-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eb5OfwJN7K2nbYgzfF+5ZW8ZTOxBHYtIcifHZQjbm0grEQ5qJ5STvfs+QiGF2l9L 2niw05A/X58Hcuxuw9yhiA== 0000950132-96-000290.txt : 19960515 0000950132-96-000290.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950132-96-000290 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH PITTSBURGH SYSTEMS INC CENTRAL INDEX KEY: 0000764765 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 251485389 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13716 FILM NUMBER: 96562726 BUSINESS ADDRESS: STREET 1: 4008 GIBSONIA RD CITY: GIBSONIA STATE: PA ZIP: 15044-9311 BUSINESS PHONE: 4124439600 MAIL ADDRESS: STREET 1: 4008 GIBSONIA ROAD CITY: GIBSONIA STATE: PA ZIP: 15044-9311 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 -------------------------------------------- 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 0-13716 ------------------------------------------------- NORTH PITTSBURGH SYSTEMS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 25-1485389 - ------------------------------- --------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4008 Gibsonia Road, Gibsonia, Pennsylvania 15044-9311 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 412 443-9600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) No Change - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (l) 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, and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock Outstanding ------------------------ At May 1, 1996, the Registrant had 7,520,000 shares of common stock outstanding, par value $.3125 per share, the only class of such stock issued. PART I ITEM 1 FINANCIAL STATEMENTS NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (Thousands - Except Per Share Amounts)
For the Three Months Ended March 31 -------------------- 1996 1995 -------- --------- Operating revenues: Local network services $ 2,114 $ 1,801 Long distance and access services 10,465 9,263 Directory advertising, billing & other services 548 530 Telecommunication equipment sales 721 490 Other operating revenues 1,017 390 ------- ------- Total Operating Revenues 14,865 12,474 ------- ------- Operating expenses: Depreciation and amortization 2,307 1,853 Network and other operating expenses 5,966 5,015 State and local taxes 664 592 Telecommunication equipment expenses 671 442 ------- ------- Total Operating Expenses 9,608 7,902 ------- ------- Net Operating Revenues 5,257 4,572 Other expense (income), net: Interest expense 395 403 Interest income (197) (365) Sundry (income) expense, net (8) 64 ------- ------- 190 102 ------- ------- Earnings before income taxes 5,067 4,470 Income taxes: Current 2,011 1,785 Deferred - - ------- ------- 2,011 1,785 ------- ------- Net earnings $ 3,056 $ 2,685 ======= ======= Average common shares outstanding 7,520 7,520 ======= ======= Earnings per share of common stock $ .41 $ .36 ======= ======= Dividends per share of common stock $ .26 $ .24 ======= =======
See accompanying notes to condensed consolidated financial statements. 1 NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Thousands of Dollars)
March 31 Dec. 31 ASSETS 1996 1995 ------ -------- -------- Current assets: Cash and temporary investments $ 12,043 $ 9,359 Marketable securities available for sale 1,081 1,593 Marketable securities held to maturity 5,344 6,569 Accounts receivable: Customers 3,759 3,725 Access service settlements and other 5,453 5,120 Inventories of construction and operating materials and supplies 2,049 2,381 Prepaid taxes 642 -- -------- -------- Total current assets 30,371 28,747 -------- -------- Property, plant and equipment: Telephone plant in service: Land 461 461 Buildings 8,943 8,943 Equipment 99,612 97,334 Miscellaneous physical property 48 48 -------- -------- 109,064 106,786 Less accumulated depreciation and amortization 54,792 52,675 -------- -------- 54,272 54,111 Construction in progress 4,677 4,505 -------- -------- Total property, plant and equipment, net 58,949 58,616 Investments 3,876 3,876 Deferred financing costs 1,133 1,159 Prepaid pension cost 1,302 689 Other assets 1,492 3,069 -------- -------- $ 97,123 $ 96,156 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Current portion of long-term debt $ 721 $ 702 Accounts payable 5,090 6,337 Accrued interest 122 123 Dividend payable 1,955 1,805 Taxes other than income taxes 481 610 Accrued vacation 673 673 Other liabilities 316 404 Federal and state income taxes 1,812 291 -------- -------- Total current liabilities 11,170 10,945 -------- -------- Long-term debt 21,501 21,694 Unamortized investment tax credits 445 470 Deferred income taxes 5,603 5,670 Postretirement benefits 4,306 4,250 Other liabilities 1,567 1,600 Shareholders' equity: Capital stock/Common stock 2,350 2,350 Capital in excess of par value 2,215 2,215 Retained earnings 47,915 46,814 Unrealized gain (loss) on available for sale securities, net 51 148 -------- -------- Total shareholders' equity 52,531 51,527 -------- -------- $ 97,123 $ 96,156 ======== ========
See accompanying notes to condensed consolidated financial statements. 2 NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Thousands of Dollars)
For the Three Months Ended March 31 -------------------- 1996 1995 -------- --------- Cash from operating activities: Net earnings $ 3,056 $ 2,685 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 2,310 1,853 Equity (income) losses of affiliated companies -- 13 Provision for postretirement benefits other than pensions 56 65 Investment tax credit amortization (25) (38) Deferred income taxes -- -- Changes in assets and liabilities: Accounts receivable (367) (445) Inventories of construction and operating materials & supplies 331 159 Prepaid federal and state taxes (642) (632) Accounts payable (1,247) 357 Taxes other than income taxes (129) (179) Other liabilities and accrued interest (122) (55) Federal and state income taxes 1,521 1,351 Deferred financing costs, prepaid pension costs and other assets 990 (543) Other, net (71) -- ------- ------- Total adjustments 2,605 1,906 ------- ------- Net cash from operating activities 5,661 4,591 ======= ======= Cash used for investing activities: Expenditures for property and equipment (2,665) (3,875) Net salvage on retirements 22 (23) ------- ------- Net capital additions (2,643) (3,898) ------- ------- Purchase of marketable securities held to maturity -- (1,275) Proceeds from redemption of marketable securites held to maturity 1,200 1,021 Purchase of marketable securities available for sale (65) (158) Proceeds from sale of marketable securities available for sale 510 1,095 Investments in affiliated entities -- (40) ------- ------- Net cash used for investing activities (998) (3,255) ------- ------- Cash used for financing activities: Cash dividends (1,805) (1,654) Retirement of debt (174) (167) ------- ------- Net cash used for financing activities (1,979) (1,821) ======= ======= Net (decrease) increase in cash and temporary investments 2,684 (485) Cash and temporary investments at beginning of period 9,359 14,779 ------- ------- Cash and temporary investments at end of period $12,043 $14,294 ======= ======= Interest paid $ 371 $ 378 ======= ======= Income taxes paid $ 557 $ 472 ======= =======
See accompanying notes to condensed consolidated financial statements. 3 NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) GENERAL ------- The condensed consolidated financial statements included herein have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Consolidated herein are the financial results of the Registrant's wholly-owned subsidiaries, North Pittsburgh Telephone Company (North Pittsburgh), Penn Telecom, Inc., Pinnatech, Inc. (Pinnatech) and Management Consulting Solutions, Inc. (MCSI). 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. Nevertheless, the Registrant believes that its disclosures herein are adequate to make the information presented not misleading and, in the opinion of management, all adjustments (which consisted only of normal recurring accruals) necessary to present fairly the results of operations for the interim periods have been reflected. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Registrant's latest annual report to the Securities and Exchange Commission on Form 10-K. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1. Financial Condition ------------------- (a) General ------- There were no material changes in the Registrant's consolidated general financial condition from the end of its preceding fiscal year on December 31, 1995 to March 31, 1996, the end of the three-month period reported herein. (b) Liquidity and Capital Resources ------------------------------- Consolidated capital expenditure commitments for the purchase and installation of communications and other equipment at March 31, 1996 amounted to approximately $1,597,022 with such amount being part of the 1996 Construction Program. Funds for financing construction expenditures in the three-month period ended March 31, 1996 were generated from internal sources. In the foreseeable future, based on projected construction budgets and cash flows, North Pittsburgh anticipates financing all telephone plant construction from cash reserves and internally generated funds. At March 31, 1996, construction work in progress is $4,676,558. An additional $6,540,776 will be expended to complete these projects. The Registrant and its subsidiaries have not experienced any difficulty in the past meeting either long-term or short-term cash commitments. Cash flow generated through regular operations has been adequate to not only finance a significant portion of the capital requirements of the Registrant as discussed in the previous paragraph but also to meet principal and interest payments on long-term debt and all working capital requirements. It is anticipated that future long-term interest and principal payments will be made from the same source of internally generated funds. 4 (c) Regulatory/Competition ---------------------- The Federal Communications Commission (FCC) is presently working on Rulemakings that spell out the specifics of the Telecommunications Act of 1996 (1996 Act) and the Pennsylvania Public Utility Commission (PA PUC) must choose a course of action to implement the 1996 Act as enacted, or to the extent possible and permissible, change the manner in which such regulations are implemented in Pennsylvania before the impact on North Pittsburgh, a Rural Telephone Company under the 1996 Act, can be fully understood and measured. However, the clear intent of the 1996 Act is to open up the local exchange market to competition. This appears to mandate, among other items, that North Pittsburgh, at some point in time, permit the resale of its service at wholesale rates, provide number portability if feasible, provide dialing parity, provide interconnection to any requesting carrier for the transmission and routing of telephone exchange service and exchange access and provide access to network elements. The 1996 Act, regulatory proceedings in Pennsylvania, and the thrust towards a fully competitive marketplace have created some uncertainty in respect to the levels of North Pittsburgh's revenue growth in the future. However, its unique location in a growing commercial/residential suburban traffic corridor to the north of the City of Pittsburgh, its state-of-the- art switching transmission and transport facilities and its extensive fiber network place North Pittsburgh in a solid position to meet competition and minimize any loss of revenues. In addition, North Pittsburgh continues to make its network flexible and responsive to the needs of its customers to meet competitive threats. New services, access line growth and anticipated usage growth will lessen or offset any reductions in North Pittsburgh's revenue sources. 2. Results of Operations --------------------- Total operating revenues increased $2,391,000 (19.2%) in the three-month period ended March 31, 1996 over the comparable period in 1995. This change was due to increases in long distance and access services of $1,203,000 (13.0%), local network services of $313,000 (17.4%), telecommunication equipment sales of $231,000 (47.1%) and other operating revenues of $626,000 (160.5%). Higher long distance and access service revenues were generally the result of an increase in the number of customers and in minutes of use. Increased local network service revenues were attributable to customer growth. The increase in telecommunication equipment sales reflects an increase in the number of systems sold in 1996 as compared to 1995. The increase in other operating revenues is the direct result of start-up business activities of Pinnatech and MCSI. Total operating expenses for the three-month period ended March 31, 1996, increased $1,706,000 (21.6%) over the preceding year. That change is principally the result of an increase in network and other operating expenses of $951,000 (19.0%), an increase in depreciation and amortization of $454,000 (24.5%), and an increase in telecommunication equipment expenses of $229,000 (51.8%). The increase in network and other operating expenses is the result of expanded operations to serve customer growth as noted above. The increase in depreciation and amortization is due to a change in the lives of equipment and asset growth. The increase in telecommunication equipment expenses is related to the increase in equipment sales discussed above. The increase in total operating revenues discussed above coupled with the increase in total operating expenses resulted in a 15.0% increase in net operating revenues in 1996 as compared to the same period in 1995. Interest income decreased $165,000 primarily due to decreased interest rates available on marketable securities, as well as decreased levels of investment in such instruments. Net sundry income increased $72,000 due to a one time recording of realized gains on sale of investments. The increase in net operating revenues for the three-month period ended March 31, 1996, in conjunction with the increase in other expense (income), net, resulted in an increase of $597,000 (13.4%) in earnings before income taxes. 5 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) Exhibits - Exhibit Index for Quarterly Reports on Form 10-Q. --------
Exhibit Number Subject Applicability - ------- ------- ------------- (2) Plan of acquisition, reorganization, Not Applicable arrangement, liquidation or succession (3) Articles of Incorporation Provided in Annual Report on Form 10-K for the year ended December 31, 1993 and Incorporated Herein by Reference. (3) By-Laws Provided in Annual Report on Form 10-K for the year ended December 31, 1993 and Incorporated Herein by Reference. (4) Instruments defining the rights of Provided in Registration of security holders including indentures Securities of Certain Successor Issuers on Form 8-B filed on June 25, 1985 and Incorporated Herein by Reference. (10) Material Contracts Not Applicable (11) Statement re computation of per Attached Hereto share earnings (15) Letter re unaudited interim financial Not Applicable information (18) Letter re change in accounting Not Applicable principles (19) Report furnished to security holders Not Applicable (22) Published report regarding matters Not Applicable submitted to a vote of security holders (23) Consents of experts and counsel Not Applicable (24) Power of attorney Not Applicable (27) Financial Data Schedule Attached Hereto (99) Additional exhibits Not Applicable
(b) Reports on Form 8-K -No reports on Form 8-K were filed during the quarter ------------------- ended March 31, 1996. 6 SIGNATURES 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. NORTH PITTSBURGH SYSTEMS, INC. ------------------------------ (Registrant) May 14, 1996 /s/ G. A. Gorman Date______________________ _________________________________________ G. A. Gorman, President May 14, 1996 /s/ A. P. Kimble Date______________________ _________________________________________ A. P. Kimble, Vice President, Secretary & Treasurer 7 EX-11 2 COMPUTATION OF EARNINGS NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES Exhibit No. (11) - Statement - computation of per share earnings Statement of Computations of Earnings per Share
For the Three Months Ended March 31 -------------------- 1996 1995 ------ ------ Net earnings $3,056,000 $2,685,000 ========== ========== Average common shares outstanding 7,520,000 7,520,000 ========== ========== Earnings per share of common stock $ .41 $ .36 ========== ==========
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM March 31, 1996 Quarterly Report AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1995 JAN-01-1996 MAR-31-1996 12,043 6,425 9,212 0 2,049 30,371 113,741 54,792 97,123 11,170 21,501 2,350 0 0 50,181 97,123 721 14,865 671 9,608 0 0 395 5,067 2,011 3,056 0 0 0 3,056 .41 .41
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