Thursday, January 03, 2002
Investment losses wipe out business' profits
Optical Cable Corp. reports loss

The company's acting president said many of the losses and legal expenses "are not expected to recur."

By JEFF STURGEON
THE ROANOKE TIMES

Optical Cable Corp. ended a long succession of profitable years in 2001, losing $6.7 million due in large part to ill-timed stock market investments, the company announced.

Optical Cable also said it has earmarked money to settle job discrimination charges brought by the federal government in 2000.

The Roanoke County maker of fiber-optic cable lost big money in the stock market last year. So did its former president and chief executive, Bob Kopstein, according to previously disclosed information. The company's board of directors fired Kopstein Dec. 3, saying he was too distracted by his money problems to handle his work. Friday, Optical Cable revealed its investments had resulted in an $11.4 million charge against earnings.

The charge and several other expenses "that are not expected to recur" eliminated otherwise substantial operating profits, acting president Neil Wilkin said in a press release containing fourth quarter and fiscal 2001 financial results. The company's board of directors has banned investments of excess cash in investments such as the Nasdaq-100 Index Tracking Stock, where Optical Cable placed $18 million two years ago, only to lose most of it.

"We have taken affirmative steps to refocus the company," Wilkin said. "We are evaluating potential improvements to past practices with the hope of growing sales and improving profitability."

During the 12-month period which ended Oct. 31, Optical Cable lost $6.7 million, or 12 cents a share, on sales of $60.4 million. Last year, the company earned $8.3 million on sales of $58.2 million. Optical Cable had made money on a yearly basis since at least 1992.

Optical Cable disclosed it has set aside $900,000 "for an anticipated settlement" with the U.S. Equal Employment Opportunity Commission. The EEOC accused Optical Cable in 2000 of discriminating against blacks and using sex-segregated job categories. The company has a July trial date.

In addition, Optical Cable paid unspecified, substantial legal fees, spent $400,000 to abort a stock offering proposed last summer and took a charge for "slow-moving and impaired inventory."

Sales were off 31 percent in the fourth quarter, due to the slowing economy, the company said.

Three pending shareholder lawsuits and the company's low stock price could hurt finances in the future, the company said.

Shares of Optical Cable common stock plunged in September to less than $2. The stock was worth nearly $18 a share at the start of 2001, but a sell-off of shares owned by Kopstein sent the value plummeting. Before September 2001, Kopstein had made investments using loans secured by his vast Optical Cable holdings. His personal stock purchases did poorly and he could not repay the loans, causing him to lose the Optical Cable shares to brokerage houses.

The brokerage houses had sold 30 million of Kopstein's pledged shares as of Nov. 30 to reduce what he owed them, leaving him with about 20 million shares on that date, according to information he filed with federal regulators. Such sales could continue.

Shares of Optical Cable stock, traded on the Nasdaq under the symbol OCCF, closed Wednesday at $1.59.

Jeff Sturgeon can be reached at 981-3251 or jeffs@roanoke.com.

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