted share for its third fiscal quarter of 2002. Excluding the charges associated with the anticipated settlement of the shareholder class action suit ($992,000 expensed in the third fiscal quarter of 2002 and $1.1 million expensed during the nine months ended July 31, 2002), and the $110,000 charge in connection with a staff reduction announced June 14,2002, net of the related tax effect, Optical Cable would have had a net loss for the third fiscal quarter of 2002 of approximately $42,000. This compares to a net income of $875,000 or $0.12 per basic and diluted share for its third fiscal quarter ended July 31, 2001.

For the nine months ended July 31, 2002 the company reported a net loss of $43,000 or $0.01 per basic and diluted share, compared to a net loss of $2.9 million or $0.41 per basic and diluted share for the first nine months of 2001. Excluding the charges stated above, Optical Cable would have had a net income of approximately $765,000 for the first nine months of fiscal 2002. In an ongoing effort to control costs, and as a result of lower production volumes, on June 14, 2002, Optical Cable announced the layoff of approximately 15 percent of its workforce. The layoffs were part of a company-wide downsizing and resulted in a charge of approximately $110,000 during the third quarter of 2002 that adversely impacted both gross profit and selling, general and administrative costs during the third fiscal quarter of 2002. As a result, the anticipated cost savings from this action will not be substantially realized until the fourth fiscal quarter of 2002.

Net sales for the third fiscal quarter decreased 30.9 percent to $9.7 million from $14.1 million for the same period last year. Net sales of $9.7 million for the third quarter compared to net sales of $10.9 million for the second fiscal quarter of 2002. The decrease was the result of weak economic conditions on market demand, a trend that has significantly affected Optical Cable beginning in the second half of fiscal year 2001.

Gross profit as a percentage of net sales for the third fiscal quarter was 33.0 percent compared to 43.3 percent for the third fiscal quarter of 2001. Selling, general and administrative costs as a percentage of sales for the quarter were 34.4 percent for the third fiscal quarter of 2002, compared to 27.1 percent in the third quarter of fiscal 2001. By comparison SG&A expenses as a percentage of net sales were 30.8 percent and 31.1 percent for the first and second fiscal quarters of this year, respectively.

The $992,000 charge in the third fiscal quarter of 2002 related to the anticipated settlement of the shareholder class action lawsuit represents the estimated cost of the expected settlement of the lawsuit and related professional fees incurred, net of insurance proceeds. The US District Court for the Western District of Virginia has set a Final Approval Hearing for September 23, 2002 to consider, among other things, whether the agreed- upon settlement is fair, reasonable and adequate for the shareholders who are members of the class, and whether an Order and Final Judgment should be entered ratifying the settlement and dismissing the shareholder class action suit with prejudice.

For the nine months ended July 31, 2002 the company reported net sales of $32.0 million compared to net sales of $48.5 million for the first nine months of fiscal 2001. Year-over-year, Optical Cable's gross margin decreased to 35.3 percent compared to 45.0 percent for last year's comparable nine-month period.

Optical Cable has been notified by Nasdaq that it has regained compliance with the minimum pricing requirement necessary to remain listed on the Nasdaq National Market, where the company's common stock is presently traded. On June 14, 2002, the company announced the receipt of notification from Nasdaq regarding the company's noncompliance with the minimum $1.00 per share trading price requirement for inclusion on the Nasdaq National Market. Nasdaq provided the company until August 13, 2002 to regain compliance. On July 30, 2002, Optical Cable's shareholders approved a 1-for-8 reverse stock split that assisted the company in regaining compliance with the Nasdaq requirement.

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.