-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ANItOnEUYbq3dBt6u7wPhXdsKDODVlDVpk0JAJ+5NgbHz4zva5Xhptl5EpBEGpm4 cIVOUduyC5yL0MKqnjfC5w== 0000024186-94-000027.txt : 19940519 0000024186-94-000027.hdr.sgml : 19940519 ACCESSION NUMBER: 0000024186-94-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTEL OF CALIFORNIA INC CENTRAL INDEX KEY: 0000024186 STANDARD INDUSTRIAL CLASSIFICATION: 4813 IRS NUMBER: 951789511 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01245 FILM NUMBER: 94527446 BUSINESS ADDRESS: STREET 1: 16071 MOJAVE DR CITY: VICTORVILLE STATE: CA ZIP: 92392 BUSINESS PHONE: 6192450511 FORMER COMPANY: FORMER CONFORMED NAME: CONTINENTAL TELEPHONE CO OF CALIFORNIA DATE OF NAME CHANGE: 19880519 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA INTERSTATE TELEPHONE CO DATE OF NAME CHANGE: 19750501 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 31, 1994 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 0-1245 CONTEL OF CALIFORNIA, INC. (Exact name of registrant as specified in its charter) CALIFORNIA 95-1789511 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 16071 Mojave Drive, Victorville, California 92392 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 619-245- 0511 (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO The Company had 2,503,667 shares of $5 par value common stock outstanding at April 30, 1994. CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY INDEX PART I. FINANCIAL INFORMATION PAGE Condensed Consolidated Statements of Income. . . . . . . . . . . . . 1 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . 2 Condensed Consolidated Balance Sheets - Assets . . . . . . . . . . . 4 Condensed Consolidated Balance Sheets - Liabilities and Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . . 5 Condensed Consolidated Statements of Cash Flows. . . . . . . . . . . 6 Notes to Condensed Consolidated Financial Statements . . . . . . . . 7 PART II. OTHER INFORMATION Items 1 through 6. . . . . . . . . . . . . . . . . . . . . . . . . . 8 Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 PART I. FINANCIAL INFORMATION CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended March 31, 1994 1993 (Thousands of Dollars) OPERATING REVENUES: Local network services $ 24,177 $ 23,431 Network access services 35,089 37,396 Long distance services 24,192 30,744 Equipment sales and services 3,251 1,978 Other 1,892 1,886 88,601 95,435 OPERATING EXPENSES: Cost of sales and services 21,000 19,063 Depreciation and amortization 16,118 13,683 Marketing, selling, general and administrative 27,144 22,264 64,262 55,010 Net operating income 24,339 40,425 OTHER (INCOME) DEDUCTIONS: Interest expense 3,017 3,236 Other - net (70) (445) INCOME BEFORE INCOME TAXES 21,392 37,634 INCOME TAXES 8,748 15,231 NET INCOME $ 12,644 $ 22,403 Per share data is omitted since the Company's common stock is 100% owned by Contel Corporation (a wholly-owned subsidiary of GTE Corporation). See Notes to Condensed Consolidated Financial Statements. 1 CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS Net income decreased 44% or $9.8 million for the three months ended March 31, 1994 compared to the same period in 1993 attributable to higher operating expenses and lower operating revenues. Operating Revenues Operating revenues decreased 7% or $6.8 million for the three months ended March 31, 1994 compared to the same period in 1993. Local network service revenues increased 3% or $0.7 million for the three months ended March 31, 1994 compared to the same period in 1993 primarily due to continued customer growth, as experienced through an increase in access lines. Network access service revenues decreased 6% or $2.3 million for the three months ended March 31, 1994 compared to the same period in 1993. The decrease is primarily due to lower settlements with Pacific Bell as a result of the Company's exit from the toll pool. Long distance service revenues decreased 21% or $6.5 million for the three months ended March 31, 1994 compared to the same period in 1993 primarily due to lower settlements with Pacific Bell during 1994 as a result of the Company's exit from the toll pool. The Company is currently recording revenues on a bill and keep basis. Equipment sales and services revenues increased 64% or $1.3 million for the three months ended March 31, 1994 compared to the same period in 1993 due to increased revenue from billing and collection services. Operating Expenses Operating expenses increased 17% or $9.3 million for the three months ended March 31, 1994 compared to the same period in 1993. The increase is primarily due to higher depreciation and amortization expense due to a rate increase in 1994 and higher expenses for billing and collection services and higher data programming and processing costs. Other Expenses Income taxes decreased 43% or $6.5 million compared to the same period in 1993 primarily due to a decrease in pretax income. 2 CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CAPITAL RESOURCES AND LIQUIDITY The Company's primary source of funds during the first three months of 1994 was cash flow from operating activities of $37.3 million compared to $44.6 million for the same period in 1993. Capital expenditures represent a significant use of funds during 1994 and 1993 reflecting the Company's continued growth in access lines, modernization of current facilities and introduction of new products and services. The Company's capital expenditures during the first three months of 1994 were $12.8 million compared to $19.1 million during the same period in 1993. The Company's anticipated construction costs for 1994 are approximately $60 million. Cash used for financing activities was $24.1 million in 1994 compared to $25.5 million in 1993. This included dividend payments of $42.2 million in 1994 compared to $27.1 million in 1993. External financing included short-term borrowings of $22.9 million in 1994 compared to $1.6 million in 1993. The Company retired $4.8 million of long-term debt and preferred stock in 1994, including the retirement of 8.75% Debentures and all outstanding issues of preferred stock. During the first quarter of 1994, the Company began implementation of its re-engineering plan. This plan will allow the Company to continue to respond aggressively to competitive and regulatory developments through reduced costs, improved service quality, competitive prices and new product offerings. Moreover, implementation of this program over the next three years will position the Company to accelerate delivery of a full array of voice, video and data services. Management believes that the Company has adequate internal and external resources available to meet ongoing operating requirements for construction of new plant, modernization of facilities and payment of dividends. The Company generally funds its construction programs from operations, although external financing is available. Short-term borrowings can be obtained through commercial paper borrowings or borrowings from GTE. In addition, a $3.9 billion line of credit is available to the Company through shared lines of credit with GTE and other affiliates to support short-term financing needs. 3 CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS March 31, December 31, 1994 1993 (Thousands of Dollars) CURRENT ASSETS: Cash $ 413 $ 68 Accounts and notes receivables, less allowances of $5,480 and $3,592 respectively 72,983 82,092 Materials and supplies, at average cost 2,726 2,566 Deferred income tax benefits 8,147 7,783 Prepayments and other 698 450 Total current assets 84,967 92,959 PROPERTY, PLANT AND EQUIPMENT: Original cost 887,173 876,420 Accumulated depreciation (356,942) (343,195) Net property, plant and equipment 530,231 533,225 OTHER ASSETS 30,587 32,898 TOTAL ASSETS $ 645,785 $ 659,082 See Notes to Condensed Consolidated Financial Statements. 4 CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY March 31, December 31, 1994 1993 (Thousands of Dollars) CURRENT LIABILITIES: Notes payable to affiliates $ 91,783 $ 68,873 Accounts payable 40,572 59,317 Accrued taxes 41,386 34,726 Accrued dividends 5,000 42,152 Accrued payroll and vacations 8,593 8,177 Accrued restructuring costs and other 44,530 43,468 Total current liabilities 231,864 256,713 LONG-TERM DEBT 92,800 95,800 DEFERRED CREDITS, primarily deferred income taxes and investment tax credits 127,535 118,852 PREFERRED STOCK, subject to mandatory redemption -- 1,710 SHAREHOLDER'S EQUITY: Common stock 12,518 12,518 Other capital 78,917 78,917 Reinvested earnings 102,151 94,572 Total shareholder's equity 193,586 186,007 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 645,785 $ 659,082 See Notes to Condensed Consolidated Financial Statements. 5 CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 1994 1993 (Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 12,644 $ 22,403 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 16,118 13,683 Deferred income taxes and investment tax credits 1,388 (112) Provision for uncollectible accounts 2,167 1,664 Changes in current assets and current liabilities (3,974) 3,661 Other - net 9,001 3,265 Net cash from operating activities 37,344 44,564 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (12,768) (19,133) Other - net (114) (218) Net cash used in investing activities (12,882) (19,351) CASH FLOWS FROM FINANCING ACTIVITIES: Long-term debt and preferred stock retired (4,810) - - -- Dividends paid to shareholders (42,217) (27,101) Net change in affiliate notes 22,910 1,620 Net cash used in financing activities (24,117) (25,481) Increase (decrease) in cash 345 (268) Cash at beginning of period 68 1,477 Cash at end of period $ 413 $ 1,209 See Notes to Condensed Consolidated Financial Statements. 6 CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, in the opinion of management of the Company, the condensed consolidated financial statements include all adjustments, which consist only of normal recurring accruals, necessary to present fairly the financial information for such periods. These condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's 1993 Annual Report to Shareholders incorporated by reference in the Annual Report on Form 10-K. (2) On April 20, 1994, the California Public Utilities Commission (CPUC) issued a decision giving final approval to the merger of the Company into GTE California. The decision also would require the merging companies to flow through to their ratepayers all of the estimated savings that will be produced from the merger. This flow through requirement is based on the CPUC's interpretation of certain statutory requirements. The CPUC, however, provided the parties with the opportunity to supplement the evidentiary record to show why the estimated merger savings should be apportioned between ratepayers and shareholders. That filing was made on April 29, 1994. By making the filing, the effective date of the Decision approving the mergers has been delayed until such time as the Commission has the opportunity to review and issue a new decision based on the new evidence. In addition to approving the merger, the decision established a third phase in the proceeding in which the CPUC will consider the issues of a start-up revenue requirement for the Company's premerger operations and the integration of the Company's tariff rates with those of GTE California. Applications are also pending before the Arizona Corporation Commission and the Nevada Public Service Commission to approve the merger of the Company and GTE California. Final decisions in both of those proceedings are expected in 1994. (3) Reclassifications of prior year data have been made in the financial statements where appropriate to conform to the 1994 presentation. 7 CONTEL OF CALIFORNIA, INC. AND SUBSIDIARY PART II. OTHER INFORMATION Items 1 through 5 are not applicable for the quarter ended March 31, 1994. Item 6. Exhibits and Reports on Form 8-K. Contel of California, Inc. filed a report on Form 8-K dated January 13, 1994 on January 14, 1994, under Item 5, "Other Events." No financial statements were filed with this report. 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONTEL OF CALIFORNIA, INC. (Registrant) Date: May 12, 1994 MICHAEL W. BOLLINGER MICHAEL W. BOLLINGER Assistant Vice President - Controller (Principal Financial and Accounting Officer) 9 -----END PRIVACY-ENHANCED MESSAGE-----