附件13.1
光缆公司
年度报告
2024
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独立注册公共会计师事务所的报告 (PCAOb ID编号 |
光缆公司 (OCC)
页面故意留空。
光缆公司 (OCC)
尊敬的光缆公司（OCC®）股东：
遇到的挑战和克服的挑战
当我在一年前写信给你时，OCC的净销售受到行业板块整体宏观经济压力的挑战，这种压力始于2023财年的末期，并在2024财年期间变得更加持久——影响了我们许多目标市场，特别是我们的企业市场和某些特殊市场，包括无线运营商市场。
我很高兴地分享，随着我们结束2024财年并展望2025及以后，阳光开始透出。一方面，2024财年的OCC净销售额较2023年减少了7.6%，达到6670万美元， 我们行业的疲软开始减退。 谢谢 由于我们增长战略的强力执行和深入扎根的市场地位，OCC在此期间的收入下降相对较低，与一些同业相比。
重要的是， 同时，我们相信我们也能够使OCC做好准备，利用即将到来的机会。—准备好并能够迅速展开行动。为机会做好准备。
回归增长
OCC在2024财年第四季度的各项指标上都实现了增长—与2023财年第四季度相比，净销售额、毛利润和毛利润率（毛利润占净销售额的百分比）、营业收入和每股收益均有所增加。
我们 在2024财年第四季度，净销售额增长了12.4%与2023财年同期相比，顺序上净销售额增长了20.1%，相比于2024财年第三季度。此外，在2024财年，我们的净销售额自2024财年第一季度起逐步增长。
OCC季度净销售额
2021-2024财政年度（以千为单位）
OCC在2024财政年度第四季度的净销售增长和正收益展示了不成比例的 OCC的’显著的经营杠杆对盈利能力的积极影响 随着生产量的增加。当OCC的净销售额增长时，我们的毛利润、毛利润率和盈利能力通常也会以高于净销售额的速度增长。
光缆公司（OCC）
良好的经营杠杆得以受益
经营杠杆—制造业-半导体
在2024财年，毛利润为1820万美元，同比2023财年下降了18.3%，而2024财年的净销售额较2023财年下降了7.6%。
在2024财政年度第四季度，OCC实现了33.5%的毛利润率 并且有不成比例的 毛利润增长了68.6%，因为 净销售额增长了12.4% 与2023财政年度同一时期相比
OCC 制造业-半导体-半导体运营杠杆按季度
毛利润率%和净销售额（财政年度2023-2024）
虽然毛利润和毛利润率也受到产品组合的影响，但随着OCC的净销售额和生产量的增加，固定的制造业-半导体-半导体成本将分摊到更高的销售量上，重要的是，制造效率也往往会提高——尤其是在光纤电缆生产方面。
OCC与我们的同行之间的一个关键差异是我们在生产量较低的时期选择不裁减生产人员。采取这一严格的做法时，我们考虑了对未来增长机会的预期，以及培训新员工达到我们和客户期望的水平所需的时间和资源。忠于我们的原则和员工，在困难时期，OCC理想地准备好全力以赴，抓住未来的机会。这在2024年第四季度得到了印证，当时我们 从这一严谨而前瞻性的方法中受益— 我们预计在2025财政年度及以后仍将继续受益。
经营杠杆—销售、一般和行政费用
销售、一般和行政费用在2024财年增加了1.3%，达2150万美元，2023财年为2120万美元。销售、一般和行政费用占净销售额的比例在2024财年为32.2%，而在2023财年为29.4%。
OCC SG&A季度运营杠杆
SG&A费用占净销售额的百分比（财年2023-2024）
光缆公司（OCC）
OCC承担了巨额的销售和管理费用，以维护和建立我们的竞争优势、能力和在目标市场中的存在。我们还承担了包括在销售和管理费用中的大量上市公司成本。这些费用中的许多是相对固定的费用，而不是随着净销售额的变化而变化——随着净销售额的增加，OCC从我们的销售和管理费用的运营杠杆中受益。
我们积极继续专注于尽可能高效地运营和控制费用，包括销售、一般和管理费用，同时认识到销售、一般和管理费用运营杠杆对我们财报的影响。
期待2025财年
展望2025财年，我们看到了我们目标市场和客户基础中增长力量的迹象。 我们也看到扩大产品供应的潜在机会。
展望未来，我们将专注于推动增长、提高运营效率，并识别和把握更多机会，以确保我们为客户和用户数提供卓越的执行。
在我们推动净销售的同时，我们有信心我们的显著操作杠杆—在制造业-半导体-半导体和销售总务费用方面—使我们能够为股东创造更高的盈利能力和长期价值。
OCC的核心优势和能力使我们能够提供一流的产品和应用解决方案，并在与更大竞争对手的竞争中取得成功。OCC致力于利用我们的核心优势和能力，具体包括：
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可羡慕的市场地位、品牌认可度和行业关系 包括与忠实客户、决策者以及广泛区间的最终用户的关系。 |
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丰富的行业板块经验和专业知识与OCC的工程、销售及业务发展团队紧密合作，这些团队因其产品和应用经验及专业知识而备受尊重，使得OCC能够打造其创新的高性能产品及相关的知识产权组合。 |
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我们设施中可用的生产能力显著由知识丰富且经验丰富的制造、质量和工程团队支持。 |
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各种光纤和铜缆连接产品及解决方案使OCC能够提供满足客户和最终用户独特需求的产品和解决方案，并且非常适合我们在各个目标市场中的应用。 |
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广泛而多样的地理足迹每年OCC销售到大约50个国家。 |
我为OCC团队在过去一年取得的成就感到自豪，并感谢他们的辛勤工作——尤其是在影响我们行业板块的宏观经济疲软情况下。
我们仍然致力于识别增长机会，并执行我们的战略和措施，以增长并为我们的股东创造长期价值。
感谢您一直以来的支持。
致以诚挚的问候，
尼尔·D·威尔金， Jr.
董事会主席、总裁兼首席执行官
2024年12月23日
光缆公司 (OCC)
前瞻性信息
本报告可能包含联邦证券法所指的某些前瞻性信息。除其他信息外，前瞻性信息可能包括（i）有关我们未来展望的陈述，（ii）信念、预期或预期的陈述，（iii）未来的计划、战略或预期事件，以及（iv）与非历史事实有关的类似信息和陈述。此类前瞻性信息受已知和未知变量、不确定性、突发事件和风险的影响，这些变量可能导致实际事件或结果与我们的预期存在重大差异。此类已知和未知变量、不确定性、突发事件和风险（统称为 “因素”）也可能对光缆公司及其子公司（统称为 “公司” 或 “OCC”）产生不利影响®”）、公司的未来经营业绩和未来的财务状况，和/或公司的未来股权价值。可能导致或促成与我们的预期差异或可能对公司产生不利影响的因素包括但不限于：对包括分销商在内的主要客户的销售水平；某些项目和主要客户购买的时机；影响网络服务提供商的经济状况；公司和/或政府在信息技术方面的支出；竞争对手的行动；原材料（包括光纤、铜、金和其他贵金属、塑料和/或可用性）的波动其他材料）；运输成本的波动；我们在某些生产设施中依赖定制设备来制造某些产品；我们保护专有制造技术的能力；影响我们参与的一个或多个市场价格或定价的市场条件，包括竞争加剧的影响；我们在某些产品组件上依赖有限数量的供应商；一个或多个关键供应商或客户的损失或冲突；任何不利的结果诉讼、索赔和其他诉讼或争议，以及针对我们或与我们的潜在诉讼、索赔和其他诉讼或争议；任何监管审查和审计以及潜在的监管审查和审计的不利结果；州税法和/或州税务机关采取的影响我们的立场的不利变化；技术变革和新竞争产品的推出；最终用户对我们产品供应的竞争技术的偏好变化；影响电信行业的经济状况、数据通信行业、某些技术行业和/或某些行业市场部门（例如，商业/企业、军事、工业、广播、采矿、石化、可再生能源和无线运营商行业市场部门）；影响美国制造商的经济状况；经济状况或相对货币强度的变化（例如，美元兑某些外币走强）以及美国和其他国家征收的影响某些地理市场的进出口关税，行业市场部门和/或整个经济；我们提供自有品牌连接产品的某些竞争对手对我们产品的需求变化；在任何给定时期内销售的产品组合的变化（除其他外，由于季节性或我们所参与的特定市场的强度或弱点的变化），这可能会影响毛利和毛利率或净销售额；订单和产量的变化影响固定成本覆盖范围和生产效率，这可能会影响毛利，以及总的利润率；铜含量高的混合电缆（光纤和铜）的订单和产量的变化，其毛利率往往较低；销售额的显著差异是由于：（i）目标市场和行业内、特定类型的产品和/或某些客户（无论与总体市场有关还是与特定客户的业务有关）的高波动性，（ii）现有产品库存水平的市场普遍变化某些市场，影响产品的销售订单，（iii）大宗销售订单的时机，以及（iv）某些市场，尤其是无线运营商市场的少数客户的销售高度集中；恐怖袭击或战争行为、任何当前或未来潜在的军事冲突和内乱行为；这些活动导致的冷战和经济制裁；美国政府支出水平的变化，包括但不限于军费开支；能力招聘和留住关键人员（包括生产）人员）；不良的劳资关系；不断增加的劳动力成本；延迟、延长交货期和/或所需原材料、设备和/或供应的变化；运输和其他物流挑战；通货膨胀对成本的影响，包括原材料和劳动力，以及将任何增加的成本转嫁给客户的能力；利率上升的影响增加资本成本；网络安全风险和事件的影响以及此类风险和事件的相关实际或潜在成本和后果，包括成本和监管限制此类风险；数据隐私法的影响，包括任何适用的国际隐私法，以及相关的实际或潜在成本和后果；会计政策变更和相关合规成本的影响，包括证券交易委员会（“SEC”）、上市公司会计监督委员会（“PCAOB”）、财务会计准则委员会（“FASB”）和/或国际会计准则委员会（“IASB”）的变更；我们继续成功遵守的能力和合规成本2002 年《萨班斯-奥克斯利法案》第 404 条的规定或该法案中适用于我们的任何修订条款；对我们的业务产生不利影响和/或导致我们直接和间接成本增加的联邦法律法规的变化和潜在变化的影响，包括我们遵守此类法律法规的直接和间接成本；不断上涨的医疗成本；新的或变更的政府法律法规对医疗费用的影响；州或联邦税法变化的影响；以及法规增加了我们的成本和/或影响拥有我们股票的投资者的净回报；我们遵守贷款人契约（如果有）状况的任何变化；我们继续维持和/或保障未来的债务融资和/或股权融资以为我们的持续运营提供充足资金的能力；竞争对手之间和/或客户之间未来整合对我们在客户中的地位和/或我们的市场地位产生不利影响的影响；客户对我们扩大产品供应的反应而采取的行动，包括，但是不是仅限于，通过提供与客户竞争的产品，和/或与我们的客户建立联盟、进行投资或与客户竞争和/或发生冲突的收购方；自愿或非自愿将公司的普通股从任何交易所退市；由于公司普通股持有人人数较少，公司取消了美国证券交易委员会的报告要求；客户、供应商或其他服务提供商的不利反应转到有关以下方面的未经请求的提案公司的所有权或管理权；考虑、回应和可能捍卫我们在未经请求的有关公司所有权或管理的提案中的立场的额外成本；天气、自然灾害和/或流行病、流行病对我们经营、销售产品和/或收购原材料的地区的直接和间接影响，包括对供应链的影响、影响我们生产量和成本的劳动力限制；任何当前或未来的政府规定、旅行限制、有关任何流行病、流行病或地方性疾病的停业或其他法规；公司已发行和流通的普通股数量的增加；总体经济下滑和/或我们经营的一个或多个市场的总体经济衰退；在我们经营和销售产品的世界地区，市场需求、汇率、生产率、市场动态、市场信心、宏观经济和/或其他经济状况的变化；以及我们在管理所涉风险方面的成功前述内容。
Optical Cable Corporation (OCC)
We caution readers that the foregoing list of important factors is not exclusive. Furthermore, we incorporate by reference those factors included in current reports on Form 8‑K and/or in our other filings.
Dollar amounts presented in the following discussion have been rounded to the nearest hundred thousand, except in the case of amounts less than one million and except in the case of the table set forth in the “Results of Operations” section, the amounts in which both cases have been rounded to the nearest thousand.
Overview of Optical Cable Corporation
Optical Cable Corporation (or 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 components. Our product offerings include designs for uses ranging from enterprise network, data center, residential, campus and Passive Optical LAN (“POL”) installations to customized products for specialty applications and harsh environments, including military, industrial, mining, petrochemical, renewable energy and broadcast applications, as well as the wireless carrier market. Our products include fiber optic and copper cabling, hybrid cabling (which includes fiber optic and copper elements in a single cable), fiber optic and copper connectors, specialty fiber optic, copper and hybrid connectors, fiber optic and copper patch cords, pre-terminated fiber optic and copper cable assemblies, racks, cabinets, datacom enclosures, patch panels, face plates, multimedia boxes, fiber optic reels and accessories 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.
Optical Cable Corporation (OCC)
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 is also internationally recognized for pioneering the development of innovative copper connectivity technology and designs used to meet industry copper connectivity data communications standards.
光缆公司成立于1983年，总部位于弗吉尼亚州罗阿诺克，并在弗吉尼亚州罗阿诺克、北卡罗来纳州阿什维尔附近和德克萨斯州达拉斯附近设有办事处、制造和仓储设施。我们主要在罗阿诺克工厂制造光纤电缆，该工厂获得了ISO 9001:2015认证；我们主要在阿什维尔工厂制造企业连接产品，该工厂也获得了ISO 9001:2015认证；我们主要在达拉斯工厂制造恶劣环境和特殊连接产品，该工厂获得了ISO 9001:2015认证并且符合MIL-STD-790G标准。
OCC设计、开发和制造光纤和混合电缆，广泛应用于企业、恶劣环境、无线运营商和其他特殊市场及应用。我们将这些产品称为我们的光纤电缆产品。OCC设计、开发和制造针对企业市场的光纤和铜连接产品，包括广泛的企业和住宅应用。我们将这些产品称为我们的企业连接产品。OCC设计、开发和制造广泛的特殊光纤连接器和连接解决方案，主要用于军工-半导体、恶劣环境和其他特殊应用。我们将这些产品称为我们的恶劣环境和特殊连接产品。
我们通过全资子公司Applied Optical Systems, Inc.（"AOS"）以Optical Cable Corporation和OCC的名义，推广和出售在我们达拉斯工厂生产的产品。® 这是我们综合OCC销售团队的努力。
OCC团队旨在通过将我们所有的光纤和铜数据通信产品组合成最适合客户个人数据通信需求和系统最终用户应用要求的系统，提供一流的通信解决方案。
OCC全资子公司Centric Solutions LLC（“Centric Solutions”）为IDC概念市场提供布线和连接解决方案。Centric Solutions的业务位于位于德克萨斯州达拉斯附近的OCC设施内。
光纤电缆公司™, OCC®，Procyon®，Superior Modular Products™, SMP 数据通信™, 应用光学系统™, Centric Solutions™ 和相关标志均为光纤电缆公司的商标。
2024财年及2024财年第四季度公司业绩摘要
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2024财年的合并净销售额下降了7.6%，降至6670万美元，而2023财年的合并净销售额为7220万美元。 |
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在2024财年的第四季度，净销售额增加了12.4%，达1950万美元，而2023财年同一时期为1730万美元。与2024财年第三季度的1620万美元相比，第四季度的净销售额环比增长了20.1%。 |
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2024财年的毛利润为1820万，与2023财年的2230万相比，减少了18.3%. |
光缆公司 (OCC)
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在2024财年的第四季度，毛利润增长了68.6%，达650万美金，相比2023财年同期的390万美金。毛利润在第四季度环比增长了66.6%，相比于2024财年第三季度的390万美金。 |
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毛利润率（毛利润占净销售额的百分比）在2024财年下降至27.3%，相比之下2023财年为30.9%。 |
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在2024财年的第四季度，毛利润率提高到33.5%，相比于2023财年同期的22.4%。毛利润率在2024财年的第四季度也较2024财年的第三季度的24.2%有所上升。 |
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2024 财政年度的销售和行政费用增长了 1.3%，达到 2150万美元，而 2023 财政年度为 2120万美元。2024 财政年度的销售和行政费用占净销售额的比重为 32.2%，而 2023 财政年度为 29.4%。 |
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在2024财年第四季度，SG&A费用增加了13.7%，达到了590万美元，而2023财年同一时期为510万美元。2024年第四季度SG&A费用占净销售额的百分比为30.0%，而2023财年同期为29.7%。 |
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2024财年的净亏损为420万美元，合每股亏损0.54美元，而2023财年的净收益为210万美元，合每股亏损0.26美元。 |
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在2024财年的第四季度，净利润为373,000美元，或每股0.05美元，而2023财年同一时期的净亏损为130万美元，或每股0.17美元。 |
营业结果
我们向国际和国内的客户销售产品，包括主要分销商、各区域型和小型分销商、原始设备制造商和增值经销商。我们所有对美国以外的客户的销售均以美元计价。我们可能会经历对美国以外客户和美国客户的净销售百分比的波动，这取决于大订单的时机，以及对世界各区域客户销售的增减影响。美国以外的销售也可能会受到美元与其他货币的汇率波动的影响。
净销售额 包括公司及其子公司在合并基础上的产品总销售额减去折扣、退款和退货。营业收入在产品转让给客户（包括分销商）时确认，金额反映了预期收到的对产品的对价。我们的客户通常没有退货权，除非产品存在缺陷或损坏，并在销售时有效的产品保修范围内。
营业成本 包括材料成本、产品保修成本和补偿成本，以及与我们制造业-半导体相关的管理费用和其他费用。营业成本中最大比例的成本归因于材料费用。
我们的毛利润率百分比在季度基础上严重依赖于产品组合，并可能因产品组合的变化而有所不同。在未受到产品组合影响的情况下，当我们实现更高的净销售水平时，毛利润率往往更高，因为某些固定的制造成本会分摊到更高的销售额上，其他制造效率也更容易实现。含有光纤和铜的混合电缆，铜含量较高时，往往毛利润率较低。
销售、一般和管理费用 （“销售和一般管理费用”）包括销售和市场人员的薪酬成本、运输费用、展会费用、客户支持费用、差旅费用、广告费、坏账费用、行政和管理人员的薪酬成本、法律、会计、咨询和专业费用、解决诉讼或索赔及其他对我们的行动所产生的费用，以及与我们运营相关的其他费用。
光缆公司 (OCC)
特许权费用，净额 包括皇室费用及相关费用，扣除与我们的专利产品相关的许可证所赚取的特许权收入（如果有的话）。
无形资产摊销 包括与已获批准的内部开发专利相关的费用摊销，包括法律费用。无形资产的摊销是根据无形资产的估计使用寿命采用直线法计算的。
其他收入（费用），净额 包括利息支出和其他与我们运营不直接相关的杂项收入和支出项目。
下表列出了我们合并利润表中指定财年的选定项目的波动情况：
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财政年度结束 |
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10月31日， |
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百分比 |
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2024 |
2023 |
变更 |
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净销售额 |
$ | 66,700,000 | $ | 72,200,000 | (7.6 | )% | ||||||
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毛利润 |
18,200,000 | 22,300,000 | (18.3 | ) | ||||||||
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SG&A费用 |
21,500,000 | 21,200,000 | 1.3 | |||||||||
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来自业务的收入（损失） |
(3,400,000 | ) | 993,000 | (440.0 | ) | |||||||
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净利润（亏损） |
(4,200,000 | ) | 2,100,000 | (303.7 | ) | |||||||
下表总结了所示期间未经审计的季度运营结果：
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截至三个月 |
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10月31日， |
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百分比 |
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2024 |
2023 |
变更 |
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|
净销售额 |
$ | 19,500,000 | $ | 17,300,000 | 12.4 | % | ||||||
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毛利润 |
6,500,000 | 3,900,000 | 68.6 | |||||||||
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SG&A费用 |
5,900,000 | 5,100,000 | 13.7 | |||||||||
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来自业务的收入（损失） |
662,000 | (1,300,000 | ) | 151.3 | ||||||||
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净利润（亏损） |
373,000 | (1,300,000 | ) | 129.5 | ||||||||
净销售额
2024财年的合并净销售额为6670万，较2023财年的7220万下降了7.6%。与去年相比，2024财年我们在企业市场和特种市场（包括无线运营商市场）的净销售额都有所下降。我们认为这与我们行业整体的疲软以及某些目标市场的疲弱一致，这种情况我们在2023财年下半年就开始感受到。
在2024财政年度的第四季度，净销售额增长了12.4%，达1950万美元，相较于2023财政年度同一时期的1730万美元。2024财政年度第四季度的净销售额相比2024财政年度第三季度的1620万美元，环比增长20.1%。
2024财年的净销售额受到各种宏观经济压力、风险和我们行业的不确定性影响——我们认为这与我们行业普遍面临的疲软现象是一致的。虽然我们某些市场仍然显示出疲软迹象，但我们相信在某些市场中有积极的因子。我们在2024财年第二、第三和第四季度的季度净销售额呈顺序增长，其中第四季度的增长最为显著。我们相信改善净销售额的机会将持续到2025财年。
光缆公司 (OCC)
2023财年受到我们在2022财年末存在的超过1200万美元的高于典型水平的销售订单积压/前置负载的积极影响，而到2023财年末我们的销售订单积压/前置负载已恢复到大约540万美元的正常水平。在2024财年末，我们的销售订单积压/前置负载为570万美元。
2024财年和2023财年，来自美国以外客户的净销售额分别占总净销售额的约21%和18%。与去年相比，2024财年来自美国以外客户的净销售额增加了9.2%，而来自美国客户的净销售额减少了11.4%。
我们通常预计，每个财年的上半年的净销售额将相对较低，每个财年的下半年相对较高，不包括其他波动性，我们通常预计总净销售额的48％将在一个财年的上半年发生，总净销售额的52％将在该财年的下半年发生。我们认为，这种历史季节性模式通常表明了整体趋势，也反映了客户的购买模式和预算周期。但是，这种模式在任何季度或一年中都可能因其他因素导致的净销售额的季度和年度波动而改变，例如：无线运营商市场订单量、大型项目的时机、来自大客户的订单时机、影响我们行业或影响客户和最终用户行业的其他经济因素以及宏观经济状况。尽管我们认为季节性可能是影响我们季度净销售业绩的一个因素，尤其是在不包括无线运营商市场销售波动性的情况下，但我们无法可靠地根据季节性预测净销售额，因为此类其他因素导致的净销售波动也可能而且经常会严重影响我们一年的净销售模式。在过去的两个财年中，总净销售额的约46％和53％分别发生在2024和2023财年的上半年，净销售总额的约54％和47％分别发生在2024和2023财年的下半年。
毛利润
2024财年的毛利润为1820万美金，与2023财年的毛利润2230万美金相比，减少了18.3%。毛利润率，即毛利润占净销售额的百分比，在2024财年为27.3%，而在2023财年为30.9%。
在2024财年第四季度，毛利润增长了68.6%，达到650万，比2023财年同期的390万有所增加，这得益于产量增加带来的生产效率提升及OCC运营杠杆的积极影响。2024财年第四季度毛利率提高至33.5%，而2023财年同期为22.4%。
在2024财年的第四季度，毛利润环比增长了66.6%，与2024财年第三季度的390万美元相比。2024财年第四季度的毛利润率环比上升至33.5%，而在2024财年第三季度为24.2%。
2024财年的毛利润率受到了负面影响，特别是在前三个财政季度，因销量下降，固定费用被分摊到较低的销售额上，同时工厂的效率也下降，销售减少和积压降低影响了我们制造设施的产品流动——运营杠杆的影响。此外，我们的毛利润率百分比在季度基础上重度依赖于产品组合，并可能因产品组合的变化而有所变化。
尽管与去年相比，2024财年的生产成交量有所下降，但我们并没有像行业内其他公司那样减少生产人员。我们在2024财年第四季度的计划性控制为我们带来了好处，因为净销售额增加。我们的这种做法与我们对2025财年预期机会的看法一致，同时也考虑到在某些生产环节培训新生产人员所需的时间。
光缆公司 (OCC)
销售、一般和管理费用
在2024财年，SG&A费用增长1.3%，达到2150万美金，而2023财年为2120万美金。2024财年SG&A费用占净销售额的百分比为32.2%，而2023财年为29.4%。
2024财政年度与去年相比，销售和一般管理费用的增加主要是由于员工和合同销售人员相关费用增加，总计为280,000美元。员工和合同销售人员相关费用中包括薪酬成本和销售激励。由于新员工的加入（扣除离职员工）以及某些薪资上涨，薪酬成本增加了628,000美元。这一增幅部分被销售激励减少348,000美元所抵消，原因是销售额下降。
在2024财年第四季度，销售、一般和行政费用（SG&A）同比增长13.7%，达到590万美元，而2023财年同期为510万美元，主要是由于员工和合同销售人员相关成本的增加。2024年第四季度SG&A费用占净销售额的比例为30.0%，而2023财年同期为29.7%。与2024财年第三季度相比，第四季度的SG&A费用环比增加了11.7%，而第三季度为520万美元。
版税收入（支出），净额
在2024和2023财年，我们确认了净皇家费用（扣除皇家收入），总计26,000美元。皇家收入和/或费用可能会因授权产品的销售和非授权产品销售的估计金额的变化而波动（如有）。
无形资产的摊销
在2024和2023财年，我们确认了与无形资产相关的53,000美元摊销费用。
营业收入（亏损）
我们在2024财年的运营损失为340万美元，而2023财年的运营收入为993,000美元。这一变化主要是由于毛利润减少了410万美元。
其他收入（费用），净额
我们在2024财年确认了其他费用净额为813,000美元，而2023财年的其他收入净额为120万美元。2024财年的其他费用净额包括利息费用和其他杂项项目，部分被保险赔款的收益304,000美元抵消。2023财年的其他收入净额主要由因财产和设备损坏而收到的保险赔偿金220万美元组成，部分被利息费用和其他杂项项目抵消。2024财年与去年相比，其他费用净额的变化主要是由于2024财年因财产和设备损坏而收到的保险赔款减少了190万美元。
在2024年和2023财年，我们收到了与我们的办公楼及其在阿什维尔设施中的物品有关的保险收益，这些财产在2022年12月底因喷水灭火系统的管道爆裂而遭受水灾。在此事件中，我们确认了2024和2023财年因财产和设备损坏而收到的保险收益分别为30.4万美元和220万美元。
所得税前的收入（损失）
我们报告了2024财年税前亏损420万美元，而2023财年税前收入为220万美元。 这一变化主要是由于毛利润减少410万美元，以及保险赔付净额减少190万美元。
光缆公司 (OCC)
所得税费用（收益）
2024财年的所得税费用总计为21,000美元，相比2023财年的146,000美元。2024财年的有效税率低于负1%，而2023财年的税率为6.6%。
我们有效税率的波动主要源于美国公认会计原则（"U.S. GAAP"）与税务会计在各种税收减免和优惠方面的永久性差异，但在税前收入或损失处于某一水平时，这些永久性差异对预计有效税率产生不成比例的影响，可能会使其与法定税率显著不同。
我们之前对所有的净递延税资产建立了估值准备。由于对我们的净递延税资产建立了全额估值准备，如果我们在后续期间产生足够的应税收入以实现部分或全部净递延税资产，我们的有效所得税税率可能会因为对估值准备的必要减少而异常低。此外，如果我们在后续期间产生税前亏损，由于由于这样的净运营亏损导致的净递延税资产的增加将会被对应增加的净递延税资产的估值准备抵消，我们的有效所得税税率也可能异常低。
如果我们在后续期间产生足够的税前收入，以至于美国通用会计准则允许我们得出结论，认为取消对我们的净递延税资产的任何估值准备是适当的，那么在做出此项决定的期间内，我们将在合并经营报表的所得税费用中确认该估值准备的取消所带来的非现金利益，这将增加净利润，同时也将在我们的合并资产负债表上增加净递延税资产。如果我们在后续期间没有产生足够的税前收入，无法得出结论认为对我们的净递延税资产取消或减少任何估值准备是适当的，那么将无法实现这样的非现金利益。我们不能保证未来能实现我们所有或部分净递延税资产的利益。
截至2024年10月31日，我们总的递延税资产的估值备抵总额为490万。
另请参见本文件中的“关键会计政策和估算”以及合并基本报表的第12节。
净利润（损失）
2024财年的净亏损为420万美元，或每股0.54美元，而2023财年的净利润为210万美元，或每股0.26美元。这一变化主要是由于税前收入减少了640万美元，其中包括保险赔偿收益减少了190万美元。
财务状况
截至2024年10月31日，整体资产减少了350万元，或8.0%，降至4040万元，而2023年10月31日为4390万元。此次减少主要是由于库存减少了500万元和现金减少了120万元，部分被应收账款净额增加了220万元和其他资产净额增加了120万元所抵消，这主要是由于与德克萨斯州普莱诺的制造和仓储设施的经营租赁协议延长相关的使用权资产增加所致。现金的减少主要是由于我们的预付款和循环贷款的还款时机。库存的减少主要是由于某些原材料采购时机的调整，以及由于销售下降和存货销售时机的变化导致的补货率降低。应收账款净额的增加是由于2024财年第四季度的净销售额相比2023财年第四季度的增加所致。
截至2024年10月31日，总负债增加了359,000美元，或1.9%，达到1950万美元，高于2023年10月31日的1920万美元。总负债的增加主要是由于其他非流动负债增加了140万美元，这与德克萨斯州普莱诺市制造业和仓库设施的经营租赁协议延长相关的经营租赁负债增加有关，部分被应付账款和应计费用（包括应计薪酬和工资税）减少947,000美元所抵消，主要是由于某些供应商和工资相关支付的时间安排。
光缆公司 (OCC)
截至2024年10月31日的股东总权益在2024财年减少了390万美元，或15.7%。减少的原因是净亏损420万美元，部分被330,000美元的股票报酬所抵消。
流动性和资本资源
我们的主要资本需求是通过我们的循环信贷来满足流动资金的要求。为了此目的，我们的主要资金来源是现有现金、运营提供的任何现金以及通过我们的循环信贷借款（见下文“信用设施”）。
截至2024年和2023年10月31日，我们的循环信用贷款余额为830万美元。截至2024年和2023年10月31日，我们其他未偿还的银行贷款余额（不包括我们的循环信用贷款）分别为260万美元和270万美元。
截至2024年和2023年10月31日，我们的现金总额分别为244,000美元和150万。2024年10月31日结束的财年现金减少主要是由于经营活动使用的净现金为857,000美元、资本支出净额为370,000美元，以及融资活动使用的现金为300,000美元，这些减少部分被保险赔偿净额304,000美元部分抵消。
截至2024年10月31日，我们的营运资金为1550万美元，相较于2023年10月31日的1890万美元。2024年10月31日的流动资产与流动负债的比例为2.0比1，而2023年10月31日为2.2比1。营运资金和流动比率的减少主要源于现金减少120万美元和存货减少500万美元，部分被应收账款净增加220万美元及应付账款和应计费用（包括应计薪酬和工资税）减少94.7万美元所抵消。
Net Cash
Net cash used in operating activities was $857,000 in fiscal year 2024 compared to $396,000 in fiscal year 2023. Net cash used in operating activities during fiscal year 2024 primarily resulted from the cash flow impact of increases in trade accounts receivable, net totaling $2.2 million and decreases in the cash impact of accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $1.1 million, partially offset by decreases in inventories totaling $5.0 million and certain adjustments to reconcile a net loss of $4.2 million to net cash used in operating activities including depreciation and amortization of $866,000, share-based compensation expense of $443,000, and the gain on insurance proceeds, net totaling $304,000.
Net cash used in operating activities during fiscal year 2023 primarily resulted from an increase in inventories totaling $4.3 million and adjustments to reconcile net income of $2.1 million to net cash used in operating activities for the gain on insurance proceeds totaling $2.2 million, partially offset by the cash flow impact of decreases in trade accounts receivable, net totaling $2.2 million and certain other adjustments to reconcile net income of $2.1 million to net cash used in operating activities including depreciation and amortization of $946,000 and share-based compensation expense of $611,000.
Net cash used in investing activities totaled $67,000 in fiscal year 2024 compared to net cash provided by investing activities totaling $1.4 million in fiscal year 2023.
Net cash used in investing activities during fiscal year 2024 resulted primarily from purchases of property and equipment and deposits for the purchase of property and equipment totaling $370,000, partially offset by net insurance proceeds of $304,000. Net cash provided by investing activities during fiscal year 2023 resulted primarily from insurance proceeds received for damage to property and equipment, net totaling $1.9 million, partially offset by purchases of property and equipment and deposits for the purchase of property and equipment totaling $521,000.
Optical Cable Corporation (OCC)
Net cash used in financing activities totaled $300,000 in fiscal year 2024 compared to net cash provided by financing activities totaling $220,000 in fiscal year 2023.
Net cash used in financing activities in fiscal year 2024 resulted primarily from payroll taxes withheld and remitted on share-based payments totaling $113,000, debt financing costs totaling $100,000 and principal payments on long-term debt totaling $47,000. Net cash provided by financing activities in fiscal year 2023 resulted primarily from net proceeds on our revolving line of credit totaling $2.3 million, partially offset by principal payments on debt totaling $1.9 million.
Credit Facilities
We have credit facilities consisting of a real estate term loan, as amended and restated (the “Virginia Real Estate Loan”) and a Revolving Credit Master Promissory Note and related Loan and Security Agreement (collectively, the “Revolver”).
The Virginia Real Estate Loan is with Northeast Bank and is payable in monthly installments of principal and interest. Principal is calculated using the unpaid balance of the loan and a two hundred forty (240) month amortization schedule. Interest is computed on the aggregate principal balance outstanding at a rate equal to the Prime Rate, adjusted monthly on the fifth day of each calendar month in accordance with changes to the Prime Rate, provided, however, that the interest rate is never less than 8.5% per annum on the basis of a 360-day year times the actual number of days elapsed. The Prime Rate was 8.0% per annum at October 31, 2024 and 8.5% at October 31, 2023. The maturity date of the Virginia Real Estate Loan is May 5, 2026.
On October 31, 2023, OCC and Northeast Bank entered into an Omnibus Amendment of Loan Documents (the “Amendment”) to modify certain loan documents currently in effect between the parties related to the Virginia Real Estate Loan and a supplemental real estate term loan (the “North Carolina Real Estate Loan”). The primary purpose of the Amendment was to: (i) pay off the North Carolina Real Estate Loan; (ii) pay down the balance on the Virginia Real Estate Loan; (iii) extend the maturity date of the Virginia Real Estate Loan through May 5, 2026, with principal payments being made on a 20-year amortization schedule; (iv) release the collateral of the North Carolina Real Estate Loan; and (v) effective October 5, 2023, modify the interest rate of the Virginia Real Estate Loan to a variable rate equal to the Prime Rate, provided that the interest rate shall never be less than 8.5% per annum.
The Virginia Real Estate Loan is secured by a first lien deed of trust on the land and buildings at the Company’s headquarters and manufacturing facilities located in Roanoke, Virginia.
We had an outstanding balance on our Virginia Real Estate Loan of $2.6 million and $2.7 million as of October 31, 2024 and 2023, respectively.
On June 27, 2024, we entered into a Modification Agreement with North Mill Capital LLC (now doing business as SLR Business Credit, “SLR”) to modify the existing Loan and Security Agreement (“Loan Agreement”) dated July 24, 2020. In addition to certain other modifications to the Loan Agreement as set forth in the Modification Agreement, the Modification Agreement provides a two-year extension of the initial term of the Loan Agreement to July 24, 2027 and increases eligible inventory maximum from $5,000,000 to $7,000,000.
The Revolver with SLR provides us with one or more advances in an amount up to: (a) 85% of the aggregate outstanding amount of eligible accounts (the “eligible accounts loan value”); plus (b) the lowest of (i) an amount up to 35% of the aggregate value of eligible inventory, (ii) $7.0 million, and (iii) an amount not to exceed 100% of the then outstanding eligible accounts loan value; minus (c) $1.15 million.
The maximum aggregate principal amount subject to the Revolver is $18.0 million. Interest accrues on the daily balance at the per annum rate of 1.5% above the Prime Rate in effect from time to time, but not less than 4.75% (the “Applicable Rate”). As a result, the Revolver accrued interest at a 9.5% rate at October 31, 2024 and 10.0% at October 31, 2023. In the event of a default, interest may become 6.0% above the Applicable Rate. The loan may be extended in one year periods subject to the agreement of SLR.
Optical Cable Corporation (OCC)
Our Revolver requires a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective acceleration clause” (as defined by U.S. GAAP) in the Revolver, requires the balance on the Revolver to be classified as a current liability. The “subjective acceleration clause” allows SLR to declare an event of default if there is a material adverse change in our business or financial condition. Upon the occurrence of an event of default, SLR may, among other things, declare all obligations payable in full. We believe that no such material adverse change has occurred. In addition, at October 31, 2024 and through the date of this report, SLR has not informed us that any such event of default has occurred. On June 27, 2024, the Revolver was extended through July 24, 2027 and we believe that we will continue to be able to borrow on the Revolver to fund our operations over the remaining term.
The Revolver is secured by all of the following assets, properties, rights and interests in property of the Company whether now owned or existing, or hereafter acquired or arising, and wherever located; all accounts, equipment, commercial tort claims, general intangibles, chattel paper, inventory, negotiable collateral, investment property, financial assets, letter-of-credit rights, supporting obligations, deposit accounts, money or assets of the Company, which hereafter come into the possession, custody, or control of SLR; all proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing; any and all tangible or intangible property resulting from the sale, lease, license or other disposition of any of the foregoing, or any portion thereof or interest therein, and all proceeds thereof; and any other assets of the Company which may be subject to a lien in favor of SLR as security for the obligations under the Loan Agreement.
As of October 31, 2024, we had $8.3 million of outstanding borrowings on our Revolver and $3.2 million in available credit. As of October 31, 2023, we had $8.3 million of outstanding borrowings on our Revolver and $2.6 million in available credit.
Capital Expenditures
We did not have any material commitments for capital expenditures as of October 31, 2024. We expected capital expenditures in fiscal year 2024 would not exceed $1.0 million. We incurred capital expenditures totaling $370,000 for items including new manufacturing equipment, improvements to existing manufacturing equipment, new information technology equipment and software, upgrades to existing information technology equipment and software, and other capitalizable expenditures for property, plant and equipment for fiscal year 2024.
During our 2025 fiscal year budgeting process, we included an estimate for capital expenditures of $1.0 million for the year. Any capital expenditures will be funded out of our working capital, cash provided by operations or borrowings under our Revolver, as appropriate. This amount includes estimates for capital expenditures for similar types of items as those purchased in fiscal year 2024. Capital expenditures are reviewed and approved based on a variety of factors including, but not limited to, current cash flow considerations, the expected return on investment, project priorities, impact on current or future product offerings, availability of personnel necessary to implement and begin using acquired equipment, and economic conditions in general. Historically, we have spent less than our budgeted capital expenditures in most fiscal years.
Future Cash Flow Considerations
We believe that our cash flow from operations, our cash on hand and our existing Revolver will be adequate to fund our operations for at least the next twelve months.
From time to time, we are involved in various claims, legal actions and regulatory reviews arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our financial position, results of operations or liquidity.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations is based on the consolidated financial statements and accompanying notes which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Note 1 to the consolidated financial statements provides a summary of our significant accounting policies. The following are areas requiring significant judgments and estimates due to uncertainties as of the reporting date: revenue recognition, trade accounts receivable and the allowance for credit losses, inventories, deferred tax assets (and valuation allowances thereon), long-lived assets and commitments and contingencies.
Optical Cable Corporation (OCC)
Application of the critical accounting policies discussed in the section that follows requires management’s significant judgments, often as a result of the need to make estimates of matters that are inherently uncertain. If actual results were to differ materially from the estimates made, the reported results could be materially affected. We are not currently aware of any reasonably likely events or circumstances that would result in materially different results.
Revenue Recognition
Management views revenue recognition as a critical accounting estimate since we must estimate an allowance for sales returns for the reporting period. This allowance reduces net sales for the period and is based on our analysis and judgment of historical trends, identified returns and the potential for additional returns.
Trade Accounts Receivable and the Allowance for Credit Losses
Management views trade accounts receivable net of the related allowance for credit losses as a critical accounting estimate since the allowance for credit losses is based on judgments and estimates concerning the likelihood that individual customers will pay the amounts included as receivable from them. In determining the amount of allowance for credit losses to be recorded for individual customers, we assess the net amount expected to be collected from each customer. In addition, we establish an allowance for all other receivables for which no specific allowances are deemed necessary. This portion of the allowance for credit losses is based on a percentage of total trade accounts receivable with different percentages used based on different age categories of receivables. The percentages used are based on our expectations of net amounts expected to be collected.
Inventories
Management views the determination of the net realizable value of inventories as a critical accounting estimate since it is based on judgments and estimates regarding the salability of individual items in inventory and an estimate of the ultimate selling prices for those items. Individual inventory items are reviewed and adjustments are made based on the age of the inventory and our judgment as to the salability of that inventory in order for our inventories to be valued at the lower of cost and net realizable value.
Deferred Tax Assets
Management views the valuation of deferred tax assets as a critical accounting estimate since we must assess whether it is “more likely than not” that we will realize the benefits of our gross deferred tax assets and determine an appropriate valuation allowance if we conclude such an allowance is appropriate. This determination requires that we consider all available evidence, both positive and negative, in making this assessment. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.
Generally, a cumulative loss in recent years is a significant piece of negative evidence that is quite difficult to overcome under U.S. GAAP. Since the amount of our loss before income taxes in fiscal year 2015 exceeded our income before taxes during the previous two fiscal years, we believed that U.S. GAAP required us to treat as significant negative evidence that it was “more likely than not” that we would be unable to realize the future benefits of our deferred tax assets in the coming years—significant negative evidence that was quite difficult to overcome under U.S. GAAP and which we were not able to overcome with sufficient objectively verifiable positive evidence.
Optical Cable Corporation (OCC)
While we believe that ultimately we will utilize the benefit of our net deferred tax assets in the future (prior to any expiration of the usability of such deferred tax assets for income tax purposes), we concluded as a result of our cumulative loss position and insufficient objectively verifiable positive evidence, it was appropriate under U.S. GAAP for us to establish a full valuation allowance against net deferred tax assets as of October 31, 2015. The valuation allowance against our net deferred tax assets does not in any way impact our ability to use future tax deductions such as our net operating loss carryforwards; rather, the valuation allowance indicates, according to the provisions of Accounting Standards Codification 740, Income Taxes, it is “more likely than not” that our deferred tax assets will not be realized.
The valuation allowance that was established will be maintained until there is sufficient positive evidence to conclude that it is “more likely than not” that our net deferred tax assets will be realized. Our income tax expense for future periods will be reduced to the extent of corresponding decreases in our valuation allowance. There can be no assurance regarding any future realization of the benefit by us of all or part of our net deferred tax assets.
Long-lived Assets
Management views the determination of the carrying value of long-lived assets as a critical accounting estimate since we must determine an estimated economic useful life in order to properly amortize or depreciate our long-lived assets and because we must consider if the value of any of our long-lived assets have been impaired, requiring adjustment to the carrying value.
Economic useful life is the duration of time the asset is expected to be productively employed by us, which may be less than its physical life. Management’s assumptions on wear and tear, obsolescence, technological advances and other factors affect the determination of estimated economic useful life. The estimated economic useful life of an asset is monitored to determine if it continues to be appropriate in light of changes in business circumstances. For example, technological advances or excessive wear and tear may result in a shorter estimated useful life than originally anticipated. In such a case, we would depreciate the remaining net book value of an asset over the new estimated remaining life, thereby increasing depreciation expense per year on a prospective basis. We must also consider similar issues when determining whether or not an asset has been impaired to the extent that we must recognize a loss on such impairment.
The Company amortizes intangible assets over their respective finite lives up to their estimated residual values.
Commitments and Contingencies
Management views accounting for contingencies as a critical accounting estimate since loss contingencies arising from product warranties and defects, claims, assessments, litigation, fines and penalties and other sources require judgment as to any probable liabilities incurred. For example, accrued product warranty costs recorded by us are based primarily on historical experience of actual warranty claims and costs as well as current information with respect to warranty claims and costs. Actual results could differ from the expected results determined based on such estimates of loss contingencies.
Quantitative and Qualitative Disclosures About Market Risk
We do not engage in transactions in derivative financial instruments or derivative commodity instruments. As of October 31, 2024 our financial instruments were not exposed to significant market risk due to interest rate risk, foreign currency exchange risk, commodity price risk or equity price risk.
New Accounting Standards
In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires enhanced disclosures about significant segment expenses and enhanced disclosures in interim periods. The guidance in ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023 and interim reporting periods in fiscal years beginning after December 31, 2024, with early adoption permitted. We are currently evaluating the impact ASU 2023-07 will have on our financial statement disclosures.
Optical Cable Corporation (OCC)
In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The objective of ASU 2023-09 is to enhance disclosures related to income taxes, including specific thresholds for inclusion within the tabular disclosure of income tax rate reconciliation and specified information about income taxes paid. ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact ASU 2023-09 will have on our financial statement disclosures.
There are no other new accounting standards issued, but not yet adopted by us, which are expected to be applicable to our financial position, operating results or financial statement disclosures.
Disagreements with Accountants
We did not have any disagreements with our accountants on any accounting matter or financial disclosure made during our fiscal year ended October 31, 2024.
Optical Cable Corporation (OCC)
October 31, 2024 and 2023
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October 31, |
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Restated 2023 |
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Current assets: |
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Trade accounts receivable, net of allowance for credit losses of $ |
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Income taxes refundable - current |
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Inventories |
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Other assets, net |
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Total assets |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Current installments of long-term debt |
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Commitments and contingencies |
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Total liabilities and shareholders’ equity |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
Optical Cable Corporation (OCC)
Consolidated Statements of Operations
Years ended October 31, 2024 and 2023
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Years Ended October 31, |
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2024 |
2023 |
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Net sales |
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Gain on insurance proceeds, net |
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Other, net |
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Income tax expense |
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Net income (loss) |
$ | ( |
) | $ | ||||
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Net income (loss) per share - basic and diluted |
$ | ( |
) | $ | ||||
See accompanying notes to consolidated financial statements.
Optical Cable Corporation (OCC)
Consolidated Statements of Shareholders’ Equity
Years ended October 31, 2024 and 2023
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Total |
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Common Stock |
Retained |
Shareholders’ |
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Shares |
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Earnings |
Equity |
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Balances at October 31, 2022 |
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Share-based compensation, net |
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Balances at October 31, 2023 |
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Share-based compensation, net |
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Net loss |
— | ( |
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Balances at October 31, 2024 |
$ | $ | $ | |||||||||||||
See accompanying notes to consolidated financial statements.
Optical Cable Corporation (OCC)
Consolidated Statements of Cash Flows
Years Ended October 31, 2024 and 2023
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Years ended October 31, |
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2024 |
2023 |
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Cash flows from operating activities: |
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Net income (loss) |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Depreciation and amortization |
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Bad debt expense |
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Loss on disposal of property and equipment |
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(Increase) decrease in: |
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Trade accounts receivable |
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Other receivables |
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Income taxes refundable |
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Inventories |
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Prepaid expenses and other assets |
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Other assets |
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Income taxes payable |
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Other noncurrent liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Purchase of and deposits for the purchase of property and equipment |
( |
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Insurance proceeds received |
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Investment in intangible assets |
( |
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Proceeds from sale of property and equipment |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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Payroll taxes withheld and remitted on share-based payments |
( |
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Proceeds from note payable, revolver |
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Payments on note payable, revolver |
( |
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Principal payments on long-term debt |
( |
) | ( |
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Payments for financing costs |
( |
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Principal payments on financing lease |
( |
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Cash at end of year |
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Supplemental disclosure of cash flow information: |
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$ | $ | ||||||
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Income taxes paid, net of refunds |
$ | ( |
) | $ | ||||
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Noncash investing and financing activities: |
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Capital expenditures accrued in accounts payable at year end |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
Optical Cable Corporation (OCC)
Notes to Consolidated Financial Statements
Years ended October 31, 2024 and 2023
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(1) |
Description of Business and Summary of Significant Accounting Policies |
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(a) |
Description of Business |
Optical Cable Corporation and its subsidiaries (collectively, the “Company” or “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 components. The Company’s product offerings include designs for uses ranging from enterprise network, data center, residential, campus and Passive Optical LAN (“POL”) installations to customized products for specialty applications and harsh environments, including military, industrial, mining, petrochemical, renewable energy and broadcast applications, and 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.
The Company’s cabling and connectivity products are used for high bandwidth transmission of data, video and audio communications. The Company’s product offering includes products well-suited for use in various other short- to moderate-distance applications as well. The Company’s products are sold worldwide. Also see note 10.
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(b) |
Principles of Consolidation |
The accompanying consolidated financial statements include the accounts of Optical Cable Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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(c) |
Cash and Cash Equivalents |
All of the Company’s bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC). As of October 31, 2024, the Company did have bank deposits in excess of the insured limit. As of October 31, 2023, the Company had bank deposits in excess of the insured limit totaling $
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. As of October 31, 2024 and 2023, the Company had cash equivalents.
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(d) |
Trade Accounts Receivable and Allowance for Credit Losses |
Trade accounts receivable are recorded at the invoiced amount and do not typically bear interest. The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company reviews outstanding trade accounts receivable at the end of each quarter and records expected credit losses as deemed appropriate for (i) certain individual customers and (ii) for all other trade accounts receivable in total. In determining the amount of allowance for credit losses to be recorded for individual customers, the Company assesses the net amount expected to be collected from each customer. In addition, the Company establishes an allowance for all other receivables for which no specific allowances are deemed necessary. This portion of the allowance for credit losses is based on a percentage of total trade accounts receivable with different percentages used based on different age categories of receivables. The percentages used are based on the Company’s expectations of net amounts expected to be collected. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.
Optical Cable Corporation (OCC)
|
(e) |
Inventories |
Inventories are stated at the lower of cost and net realizable value. The determination of cost includes raw materials, direct labor and manufacturing overhead. The cost of optical fibers, included in raw materials, is determined using specific identification for optical fibers. The cost of other raw materials and production supplies is generally determined using the first-in, first-out basis. The cost of work in process and finished goods inventories is determined either as average cost or standard cost, depending upon the product type. A standard cost system is used to estimate the actual costs of inventory for certain product types. Actual costs and production cost levels may vary from the standards established and such variances, if material, are charged to cost of goods sold or capitalized to inventory. Also see note 3.
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(f) |
Property and Equipment |
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided for using both straight-line and declining balance methods over the estimated useful lives of the assets. Estimated useful lives are to years for buildings and to years for building improvements, machinery and equipment and furniture and fixtures. Also see note 4.
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(g) |
Patents and Trademarks |
The Company records legal fees associated with patent and trademark applications as intangible assets. Such intangible assets are not amortized until such time that the patent and/or trademark is granted. The Company estimates the useful life of patents and trademarks based on the period over which the intangible asset is expected to contribute directly or indirectly to future cash flows. If patents and/or trademarks are not granted, the capitalized legal fees are expensed during the period in which such notification is received. If the Company decides to abandon a patent or trademark application, the capitalized legal fees are expensed during the period in which the Company’s decision is made.
|
(h) |
Revenue Recognition |
The Company recognizes revenue at the time product is transferred to the customer (including distributors) at an amount that reflects the consideration expected to be received in exchange for the product. Customers generally do not have the right of return unless a product is defective or damaged and is within the parameters of the product warranty in effect for the sale. Also see note 11.
The Company recognizes royalty income (if any), net of related expenses, on an accrual basis and estimates royalty income earned based on historical experience.
|
(i) |
Shipping and Handling Costs |
Shipping and handling costs include the costs incurred to physically move finished goods from the Company’s warehouse to the customers’ designated location. All shipping and handling activities related to contracts with customers as a cost to fulfill its promise to transfer control of the related product are classified as sales revenue. Shipping and handling costs of approximately $
|
Optical Cable Corporation (OCC) |
|
(j) |
Research and Development |
Research and development costs are expensed as incurred. Research and development costs totaled approximately $
|
(k) |
Advertising |
Advertising costs are expensed as incurred. Advertising costs totaled approximately $
|
(l) |
Income Taxes |
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. Also see note 12.
|
(m) |
Long-Lived Assets |
Long-lived assets, such as property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. When applicable, assets to be disposed of are reported separately in the consolidated balance sheet at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.
|
(n) |
Stock Incentive Plans and Other Share-Based Compensation |
The Company recognizes the cost of employee services received in exchange for awards of equity instruments based upon the grant-date fair value of those awards. Also see note 9.
|
(o) |
Net Income (Loss) Per Share |
Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period. In the case of basic net income per share, the calculation includes common shares outstanding issued as share-based compensation and still subject to vesting requirements. In the case of basic net loss per share, the calculation excludes common shares outstanding issued as share-based compensation and still subject to vesting requirements, as these shares are considered dilutive.
|
Optical Cable Corporation (OCC) |
Diluted net income (loss) per share also is calculated by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period, and reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income (loss) of the Company. The diluted net income (loss) per share calculation: (i) includes common shares outstanding issued as share-based compensation and still subject to vesting requirements in the calculation of diluted net income per share and (ii) excludes common shares outstanding issued as share-based compensation and still subject to vesting requirements in calculation of diluted net loss per share. Also see note 14.
|
(p) |
Commitments and Contingencies |
Liabilities for loss contingencies arising from product warranties and defects, claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
|
(q) |
Use of Estimates |
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
|
(2) |
Allowance for Credit Losses for Trade Accounts Receivable |
A summary of changes in the allowance for credit losses for trade accounts receivable for the years ended October 31, 2024 and 2023 follows:
|
Years ended October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Balance at beginning of year |
$ | $ | ||||||
|
Bad debt expense |
||||||||
|
Balance at end of year |
$ | $ | ||||||
|
(3) |
Inventories |
Inventories as of October 31, 2024 and 2023 consist of the following:
|
October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Finished goods |
$ | $ | ||||||
|
Work in process |
||||||||
|
Raw materials |
||||||||
|
Production supplies |
||||||||
|
Total |
$ | $ | ||||||
Optical Cable Corporation (OCC)
|
(4) |
Property and Equipment, Net |
Property and equipment, net as of October 31, 2024 and 2023 consists of the following:
|
October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Land and land improvements |
$ | $ | ||||||
|
Buildings and improvements |
||||||||
|
Machinery and equipment |
||||||||
|
Furniture and fixtures |
||||||||
|
Construction in progress |
||||||||
|
Total property and equipment, at cost |
||||||||
|
Less accumulated amortization and depreciation |
( |
) | ( |
) | ||||
|
Property and equipment, net |
$ | $ | ||||||
|
(5) |
Intangible Assets |
Aggregate amortization expense for amortizing intangible assets was $
|
(6) |
Product Warranties |
The Company generally warrants its products against certain manufacturing and other defects in material and workmanship. These product warranties are provided for specific periods of time and are applicable assuming the product has not been subjected to misuse, improper installation, negligent handling or shipping damage. As of October 31, 2024 and 2023, the Company’s accrual for estimated product warranty claims totaled $
The following table summarizes the changes in the Company’s accrual for product warranties during the fiscal years ended October 31, 2024 and 2023:
|
Years ended October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Balance at beginning of year |
$ | $ | ||||||
|
Liabilities accrued for warranties issued during the year |
||||||||
|
Warranty claims paid during the period |
( |
) | ( |
) | ||||
|
Changes in liability for pre-existing warranties during the year |
( |
) | ( |
) | ||||
|
Balance at end of year |
$ | $ | ||||||
Optical Cable Corporation (OCC)
|
(7) |
Long-term Debt and Notes Payable |
The Company has credit facilities consisting of a real estate term loan, as amended and restated (the “Virginia Real Estate Loan”) and a Revolving Credit Master Promissory Note and related Loan and Security Agreement (collectively, the “Revolver”).
The Virginia Real Estate Loan is with Northeast Bank and is payable in monthly installments of principal and interest. Principal is calculated using the unpaid balance of the loan and a two hundred forty (
On October 31, 2023, OCC and Northeast Bank entered into an Omnibus Amendment of Loan Documents (the “Amendment”) to modify certain loan documents currently in effect between the parties related to the Virginia Real Estate Loan and a supplemental real estate term loan (the “North Carolina Real Estate Loan”). The primary purpose of the Amendment was to: (i) pay off the North Carolina Real Estate Loan; (ii) pay down the balance on the Virginia Real Estate Loan; (iii) extend the maturity date of the Virginia Real Estate Loan through May 5, 2026; (iv) release the collateral of the North Carolina Real Estate Loan; and (v) effective October 5, 2023, modify the interest rate of the Virginia Real Estate Loan to a variable rate equal to the Prime Rate, provided that the interest rate shall never be less than
The Loan is secured by a first lien deed of trust on the land and buildings at the Company’s headquarters and manufacturing facilities located in Roanoke, Virginia.
The Company had an outstanding balance on its Virginia Real Estate Loan of $
On June 27, 2024, OCC entered into a Modification Agreement with North Mill Capital LLC (now doing business as SLR Business Credit, “SLR”) to modify the existing Loan and Security Agreement (“Loan Agreement”) dated July 24, 2020. In addition to certain other modifications to the Loan Agreement as set forth in the Modification Agreement, the Modification Agreement provides a -year extension of the initial term of the Loan Agreement to July 24, 2027, and increases the eligible inventory maximum from $
The Revolver with SLR provides the Company with one or more advances in an amount up to: (a)
The maximum aggregate principal amount subject to the Revolver is $
The Company’s Revolver requires a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective acceleration clause” (as defined by U.S. generally accepted accounting principles) in the Revolver, requires the balance on the Revolver to be classified as a current liability. The “subjective acceleration clause” allows SLR to declare an event of default if there is a material adverse change in the Company’s business or financial condition. Upon the occurrence of an event of default, SLR may, among other things, declare all obligations payable in full. Management believes that no such material adverse change has occurred. In addition, at October 31, 2024 and through the date of this report, SLR has not informed the Company that any such event of default has occurred. On June 27, 2024, the Revolver was extended through July 24, 2027 and Management believes that the Company will continue to be able to borrow on the Revolver to fund its operations over the remaining term.
The Revolver is secured by all of the following assets, properties, rights and interests in property of the Company whether now owned or existing, or hereafter acquired or arising, and wherever located; all accounts, equipment, commercial tort claims, general intangibles, chattel paper, inventory, negotiable collateral, investment property, financial assets, letter-of-credit rights, supporting obligations, deposit accounts, money or assets of the Company, which hereafter come into the possession, custody, or control of SLR; all proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing; any and all tangible or intangible property resulting from the sale, lease, license or other disposition of any of the foregoing, or any portion thereof or interest therein, and all proceeds thereof; and any other assets of the Company which may be subject to a lien in favor of SLR as security for the obligations under the Loan Agreement.
Optical Cable Corporation (OCC)
As of October 31, 2024, the Company had $
The aggregate maturities of long-term debt for each of the three years subsequent to October 31, 2024 are $
|
(8) |
Leases |
The Company has an operating lease agreement for approximately
The Company has an operating lease for approximately
The Company also leases certain office equipment under operating leases with initial
OCC leases printers that are used in the Roanoke, Virginia manufacturing facility. The lease term expires on August 22, 2026. The right-of-use asset is being amortized on a straight line basis over seven years. When the lease term ends, title of the printers transfers to the Company and the remaining net book value of the right-of-use asset will be classified as property and equipment.
The Company’s lease contracts may include options to extend or terminate the lease. The Company exercises judgment to determine the term of those leases when such options are present and includes such options in the calculation of the lease term when it is reasonably certain that it will exercise those options.
The Company includes contract lease components in its determination of lease payments, while non-lease components of the contracts, such as taxes, insurance, and common area maintenance, are expensed as incurred. At commencement, right-of-use assets and lease liabilities are measured at the present value of future lease payments over the lease term. The Company uses its incremental borrowing rate based on information available at the time of lease commencement to measure the present value of future payments.
Operating lease expense is recognized on a straight-line basis over the lease term. Short term leases with an initial term of 12 months or less are expensed as incurred. The Company’s short term leases have month-to-month terms.
Operating lease right-of-use assets of $
The weighted average remaining lease term for the operating leases is
Optical Cable Corporation (OCC)
For the fiscal years ended October 31, 2024 and 2023, cash paid for operating lease liabilities totaled $
Finance lease right-of-use assets of $
The remaining lease term for the finance lease is
For the fiscal year ended October 31, 2024, cash paid for the finance lease liability totaled $
The Company’s future payments due under leases reconciled to the lease liabilities are as follows:
|
Fiscal Year |
Operating leases |
Finance lease |
||||||
|
2025 |
||||||||
|
2026 |
||||||||
|
2027 |
||||||||
|
2028 |
||||||||
|
2029 |
||||||||
|
Thereafter |
||||||||
|
Total undiscounted lease payments |
||||||||
|
Present value discount |
( |
) | ( |
) | ||||
|
Total lease liability |
$ | $ | ||||||
|
(9) |
Employee Benefits |
Health Insurance Coverage
The Company contracts for health insurance coverage for employees and their dependents through third-party administrators. During the years ended October 31, 2024 and 2023, total expense of $
401(k) Plan
The Company maintains a 401(k) retirement savings plan for the benefit of its eligible employees. Substantially all of the Company’s employees who meet certain service and age requirements are eligible to participate in the plan. The Company’s plan document provides that the Company’s matching contributions are discretionary. The Company expensed matching contributions to the plan of $
Optical Cable Corporation (OCC)
Stock Incentives for Key Employees and Non-Employee Directors
Optical Cable Corporation uses stock incentives to increase the personal financial interest that key employees and non-employee Directors have in the future success of the Company, thereby aligning their interests with those of other shareholders and strengthening their desire to remain with the Company.
As of October 31, 2024, there were approximately
Share-based compensation expense for employees, a consultant and non-employee members of the Company’s Board of Directors recognized in the consolidated statements of operations for the years ended October 31, 2024 and 2023 was $
The Company has granted, and anticipates granting, from time to time, restricted stock awards to employees, subject to approval by the Compensation Committee of the Board of Directors. The restricted stock awards granted under the 2017 Plan vest over time if certain operational performance-based criteria are met. Failure to meet the criteria required for vesting will result in a portion or all of the shares being forfeited.
During the fiscal year ended October 31, 2024, restricted stock awards for employees under the 2017 Plan totaling
During the fiscal year ended October 31, 2024 and 2023, stock awards to non-employee Directors under the 2017 Plan totaling
The Company recognizes expense each quarter on service-based shares based on the number of shares expected to vest multiplied by the closing price of the Company’s shares of common stock on the date of grant. The Company recognizes expense each quarter on operational performance-based shares of employees using an estimate of the shares expected to vest multiplied by the closing price of the Company’s shares of common stock on the date of grant.
Optical Cable Corporation (OCC)
A summary of the status of the Company’s nonvested shares granted to employees, a consultant and non-employee Directors under the 2017 Plan as of October 31, 2024, and changes during the year ended October 31, 2024, is as follows:
|
Nonvested shares |
Shares |
Weighted- average grant date fair value |
||||||
|
Balance at October 31, 2023 |
$ | |||||||
|
Granted |
||||||||
|
Vested |
( |
) | ||||||
|
Forfeited |
( |
) | ||||||
|
Balance at October 31, 2024 |
$ | |||||||
As of October 31, 2024, the estimated amount of compensation cost related to nonvested equity-based compensation awards that the Company will recognize over a
|
(10) |
Business and Credit Concentrations, Major Customers and Geographic Information |
The Company provides credit, in the normal course of business, to various commercial enterprises, governmental entities and not‑for‑profit organizations. Concentration of credit risk with respect to trade receivables is limited due to the Company’s large number of customers. The Company also manages exposure to credit risk through credit approvals, credit limits and monitoring procedures. Management believes that credit risks as of October 31, 2024 and 2023 have been adequately provided for in the consolidated financial statements.
For the year ended October 31, 2024,
For the year ended October 31, 2023,
For the years ended October 31, 2024 and 2023, approximately
The Company has a reportable segment for purposes of segment reporting.
|
(11) |
Revenue Recognition |
Revenues consist of product sales that are recognized at a specific point in time under the core principle of recognizing revenue when control transfers to the customer. The Company considers customer purchase orders, governed by master sales agreements or the Company’s standard terms and conditions, to be the contract with the customer. For each contract, the promise to transfer the control of the products, each of which is individually distinct, is considered to be the identified performance obligation. The Company evaluates each customer’s credit risk when determining whether to accept a contract.
In determining transaction prices, the Company evaluates whether fixed order prices are subject to adjustment to determine the net consideration to which the Company expects to be entitled. Contracts do not include financing components, as payment terms are generally due 30 to 90 days after shipment. Taxes assessed by governmental authorities and collected from the customer including, but not limited to, any sales and use taxes and value-added taxes, are not included in the transaction price and are not included in net sales.
The Company recognizes revenue at the point in time when products are shipped or delivered from its manufacturing facility to its customer, in accordance with the agreed upon shipping terms. Since the Company typically invoices the customer at the same time that performance obligations are satisfied, no contract assets are recognized. The Company’s contract liability represents advance consideration received from customers prior to transfer of the product. This liability was $
Optical Cable Corporation (OCC)
Sales to certain customers are made pursuant to agreements that provide price adjustments and limited return rights with respect to the Company’s products. The Company maintains a reserve for estimated future price adjustment claims, rebates and returns as a refund liability. The Company’s refund liability was $
The Company offers standard product warranty coverage which provides assurance that its products will conform to contractually agreed-upon specifications for a limited period from the date of shipment. Separately-priced warranty coverage is not offered. The warranty claim is generally limited to a credit equal to the purchase price or a promise to repair or replace the product for a specified period of time at no additional charge.
The Company incurs sales commissions to acquire customer contracts that are directly attributable to the contracts. The commissions are expensed as selling expenses during the period that the related products are transferred to customers.
Disaggregation of Revenue
The following table presents net sales attributable to the United States and all other countries in total for the fiscal years ended October 31, 2024 and 2023:
|
Years ended October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
United States |
$ | $ | ||||||
|
Outside the United States |
||||||||
|
Total net sales |
$ | $ | ||||||
No individual country outside of the United States accounted for more than 10% of total net sales in fiscal years 2024 or 2023.
Optical Cable Corporation (OCC)
|
(12) |
Income Taxes |
Income tax expense (benefit) for the years ended October 31, 2024 and 2023 consists of:
|
Fiscal year ended October 31, 2024 |
Current |
Deferred |
Total |
|||||||||
|
U.S. Federal |
$ | $ | $ | |||||||||
|
State |
||||||||||||
|
Totals |
$ | $ | $ | |||||||||
|
Fiscal year ended October 31, 2023 |
Current |
Deferred |
Total |
|||||||||
|
U.S. Federal |
$ | $ | $ | |||||||||
|
State |
||||||||||||
|
Totals |
$ | $ | $ | |||||||||
Reported income tax expense for the years ended October 31, 2024 and 2023 differs from the “expected” tax expense (benefit), computed by applying the U.S. Federal statutory income tax rate of
|
Years ended October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
“Expected” income taxes (benefit) |
$ | ( |
) | $ | ||||
|
Increase (reduction) in income tax expense (benefit) resulting from: |
||||||||
|
State income taxes, net of federal benefit |
( |
) | ||||||
|
Provision to return reconciliation adjustment |
||||||||
|
Excess tax benefits related to share-based compensation |
( |
) | ||||||
|
Non-deductible life insurance premiums |
||||||||
|
Other differences, net |
||||||||
|
Change in valuation allowance |
( |
) | ||||||
|
Reported income tax expense |
$ | $ | ||||||
Optical Cable Corporation (OCC)
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and deferred tax liabilities as of October 31, 2024 and 2023 are presented below:
|
October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Deferred tax assets: |
||||||||
|
Accounts receivable, due to allowances for credit losses and sales returns |
$ | $ | ||||||
|
Inventories, due to allowance for damaged and slow-moving inventories and additional costs inventoried for tax purposes pursuant to the Tax Reform Act of 1986 |
||||||||
|
Liabilities recorded for accrued expenses, deductible for tax purposes when paid |
||||||||
|
Share-based compensation expense |
||||||||
|
Section 163(j) interest |
||||||||
|
Research and experimental expenditures, due to capitalization for tax purposes |
||||||||
|
Net operating loss carryforwards |
||||||||
|
Plant and equipment, due to differences in depreciation and capital gain recognition |
||||||||
|
Other |
||||||||
|
Total gross deferred tax assets |
||||||||
|
Valuation allowance |
( |
) | ( |
) | ||||
|
Net deferred tax assets |
$ | $ | ||||||
As a result of a past acquisition, the Company recorded certain deferred tax assets totaling $
Additionally, the Company has federal and state gross NOL carryforwards of $
For the fiscal years ended October 31, 2024 and 2023, the Company considered all positive and negative evidence available to assess whether it is “more likely than not” that some portion or all of the deferred tax assets will not be realized. For each year, the Company concluded that in accordance with the provisions of Accounting Standards Codification 740, Income Taxes, the negative evidence outweighed the objectively verifiable positive evidence. As a result, the Company established a valuation allowance of $
The Company estimates a liability for uncertain tax positions taken or expected to be taken in a tax return. The liability for uncertain tax positions is included in other noncurrent liabilities on the accompanying consolidated balance sheets.
Optical Cable Corporation (OCC)
A reconciliation of the unrecognized tax benefits for fiscal years 2024 and 2023 follows:
|
October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Unrecognized tax benefits balance at beginning of year |
$ | $ | ||||||
|
Gross decreases for tax positions of prior years |
( |
) | ( |
) | ||||
|
Gross increases for current year tax positions |
||||||||
|
Unrecognized tax benefits balance at end of year |
$ | $ | ||||||
During fiscal year 2024, the Company increased accrued interest and penalties by $
The Company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. The statute of limitations remains open for U.S. and certain state income tax examinations for years ended October 31, 2021 through October 31, 2023.
|
(13) |
Fair Value Measurements |
The carrying amounts reported in the consolidated balance sheets for cash, trade accounts receivable, income taxes refundable – current, other receivables, current installments of long-term debt, accounts payable and accrued expenses, accrued compensation and payroll taxes, and income taxes payable approximate fair value because of the short maturity of these instruments. The carrying values of the Company’s note payable, revolver – noncurrent, and long-term debt, excluding current installments, approximate fair value because the interest rates vary with the market. Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company uses a fair value hierarchy that prioritizes the inputs for valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows:
|
● |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
|
● |
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
|
● |
Level 3 inputs are unobservable inputs for the asset or liability. |
The Company utilizes the best available information in measuring fair value.
Optical Cable Corporation (OCC)
|
(14) |
Net Income (Loss) Per Share |
The following is a reconciliation of the numerators and denominators of the net income (loss) per share computations for the periods presented:
|
Years ended October 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Net income (loss) (numerator) |
$ | ( |
) | $ | ||||
|
Shares (denominator) |
||||||||
|
Basic and diluted net income (loss) per share |
$ | ( |
) | $ | ||||
Nonvested shares which have been issued and are outstanding as of October 31, 2024 totaling
|
(15) |
Shareholders’ Equity |
Stockholder Protection Rights Agreement
On October 28, 2011, the Board of Directors of the Company adopted a Stockholder Protection Rights Agreement (the “Rights Agreement”) and declared a dividend of preferred share purchase right for each outstanding share of common stock. These purchase rights and the related Rights Agreement were set to expire on November 2, 2021. On November 2, 2021, the Board of Directors of the Company amended and restated the Rights Agreement (the “Amended Rights Agreement”) to amend and restate the Rights Agreement to continue the dividend of preferred share purchase right (a “Right”) for each outstanding share of Common Stock, no par value, of the Company (“Common Shares”), held of record at the close of business on November 2, 2021, or issued thereafter. Except to extend the Amended Rights Agreement to November 2, 2031, no other material changes were made to the Rights Agreement by the Amended Rights Agreement.
Under the terms of the Amended Rights Agreement, if a person or group who is deemed an Acquiring Person as defined in the Amended Rights Agreement acquires
Optical Cable Corporation (OCC)
Upon the occurrence of certain events, each Right will entitle its holder to purchase from the Company one one‑thousandth of a Series A Participating Preferred Share (“Preferred Share”), no par value, at an exercise price of $
The Company has reserved
|
(16) |
Gain on Insurance Proceeds |
During fiscal year 2024 and 2023, the Company received insurance proceeds in connection with the office building and its contents at the Company’s Asheville facilities sustaining water damage from a burst pipe at the end of December 2022. The office building damaged is separate from the Company’s manufacturing building, which houses its manufacturing operations and certain offices at the same location. There was no significant impact to the Company’s operations as a result of this event.
Insurance proceeds in excess of expenses incurred through October 31, 2024 and 2023, a net total of $
|
(17) |
Contingencies |
From time to time, the Company is involved in various claims, legal actions and regulatory reviews arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.
|
(18) |
New Accounting Standards Not Yet Adopted |
In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires enhanced disclosures about significant segment expenses and enhanced disclosures in interim periods. The guidance in ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023 and interim reporting periods in fiscal years beginning after December 31, 2024, with early adoption permitted. The Company is currently evaluating the impact ASU 2023-07 will have on its financial statement disclosures.
In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The objective of ASU 2023-09 is to enhance disclosures related to income taxes, including specific thresholds for inclusion within the tabular disclosure of income tax rate reconciliation and specified information about income taxes paid. ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact ASU 2023-09 will have on its financial statement disclosures.
There are no other new accounting standards issued, but not yet adopted by the Company, which are expected to materially impact the Company’s financial position, operating results or financial statement disclosures.
Optical Cable Corporation (OCC)
|
(19) |
Quarterly Results of Operations (Unaudited) |
The following is a summary of the unaudited quarterly results of operations for the years ended October 31, 2024 and 2023:
|
Quarter ended |
||||||||||||||||
|
Fiscal year ended October 31, 2024 |
January 31 |
April 30 |
July 31 |
October 31 |
||||||||||||
|
Net sales |
$ | $ | $ | $ | ||||||||||||
|
Gross profit |
||||||||||||||||
|
Selling, general & administrative expenses |
||||||||||||||||
|
Income (loss) from operations |
( |
) | ( |
) | ( |
) | ||||||||||
|
Income (loss) before income taxes |
( |
) | ( |
) | ( |
) | ||||||||||
|
Net income (loss) |
( |
) | ( |
) | ( |
) | ||||||||||
|
Basic and diluted net income (loss) per share |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
|
Quarter ended |
||||||||||||||||
|
Fiscal year ended October 31, 2023 |
January 31 |
April 30 |
July 31 |
October 31 |
||||||||||||
|
Net sales |
$ | $ | $ | $ | ||||||||||||
|
Gross profit |
||||||||||||||||
|
Selling, general & administrative expenses |
||||||||||||||||
|
Income (loss) from operations |
( |
) | ||||||||||||||
|
Income (loss) before income taxes |
( |
) | ||||||||||||||
|
Net income (loss) |
( |
) | ||||||||||||||
|
Basic and diluted net income (loss) per share |
$ | $ | $ | $ | ( |
) | ||||||||||
|
(20) |
Restatement of Previously Issued Financial Statements |
In connection with the preparation of the Company’s 2024 financial statements, it was determined that the balance on the Revolver was incorrectly classified as a noncurrent liability in the 2023 consolidated balance sheet. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) requires that a borrower’s balance outstanding on a revolving line of credit be reflected as a current liability when the loan agreement includes provisions for both (i) a required lock box arrangement with a lender in which the borrower does not have the ability to avoid using working capital to repay the amounts outstanding, whether or not the borrower has the ability to re-borrow funds based on its regular borrowing base calculation in the ordinary course of business, and (ii) a “subjective acceleration clause”, which permits the lender to accelerate the loan upon the occurrence of a material adverse change.
The Company’s management has further concluded that the classification as a current liability is required in accordance with U.S. GAAP even if (i) it is deemed that the “subjective acceleration clause” is not probable to be utilized by the lender within twelve months from the date of the balance sheet and (ii) the maturity date of the loan extends more than twelve months from the date of the balance sheet.
The Company’s Revolving Credit Master Promissory Note and Related Loan and Security Agreement (the “Revolver”) includes provisions for both: (i) a required lock box arrangement as described above for the collection of accounts receivables and other receipts by the Company and (ii) a “material adverse change” provision, similar to clauses included customarily in loan agreements. The Company’s Revolver matures July 24, 2027.
Optical Cable Corporation (OCC)
Impact of Restatement
The following table is a summary of the effect of this restatement for the periods presented:
|
Fiscal year 2024 |
July 31, 2024 (Unaudited) |
|||||||||||
|
As previously reported |
Adjustment |
As restated |
||||||||||
|
Note payable, revolver - current |
$ | $ | $ | |||||||||
|
Total current liabilities |
||||||||||||
|
Note payable, revolver - noncurrent |
( |
) | ||||||||||
|
April 30, 2024 (Unaudited) |
||||||||||||
|
As previously reported |
Adjustment |
As restated |
||||||||||
|
Note payable, revolver - current |
$ | $ | $ | |||||||||
|
Total current liabilities |
||||||||||||
|
Note payable, revolver - noncurrent |
( |
) | ||||||||||
|
January 31, 2024 (Unaudited) |
||||||||||||
|
As previously reported |
Adjustment |
As restated |
||||||||||
|
Note payable, revolver - current |
$ | $ | $ | |||||||||
|
Total current liabilities |
||||||||||||
|
Note payable, revolver - noncurrent |
( |
) | ||||||||||
|
Fiscal year 2023 |
October 31, 2023 |
|||||||||||
|
As previously reported |
Adjustment |
As restated |
||||||||||
|
Note payable, revolver - current |
$ | $ | $ | |||||||||
|
Total current liabilities |
||||||||||||
|
Note payable, revolver - noncurrent |
( |
) | ||||||||||
|
July 31, 2023 (Unaudited) |
||||||||||||
|
As previously reported |
Adjustment |
As restated |
||||||||||
|
Note payable, revolver - current |
$ | $ | $ | |||||||||
|
Total current liabilities |
||||||||||||
|
Note payable, revolver - noncurrent |
( |
) | ||||||||||
|
April 30, 2023 (Unaudited) |
||||||||||||
|
As previously reported |
Adjustment |
As restated |
||||||||||
|
Note payable, revolver - current |
$ | $ | $ | |||||||||
|
Total current liabilities |
||||||||||||
|
Note payable, revolver - noncurrent |
( |
) | ||||||||||
|
January 31, 2023 (Unaudited) |
||||||||||||
|
As previously reported |
Adjustment |
As restated |
||||||||||
|
Note payable, revolver - current |
$ | $ | $ | |||||||||
|
Total current liabilities |
||||||||||||
|
Note payable, revolver - noncurrent |
( |
) | ||||||||||
Optical Cable Corporation (OCC)
The Company’s prior classification of the Revolver balance as noncurrent did not have any effect on the Company’s previously reported total assets, total liabilities or total shareholders’ equity.
Further, the prior classification did not have any effect on the Company’s previously reported consolidated statements of operations, consolidated statements of shareholders’ equity or consolidated statements of cash flows.
There also was no impact on any covenants with lenders for the periods, as the Company’s borrowing arrangements do not include financial covenants that would be impacted by the classification of the Revolver.
It should also be noted that while U.S. GAAP requires current classification of the Revolver balance outstanding for the Restatement, the lender has not used the subjective acceleration clause at any time during the Company’s arrangement with the lender, including up to the date of this filing, which is more than twelve months after the filing of the fiscal year 2023 Annual Report on Form 10-K.
Optical Cable Corporation (OCC)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of Optical Cable Corporation
Roanoke, Virginia
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Optical Cable Corporation (the "Company") as of October 31, 2024, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended October 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2024, and the results of its operations and its cash flows for year ended October 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
We have served as the Company's auditor since 2024.
December 23, 2024
Optical Cable Corporation (OCC)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Optical Cable Corporation
Roanoke, Virginia
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Optical Cable Corporation and Subsidiaries (the “Company”) as of October 31, 2023, and the related consolidated statement of operations, shareholders’ equity, and cash flows for the year ended October 31, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2023, and the results of its operations and its cash flows for the year ended October 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Restatement
As discussed in Note 20 to the consolidated financial statements, the accompanying consolidated financial statements as of and for the year ended October 31, 2023 have been restated to correct a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Optical Cable Corporation (OCC)
Valuation of Inventory
Description of the Matter
Inventories are recorded at the lower of cost and net realizable value. Cost of raw materials is established using specific identification or a first in, first out basis, while the cost of work in process and finished goods is established using average cost or standard costs, depending upon the product type. Management routinely evaluates expected sales prices and demand in relation to the carrying value of inventory, which takes into consideration the salability of individual items in inventory and an estimate of the selling prices for those items. Individual inventory items are reviewed and adjustments are made based on the age of the inventory and management judgment as to the salability of that inventory in order for inventories to be appropriately valued.
Given the estimates involved in applying costs to inventory on either a standard or average cost basis, as well as the inherent uncertainty in both the future salability and selling prices of inventory items, auditing the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment and effort.
How We Addressed the Matter in our Audit
Our audit procedures included:
|
● |
Obtaining an understanding of the Company’s procedures for allocating manufacturing costs to inventories. |
|
● |
Obtaining an understanding of the Company’s procedures and assumptions surrounding the inventory reserve, and assessing the reasonability of those assumptions. |
|
● |
Testing the mathematical accuracy of management’s calculations. |
|
● |
Testing, on a sample basis, the assignment of costs to inventory items. |
|
● |
Evaluating whether inventories were stated at the lower of cost and net realizable value at the reporting date, as appropriate, by comparing recent sales prices of inventory to carrying cost, by evaluating the aging and/or movement of inventory, or a combination of such tests. |
|
● |
Performing corroborative inquiries with personnel responsible for product manufacturing and sales to evaluate the reasonableness of current inventory manufacturing, sales, and movement. |
/s/ Brown, Edwards & Company, L.L.P.
We served as the Company’s auditor from 2016 to 2023.
Roanoke, Virginia
December 20, 2023, except for the effects of the restatement discussed in Note 20, as to which the date is December 23, 2024.
Optical Cable Corporation (OCC)
Corporate Headquarters
Optical Cable Corporation (OCC)
5290 Concourse Drive
Roanoke, VA 24019
Primary Legal Counsel
Woods Rogers Vandeventer Black PLC
10 South Jefferson Street
Suite 1400
Roanoke, VA 24011
Independent Registered Public Accounting Firm
Crowe LLP
1 Mid America Plaza, Suite #600
Oak Brook, IL 60181
Transfer Agent
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
Form 10-K Report
Shareholders may obtain a copy of Optical Cable Corporation’s Form 10-K, including exhibits, as filed with the Securities and Exchange Commission from the SEC website at http://www.sec.gov. Our SEC filings are also available to the public on our website at http://www.occfiber.com/investor-relations/ under the tab “SEC Filings”.
Annual Meeting
The 2025 annual meeting of shareholders will be held at 10:00 a.m. on Tuesday, March 25, 2025 at the Green Ridge Recreation Center, 7415 Wood Haven Road, Roanoke, Virginia or another location stated in OCC’s filed Proxy Statement for the 2025 Annual Meeting of Shareholders.
Optical Cable Corporation (OCC)
Corporate Information
(Continued)
Common Stock and Dividend Data
Our common stock is traded on the Nasdaq Global Market under the symbol OCC. According to the records of our transfer agent, the Company had 234 shareholders of record as of December 12, 2024. Additionally, the Company estimates that it has more than 2,000 beneficial owners. On December 12, 2024, our common stock closed at a price of $2.17 per share.
Employees of the Company and members of the Board of Directors owned at least 36.9% of the shares outstanding as of October 31, 2024, including shares still subject to potential forfeiture based on vesting requirements.
The following table sets forth for the fiscal periods indicated the high and low bid prices of our common stock, as reported on the Nasdaq Global Market, during the two most recent fiscal years:
|
Range of Bid Prices |
||||||||
|
Fiscal year ended October 31, 2024 |
High |
Low |
||||||
|
Fourth Quarter |
$ | 2.93 | $ | 2.29 | ||||
|
Third Quarter |
$ | 3.08 | $ | 2.61 | ||||
|
Second Quarter |
$ | 3.53 | $ | 2.52 | ||||
|
First Quarter |
$ | 3.00 | $ | 2.48 | ||||
|
Range of Bid Prices |
||||||||
|
Fiscal year ended October 31, 2023 |
High |
Low |
||||||
|
Fourth Quarter |
$ | 4.01 | $ | 2.26 | ||||
|
Third Quarter |
$ | 4.65 | $ | 3.36 | ||||
|
Second Quarter |
$ | 4.74 | $ | 3.88 | ||||
|
First Quarter |
$ | 4.85 | $ | 3.38 | ||||
Dividend Declaration
We did not pay or declare any cash dividends on our common stock in fiscal year 2024 and do not expect to pay any cash dividends in the foreseeable future.
Optical Cable Corporation (OCC)
Corporate Information
(Continued)
Executive Officers of Optical Cable Corporation
| Neil D. Wilkin, Jr. | Chairman of the Board, President and |
| Chief Executive Officer | |
| Tracy G. Smith | Senior Vice President, Chief Financial Officer |
| and Corporate Secretary |
Board of Directors of Optical Cable Corporation
| Neil D. Wilkin, Jr., Chairman | Chairman of the Board, President |
| and Chief Executive Officer | |
| Optical Cable Corporation | |
| Randall H. Frazier | President and Founder |
| R. Frazier, Incorporated | |
| John M. Holland | President and Founder |
| Holland Technical Services | |
| John A. Nygren | Retired, former President |
| ChemTreat, Inc. | |
| Craig H. Weber | Retired, former Chief Executive Officer |
| Home Care Delivered, Inc. |
Optical Cable Corporation (OCC)
