-----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, FWyHr9GLSZ38CWDufNEI5aiHLGJi0+C187c7lN/l4DUXLQ0NVYRnK/4tJR23qLBG eLwMZQpIw1HHMiSk3OdRVw== 0000950132-97-000325.txt : 19970428 0000950132-97-000325.hdr.sgml : 19970428 ACCESSION NUMBER: 0000950132-97-000325 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970425 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: 97587400 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, 1997 ---------------------------------------- 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 (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, and (2) has been subject to such filing requirements for the past 90 days. YES X NO __________ -------- APPLICABLE ONLY TO CORPORATE USERS: 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 April 25, 1997, the Registrant had 15,040,000 shares of common stock outstanding, par value $.15625 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 -------------------- 1997 1996 -------- --------- Operating revenues: Local network services $ 2,340 $ 2,114 Long distance and access services 10,873 10,465 Directory advertising, billing & other services 586 548 Telecommunication equipment sales 607 721 Other operating revenues 2,181 1,017 -------- --------- Total Operating Revenues 16,587 14,865 -------- --------- Operating expenses: Network and other operating expenses 7,018 5,966 Depreciation and amortization 2,603 2,307 State and local taxes 779 664 Telecommunication equipment expenses 550 671 -------- --------- Total Operating Expenses 10,950 9,608 -------- --------- Net Operating Revenues 5,637 5,257 Other expense (income), net: Interest expense 420 395 Interest income (150) (197) Sundry expense (income), net 10 (8) -------- --------- 280 190 -------- --------- Earnings before income taxes 5,357 5,067 Income taxes: Current 2,162 2,011 Deferred - - -------- --------- 2,162 2,011 -------- --------- Net earnings $ 3,195 $ 3,056 ======== ========= Average common shares outstanding 15,040 15,040* ======== ========= Earnings per share of common stock $.21 $.20* ======== ========= Dividends per share of common stock $.14 $.13* ======== =========
*Adjusted for a 2 for 1 stock split-up effective May 22, 1996. See accompanying notes to condensed consolidated financial statements. 1 NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Thousands of Dollars)
ASSETS Mar. 31 Dec. 31 - ------ 1997 1996 --------- -------- Current Assets: Cash and temporary investments $ 10,764 $ 11,313 Marketable securities available for sale 257 329 Marketable securities held to maturity 351 451 Accounts receivable: Customers 4,698 4,090 Access service settlements and other 6,251 5,270 Prepaid Expenses 97 163 Inventories of construction and operating materials and supplies 3,407 3,169 Prepaid taxes 702 - --------- -------- Total current assets 26,527 24,785 --------- -------- Property, plant and equipment Land 506 357 Buildings 11,679 11,834 Equipment 110,970 108,878 --------- -------- 123,155 121,069 Less accumulated depreciation and amortization 62,562 60,333 --------- -------- 60,593 60,736 Construction in progress 6,011 4,858 --------- -------- Total property, plant and equipment, net 66,604 65,594 Investments 5,763 5,763 Deferred financing costs 1,030 1,055 Prepaid pension cost 1,234 622 Other assets 1,446 1,704 --------- -------- $102,604 $ 99,523 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Current portion of long-term debt $ 765 $ 753 Obligations under capital lease 186 191 Accounts payable 5,523 4,702 Accrued interest 119 119 Dividend payable 2,106 1,955 Taxes other than income taxes 494 657 Accrued vacation 704 705 Other liabilities 517 632 Federal and state income taxes 2,161 670 --------- -------- Total current liabilities 12,575 10,384 --------- -------- Long-term debt 20,736 20,937 Obligations under capital lease 305 374 Unamortized investment tax credits 344 369 Deferred income taxes 5,974 5,969 Postretirement benefits 4,562 4,497 Other liabilities 1,707 1,687 Shareholders' equity: Capital stock/Common stock 2,350 2,350 Capital in excess of par value 2,215 2,215 Retained earnings 51,813 50,724 Unrealized gain (loss) on available for sale securities, net 23 17 --------- -------- Total shareholders' equity 56,401 55,306 --------- -------- $102,604 $ 99,523 ========= ========
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 -------------------- 1997 1996 ---------- --------- Cash from operating activities: Net earnings $ 3,195 $ 3,056 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 2,603 2,310 Gain on sale of marketable securities (12) - Provision for postretirement benefits other than pensions 65 56 Investment tax credit amortization (25) (25) Changes in assets and liabilities: Accounts receivable (1,589) (367) Inventories of construction and operating materials & supplies (238) 331 Prepaid federal and state taxes (702) (642) Accounts payable 821 (1,247) Taxes other than income taxes (163) (129) Other liabilities, accrued interest and accrued vacation (96) (122) Federal and state income taxes 1,491 1,521 Deferred financing costs, prepaid pension costs and other assets (329) 990 Other, net 154 (71) ---------- --------- Total adjustments 1,980 2,605 ---------- --------- Net cash from operating activities 5,175 5,661 ---------- --------- Cash used for investing activities: Expenditures for property and equipment (3,702) (2,665) Net salvage on retirements 2 22 ---------- --------- Net capital additions (3,700) (2,643) ---------- --------- Proceeds from redemption of marketable securites held to maturity 100 1,200 Purchase of marketable securities available for sale (55) (65) Proceeds from sale of marketable securities available for sale 149 510 Investments in affiliated entities - - ---------- --------- Net cash used for investing activities (3,506) (998) ---------- --------- Cash used for financing activities: Cash dividends (1,955) (1,805) Retirement of debt (189) (174) Payment on capital lease obligations (74) - ---------- --------- Net cash used for financing activities (2,218) (1,979) ---------- --------- Net (decrease) increase in cash and temporary investments (549) 2,684 Cash and temporary investments at beginning of period 11,313 9,359 ---------- --------- Cash and temporary investments at end of period $10,764 $12,043 ========== ========= Interest paid $ 395 $ 371 ========== ========= Income taxes paid $ 667 $ 557 ========== ========= Fixed assets acquired under capital leases $ - $ - ========== =========
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, 1996 to March 31, 1997, 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, 1997 amounted to approximately $2,033,000 with such amount being part of the 1997 Construction Program of $23 million to $26 million. Funds for financing construction expenditures in the three-month period ended March 31, 1997 were generated from internal sources. Based on its 1997 construction budget, preliminary construction budget for 1997 and projected cash flows, North Pittsburgh anticipates cash flows provided by operating activities and cash reserves in 1997 to service long-term debt, to pay dividends and to finance approximately 25% of capital additions. The balance of capital additions will be financed from new borrowings. Beginning in the second quarter of 1997, a portion of the funds used for construction are expected to be obtained from new debt financing from the Rural Utilities Service. At March 31, 1997, construction work in progress was $6,010,000. An additional $5,736,000 is expected to 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) continues its work on Rulemakings related to the Telecommunications Act of 1996 (1996 Act) and the Pennsylvania Public Utility Commission (PA PUC) is proceeding to finalize its course of action to fully implement the 1996 Act, 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 Company recently joined with seventeen (17) other rural companies in Pennsylvania to file a Petition with the PA PUC requesting a temporary suspension of the interconnection requirements of Section 251 of the 1996 Act for a two-year period following resolution of the FCC's Universal Service and Access Reform Orders. The Petition was filed February 20, 1997, and the PA PUC is expected to act on such Petition by August 19, 1997. The 1996 Act, FCC and PA PUC regulatory proceedings 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 $1,722,000 (11.6%) in the three-month period ended March 31, 1997 over the comparable period in 1996. This change was due to increases in long distance and access services of $408,000 (3.9%), local network services of $226,000 (10.7%), other operating revenues of $1,164,000 (114.4%) offset by a decrease in telecommunication equipment sales of $114,000 (15.8%). 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, growth in second lines and expanded penetration of enhanced services. The increase in other operating revenues is primarily due to the growth of Pinnatech's Internet services and MCSI's consulting and outsourcing services. Telecommunication equipment sales fluctuate from period to period depending on the sale of large systems. Total operating expenses for the three-month period ended March 31, 1997, increased $1,342,000 (14.0%) over the preceding year. That change is principally the result of an increase in network and other operating expenses of $1,052,000 (17.6%), an increase in depreciation and amortization of $296,000 (12.8%) offset by a decrease in telecommunication equipment expenses of $121,000 (18.0%). Approximately $979,000 of the $1,052,000 increase in network and other operating expenses was directly associated with the increase in other operating revenues of $1,164,000 discussed above. The increase in depreciation and amortization is the direct result of the growth in fixed assets to serve current and future customer needs. The decrease in telecommunication equipment expenses is related to the decrease in equipment sales discussed above. The increase in total operating revenues discussed above coupled with the increase in total operating expenses resulted in a 7.2% increase in net operating revenues in 1997 as compared to the same period in 1996. Interest income decreased $47,000 primarily due to decreased levels of investment in such instruments. The increase in net operating revenues for the three-month period ended March 31, 1997, in conjunction with the increase in Sundry income, net, resulted in an increase of $290,000 (5.7%) 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) (i) Articles of Incorporation Provided in Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and Incorporated Herein by Reference. (3) (ii) By-Laws Provided in Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 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 Attached Hereto computation of per share earnings (15) Letter re unaudited Not Applicable interim financial information (18) Letter re change in accounting Not Applicable principles (19) Report furnished to Not Applicable security holders (22) Published report Not Applicable regarding matters submitted to a vote of security holders (23) Consents of experts Not Applicable and counsel (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, 1997. 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) Date April 25, 1997 /s/ A. P. Kimble --------------------- ---------------------------------- A. P. Kimble, Vice President, Secretary & Treasurer Date April 25, 1997 /s/ N. W. Barthlow --------------------- ---------------------------------- N. W. Barthlow, Vice President and Assistant Secretary 7 EX-11 2 COMPUTATION OF PER SHARE EARNINGS Exhibit No. (11) NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES Statement - computation of per share earnings Statement of Computations of Earnings per Share
For the Three Months Ended March 31 --------------------------------------- 1997 1996 --------------- ---------------- Net Earnings $3,195,000 $ 3,056,000 ========== =========== Average common shares outstanding 15,040,000 15,040,000* ========== =========== Earnings per share of common stock $ .21 $ .20* ========== ===========
*Adjusted for a 2 for 1 stock split-up effective May 22, 1996. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31, 1997 QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 10,764 608 10,949 0 3,407 26,527 129,166 62,562 102,604 12,575 20,736 2,350 0 0 54,051 102,604 607 16,587 550 10,950 0 0 420 5,357 2,162 3,195 0 0 0 3,195 .21 .21
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