-----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, jgbKIElxKeZMW2uFpKf2dptWWypPWLQUXtKFkZxQhssXt/JgeGm5xOM4dQl0PEol cdTMSV/BFPp0YVW02QsBBQ== 0000085153-94-000016.txt : 19940531 0000085153-94-000016.hdr.sgml : 19940531 ACCESSION NUMBER: 0000085153-94-000016 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: ROSEVILLE TELEPHONE CO CENTRAL INDEX KEY: 0000085153 STANDARD INDUSTRIAL CLASSIFICATION: 4813 IRS NUMBER: 940817190 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00556 FILM NUMBER: 94527533 BUSINESS ADDRESS: STREET 1: P O BOX 969 CITY: ROSEVILLE STATE: CA ZIP: 95678-0969 BUSINESS PHONE: 9167861407 MAIL ADDRESS: STREET 2: POST OFFICE BOX 969 CITY: ROSEVILLE STATE: CA ZIP: 95678-0969 10-Q 1 THE 1ST QTR 10-Q FOR 1994 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal quarter ended March 31, 1994 [ ]TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-556 ROSEVILLE TELEPHONE COMPANY (Exact name of registrant as specified in its charter) California 94-0817190 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 211 Lincoln Street, Roseville, California 95678 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (916) 786-6161 Securities registered pursuant to Section 12(g) of the Act: Common Stock - Without Par Value (Title of class) 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 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of April 30, 1994, 13,399,194 shares of the registrant's Common Stock were outstanding. ROSEVILLE TELEPHONE COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. General The condensed consolidated financial statements of Roseville Telephone Company (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results for the interim periods shown. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations and generally accepted accounting principles applicable for interim periods. Management believes that the disclosures made are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1993 Annual Report to Shareholders. 2. Cash Equivalents and Short-Term Investments The Company invests its excess cash in high-quality debt instruments and certain other investments. The Company considers highly liquid investments with maturities of three months or less from the acquisition date of the instrument to be cash equivalents. Short-term investments consist primarily of certificates of deposit and commercial paper with maturities greater than 90 days; however, none of the Company's investments have maturities greater than one year. The Company has no investments in equity securities. Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities"("SFAS No. 115"). Under SFAS No. 115, management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. At March 31, 1994 and January 1, 1994, all debt securities are designated as held-to-maturity as management believes it has the positive intent and ability to hold the securities until maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization, as well as any interest on the securities, is included in interest income. The adoption of SFAS No. 115 had no effect on the Company's current or prior period financial statements. Following is a summary of the Company's investments by major security type at amortized cost which approximates fair value (in thousands): January 1, March 31, 1994 1994 Corporate debt securities $ 12,876 $ 15,835 Certificate of deposit $ 3,008 $ - U.S. Government agency note $ 983 $ 983 Amounts included in cash and cash equivalents $ 7,947 $ 6,944 Amounts included in short-term investments 8,920 9,874 $ 16,867 $ 16,818 ROSEVILLE TELEPHONE COMPANY PART I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Operating Revenues: Operating revenues increased approximately $1.4 million, or 6% for the three months ended March 31, 1994 compared to the same period in 1993. The increase in operating revenues was principally due to 1) growth in access lines of 4.4%, 2) higher settlements from the National Exchange Carrier Association for recovery of increased costs and investment, and 3) higher intrastate access revenues resulting from increased message volumes. Operating Expenses: Operating expenses for the three months ended March 31, 1994 increased approximately $2.0 million, or 14% compared to the same period in 1993. The increase was due primarily to a combination of 1) software purchases and improvements in the Company's data systems to implement movement from a mainframe platform to a client/server platform and to implement a wide area network, 2) normal inflationary factors, and 3) increased costs associated with serving a larger number of access lines. In addition, Depreciation expense increased $1.3 million to $4.4 million for the three months ended March 31, 1994, attributable to the growth in property, plant and equipment and anticipated increases in depreciation rates. Other Income (Expense), Net: Other income (expense), net, increased $280,000 for the three months ended March 31, 1994 compared to the same period in 1993. The net change was due to an increase of $600,000 in the Company's income attributable to its interest in Sacramento-Valley Limited Partnership, offset by increased interest on long-term debt due to larger borrowings and a decrease in the allowance for funds used during construction. Income Taxes: Income tax expense for the three months ended March 31, 1994 decreased $65,000 compared to the same period in 1993, due to the decrease in income subject to income tax. The effective federal and state income tax rate was approximately 40% for the three months ended March 31, 1994 and 1993. Liquidity and Capital Resources: As reflected in the Consolidated Statements of Cash Flows, cash and cash equivalents increased approximately $2.6 million for the three months ended March 31, 1994. Capital expenditures of $3.5 million were due to on-going plant construction projects. Cash flows to meet the remaining 1994 budgeted capital expenditures of approximately $17.7 million are anticipated to be met from both positive net cash generated from operations and existing cash, cash equivalents and short-term investments. Competition: The Company believes it meets the criteria of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS No. 71"), which requires the Company to give effect in its financial statements to certain actions of regulators. Accordingly, the Company's consolidated financial statements have been prepared on that basis. As a result of increasing competition and rapid changes in the telecommunications industry, the Company periodically monitors whether it continues to meet the criteria which require the use of SFAS No. 71. In the future, should the Company determine it no longer meets the SFAS No. 71 criteria, a material, extraordinary, noncash charge would result. PART II Item 1. Regulatory and Legal Proceedings Except for the proceedings described below the Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which it is a party or to which any of its property is subject. The Company is subject to regulation by the Federal Communications Commission (the "F.C.C.") and the Public Utilities Commission of the State of California (the "P.U.C."). In the past, there have been various proceedings before these agencies to which the Company has been a party. The regulatory proceedings discussed below relate to matters which may effect the Company prospectively and are not expected to effect the Company's interim financial statements at March 31, 1994. In March 1985, the P.U.C. commenced an investigation into the "rates, tolls, rules, charges, operations, costs, separations, intercompany settlements, contracts, service and facilities of the operations of independent telephone companies" (I. 85-03-078), and consolidated this investigation with Application No. 85-01-034 of Pacific Bell. In connection with the application, the P.U.C. issued an interim rate design effective in 1988 for Pacific Bell which resulted in a local rate increase for the Company and a decrease in settled toll revenues. The P.U.C. has stated that it will order a final rate design during 1994, in conjunction with I. 87-11-033 discussed below, which could have a material impact on the sources and amount of the Company's revenues. The P.U.C. has instituted an investigation (I. 87-11-033) into the manner in which it regulates local exchange carriers, including the Company. In the course of this investigation, it will consider whether certain services presently provided solely by the Company within its LATA should be open to competition. In the course of this current proceeding the Company has proposed adjustments to its rates that would maintain revenues at their present level, while the P.U.C. staff has proposed a revenue reduction of approximately $6 million. A July 1991 decision of the P.U.C. ordered a phase-down of settlement pool payments after January 1, 1993. The Company completed negotiations and has entered into new agreements with Pacific Bell to replace these settlement procedures effective as of January 1, 1992. In addition, the July 1991 decision expressed the Commission's expectation that the Company will file a general rate proceeding, including a request for regulation under the new incentive-based regulatory framework. As a result of delays in issuing a final order, the Company expects to submit a test year 1995 general rate case application during calendar year 1994. In April 1993, the P.U.C. opened an investigation and rulemaking proceeding (R. 93-04-003) to establish rules that will provide non-discriminatory access by competing service providers to the network capabilities of local exchange carriers. The P.U.C. proposed applying these rules to the five largest local exchange carriers in California, including the Company. In connection with this proceeding, the P.U.C. issued a further order in August 1993 proposing additional rules to allow broader competition in the provision of specific special access and switched transport services. The Company has filed comments and expects a decision during 1994. In November 1993, the P.U.C. issued a report to the Governor of the State of California in which it proposed opening all markets to competition by January 1, 1997. Specifically, the P.U.C. proposed streamlining regulation and eliminating all remaining legal barriers to competition for telecommunications services in order to accelerate the pace of innovation in the California telecommunications marketplace. There are a number of regulatory proceedings occurring at the federal level that may have a material impact on the Company. These regulatory proceedings include, but are not limited to, implementation of revised separations procedures that shift revenue requirements and costs between interstate and intrastate jurisdictions and implementation of revised procedures to allocate costs between regulated and non-regulated operations. In addition, the F.C.C. periodically establishes the authorized rate of return for interstate access services, which in 1994 will remain at the 1993 rate of 11.25%. In September 1992, the F.C.C. issued an order, which is currently under appeal, granting to competitors expanded interconnection rights to the facilities of local exchange carriers with annual revenues from regulated operations in excess of $100 million. While not yet applicable to the Company, this order will permit competitors to terminate their own facilities in telephone company central offices to which the order applies. In addition, the F.C.C. initiated a separate notice of proposed rulemaking establishing a two-phased proceeding to modify interstate access rate structures to further competition in the provision of interstate services. These two proceedings may broaden the scope of competition in the provision of interstate services, the effects of which on the Company cannot yet be determined. The Company is subject to certain legal proceedings and claims arising in the ordinary course of its business. In the opinion of management, any liability which may ultimately be incurred with respect to these matters will not materially affect the consolidated financial position or results of operations of the Company. PART I. FINANCIAL INFORMATION Item 1. Financial Statements ROSEVILLE TELEPHONE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Quarter Ended Quarter Ended March 31, 1993 March 31, 1994 =============== =============== Operating Revenues $24,016,000 $25,460,000 Operating Expenses 14,353,000 16,373,000 --------------- --------------- Income From Operations 9,663,000 9,087,000 Other Income (Expense), Net (204,000) 76,000 --------------- --------------- Income Before Income Taxes 9,459,000 9,163,000 Income Taxes 3,742,000 3,677,000 --------------- --------------- NET INCOME $5,717,000 $5,486,000 =============== =============== Per Share of Common Stock Net Income $0.43 $0.41 Cash Dividends $0.14 $0.15 Shares of common stock used to calculate per share data 1/ 13,399,194 13,399,194 1/ Shares used in the computation of net income and cash dividends per share of common stock are based on the weighted average number of shares outstanding after giving retroactive effect to a 5% stock dividend issued in December 1993. ROSEVILLE TELEPHONE COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS December 31, 1993 March 31, 1994 ----------------- -------------- ASSETS (UNAUDITED) Current Assets: Cash and Cash Equivalents $9,847,000 $12,426,000 Short-term Investments 8,920,000 9,874,000 Accounts Receivable, Net 16,109,000 13,520,000 Inventories 1,115,000 1,227,000 Prepaid Expenses and Other Current Assets 2,507,000 1,793,000 ----------------- --------------- Total Current Assets 38,498,000 38,840,000 Property, Plant and Equipment, Net 168,571,000 167,746,000 Investments and Other Assets: Cellular Partnership 17,327,000 19,481,000 Deferred Charges and Other Assets 2,063,000 2,057,000 ----------------- --------------- Total Investments and Other Assets 19,390,000 21,538,000 ----------------- --------------- $226,459,000 $228,124,000 ================= =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable and Accrued Liabilities $19,143,000 $16,935,000 Long-term Debt 40,000,000 40,000,000 Deferred Credits 24,395,000 24,792,000 Shareholders' Equity: Common Stock, without par value; 20,000,000 shares authorized, 13,399,194 shares issued and outstanding 130,287,000 130,287,000 Retained Earnings 12,634,000 16,110,000 ----------------- --------------- Total Shareholders' Equity 142,921,000 146,397,000 $226,459,000 $228,124,000 ================= =============== ROSEVILLE TELEPHONE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (UNAUDITED)
Three Months Ended Three Months Ended March 31, 1993 March 31, 1994 ------------------ ------------------ Net cash provided by operating activities: $11,071,000 $10,482,000 Cash flows from investing activities: Purchases of short-term investments - (3,962,000) Maturities of short-term investments - 3,008,000 Capital expenditures for property, plant and equipment (3,755,000) (3,535,000) Investment in cellular partnership (1,387,000) (1,410,000) Changes in deferred charges and other assets (93,000) 6,000 ------------------- ------------------- Net cash used in investing activities (5,235,000) (5,893,000) Cash flows from financing activities: Dividends paid (1,915,000) (2,010,000) ------------------- ------------------- Net cash used in financing activities (1,915,000) (2,010,000) ------------------- ------------------- Net increase in cash and cash equivalents 3,921,000 2,579,000 Cash and cash equivalents at beginning of period 11,200,000 9,847,000 ------------------- ------------------- Cash and cash equivalents at end of period $15,121,000 $12,426,000 =================== ===================
Item 6. Exhibits and Reports on Form 8-K a) None. b) No reports on Form 8-K were filed during the first quarter of 1994. 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. ROSEVILLE TELEPHONE COMPANY (Registrant) Date: May 12, 1994 By: Brian H. Strom, President and Chief Executive Officer Date: May 12, 1994 By: Michael D. Campbell, Vice-President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----