Optical Cable Corp. (Roanoke, VA) has announced that net sales for the third quarter of fiscal year 2001 decreased 15.4% to $14.1 million, compared to $16.7 million for the same period last year. According to company management, the decrease in net sales resulted from the impact of weak economic conditions on market demand, as the industries the firm serves reduced or delayed capital spending. In addition, a decrease in demand for cable containing multimode fiber (which typically has a higher relative sales price) was partially offset by an increase in demand for cable containing single-mode fiber (which typically has a lower relative sales price). Total fiber meters shipped in the third quarter was down 1.8% from the same period last year as a result of a 5.5-million-meter decrease in multimode fiber shipped. This was partially offset by a 4.5-million-meter increase in single-mode fiber shipped. Cable containing multimode fiber is generally used for datacom applications, while cable containing single-mode fiber is generally used for telecom/CATV/internet applications.
The gross margin in the third quarter was 43.3% compared to 46.0% in the third quarter of fiscal year 2000. The lower gross margin percentage was attributable to manufacturing costs not decreasing proportionally to the decrease in net sales, which was partially offset by an increase in the proportion of sales to original equipment manufacturers compared to distributors. As a percentage of net sales, selling, general and administrative (SG&A) expenses increased to 27.1% in the third quarter of fiscal year 2001 compared with 21.3% for the same period last year, largely due to the decline in net sales as well as increased marketing efforts.
In the third quarter of fiscal year 2001, operating income declined 44.4% to $2.3 million from $4.1 million in the comparable quarter a year ago as a result of the decline in net sales and gross margin, and increased marketing efforts. Optical Cable reported net income in the third quarter of fiscal year 2001 of $874,943, or $0.02 per diluted share, compared to net income of $2.4 million, or $0.04 per diluted share, in the year ago period. Included in the quarter was $596,238 of losses on trading securities compared to losses of $416,799 in the year ago quarter. As announced in May 2001, the Company's Board of Directors approved a policy to cease further investments of the company's cash into trading securities.
Despite declining net sales in the third quarter, net sales for the nine months ended July 31, 2001 increased 18.1% to $48.5 million from $41.0 million in the nine months ended July 31, 2000. On a year-to-date basis, the firm's gross margin was relatively flat at 45.0% versus 45.7% in the first nine months of fiscal year 2000. Income from operations increased 8.7% to $10.3 million in the period from $9.5 million in the first nine months of fiscal year 2000. The net loss for the first nine months of fiscal year 2001 was $2.9 million, or $0.05 per diluted share, compared to net income of $7.1 million, or $0.13 per diluted share, in the year ago period. The decrease primarily reflects $9.8 million in trading securities losses due to stock market conditions during the first nine months of fiscal year 2001.
The company has reacted to the impact of weak economic conditions on market demand by announcing the layoff of 27 employees last week. During the first and second fiscal quarters, the firm had added 49 new positions and production capacity in response to record product demand during those periods.
Management's Comments
“We have seen a marked slowdown in our business over the course of the quarter primarily as a result of economic conditions in the U.S. and Europe,” said Chairman and CEO, Robert Kopstein. “Sales declined across the majority of our customer categories as demand for interconnectivity cables for high-bandwidth applications and wireless voice and data communications slipped and customers delayed capital spending projects. The bright spot in the quarter was Asia, which helped boost our international sales as a percent of revenues to 29.1% in the quarter from 20.8% in the year ago period. We hope to see growing demand in Taiwan and Japan and believe we are well positioned to take advantage of expected future growth in these markets, should it occur.
“In August, we strengthened our management team, naming Neil Wilkin Senior Vice President and Chief Financial Officer, as well as appointing him to our Board of Directors. Tom Brock was also appointed to the Board. While we are disappointed in our results for the quarter, we remain convinced of the long term opportunity for Optical Cable and the industry.”
Optical Cable Corporation manufactures and markets a broad range of fiber optic cables for ``high bandwidth'' transmission of data, video, and audio communications over 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.