-----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, S+KTiJCkt6z2qpAH6oO9Mob2ldGYyDRPK6spoiiqhq59EilAoZq+k0zDr4z5/+LA 7dj6XdxYqZ0UdGpkw/xLYw== 0000085153-94-000021.txt : 19940823 0000085153-94-000021.hdr.sgml : 19940823 ACCESSION NUMBER: 0000085153-94-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 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: 94543352 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901 (d) OF REGULATION S-T 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 June 30, 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 July 31, 1994, 13,399,194 shares of the registrant's Common Stock were outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements ROSEVILLE TELEPHONE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter Ended Six Months Ended Quarter Ended Six Months Ended June 30, 1993 June 30, 1993 June 30, 1994 June 30, 1994 =============== ================= ============== ================== Operating Revenues $23,842,000 $47,858,000 $25,368,000 $50,828,000 Operating Expenses 13,766,000 28,119,000 16,734,000 33,107,000 --------------- ----------------- -------------- ------------------ Income From Operations 10,076,000 19,739,000 8,634,000 17,721,000 Other Income, Net 483,000 279,000 455,000 531,000 --------------- ----------------- -------------- ------------------ Income Before Income Taxes 10,559,000 20,018,000 9,089,000 18,252,000 Income Taxes 4,158,000 7,900,000 3,687,000 7,364,000 --------------- ----------------- -------------- ------------------ NET INCOME $6,401,000 $12,118,000 $5,402,000 $10,888,000 =============== ================= ============== ================== Per Share of Common Stock Net Income $0.45 $0.86 $0.38 $0.77 Cash Dividends $0.14 $0.27 $0.14 $0.29 Shares of common stock used to calculate per share data 1/ 14,069,154 14,069,154 14,069,154 14,069,154 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 declared in June 1994 to be issued in December 1994.
ROSEVILLE TELEPHONE COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS December 31, 1993 June 30, 1994 ----------------- ------------- ASSETS (UNAUDITED) Current Assets: Cash and Cash Equivalents $9,847,000 $11,460,000 Short-term Investments 8,920,000 13,837,000 Accounts Receivable, Net 16,109,000 13,439,000 Inventories 1,115,000 1,304,000 Prepaid Expenses and Other Current Assets 2,507,000 1,644,000 ----------------- ------------- Total Current Assets 38,498,000 41,684,000 Property, Plant and Equipment, Net 168,571,000 167,244,000 Investments and Other Assets: Cellular Partnership 17,327,000 19,448,000 Deferred Charges and Other Assets 2,063,000 2,509,000 ----------------- ------------- Total Investments and Other Assets 19,390,000 21,957,000 ----------------- ------------- $226,459,000 $230,885,000 ================= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable and Accrued Liabilities $19,143,000 $15,763,000 Current Portion of Long-Term Debt - 893,000 Total Current Liabilities 19,143,000 16,656,000 Long-term Debt 40,000,000 39,107,000 Deferred Credits 24,395,000 25,333,000 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 Stock Dividend Distributable, 669,960 shares at $24 per share - 16,079,000 Retained Earnings 12,634,000 3,423,000 Total Shareholders' Equity 142,921,000 149,789,000 ----------------- ------------- $226,459,000 $230,885,000 ================= ============= ROSEVILLE TELEPHONE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (UNAUDITED)
Six Months Ended Six Months Ended June 30, 1993 June 30, 1994 ---------------- ---------------- Net cash provided by operating activities: $14,273,000 $18,635,000 Cash flows from investing activities: Purchases of short-term investments - (17,799,000) Maturities of short-term investments - 12,882,000 Capital expenditures for property, plant and equipment (10,531,000) (7,302,000) Investment in cellular partnership (901,000) (337,000) Changes in deferred charges and other assets (76,000) (446,000) ---------------- ---------------- Net cash used in investing activities (11,508,000) (13,002,000) Cash flows from financing activities: Dividends paid (3,830,000) (4,020,000) ---------------- ---------------- Net cash used in financing activities (3,830,000) (4,020,000) ---------------- ---------------- Net increase (decrease) in cash and cash equivalents (1,065,000) 1,613,000 Cash and cash equivalents at beginning of period 11,200,000 9,847,000 ---------------- ---------------- Cash and cash equivalents at end of $10,135,000 $11,460,000 period ================ ================
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. Stock Dividend Payable On June 29, 1994, the Board of Directors of the Company adopted a resolution, subject to the approval of the Public Utilities Commission of the State of California ("the P.U.C."), declaring a stock dividend of five percent (5%) on the common stock of the Company, payable as soon as practicable after December 1, 1994 to stockholders of record of the Company at the close of business on such date. Accordingly, 669,960 shares estimated to be distributable have been reflected on the accompanying condensed consolidated balance sheet at June 30, 1994, and have been included in the computation of net income and cash dividends per share for all periods presented. 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 $1.5 million, or 6% for the three months ended June 30, 1994 compared to the same period in 1993. For the six months ended June 30, 1994, operating revenues increased approximately $3.0 million or 6%, compared to the same period in 1993. The increases in operating revenues were due primarily to the combined effects of 1) growth in access lines of 4.6%, 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. In July 1994, the P.U.C. issued an Implementation Rate Design Draft Decision(the "Draft Decision"), which, if adopted, would authorize toll competition within the Company's Local Access Transport Area("LATA") commencing January 1, 1995. The Draft Decision would also result in decreases in the Company's access rates and other charges to interexchange carriers, which would be partially offset by increases in basic exchange rates and other revenue sources. Furthermore, the Draft Decision would require the Company to file a rate case by December 31, 1994. Based on calculations by the P.U.C., the Draft Decision, if adopted in its present form, was designed to result in a $5.3 million reduction in the Company's annual revenues commencing January 1, 1995. To avoid potential adverse effects on future results of operations, the Company must either obtain other sources of revenues, increase productivity or both. The Company is in disagreement with certain aspects of the Draft Decision and has filed comments in an effort to obtain revisions to the Draft Decision prior to its adoption in final form. Operating Expenses: Operating expenses for the three months ended June 30, 1994 increased approximately $3.0 million, or 22% compared to the same period in 1993. For the six months ended June 30, 1994, operating expenses increased approximately $5.0 million or 18%, compared to the same period in 1993. Depreciation expense increased $2.5 million to a total of $8.6 million for the six months ended June 30,1994, attributable to the growth in property, plant and equipment and anticipated increases in depreciation rates. The remaining increases were 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 combined with a 5% increase in workforce, and 3) increased costs associated with serving a larger number of access lines. Other Income, Net: Other income, net, decreased approximately $28,000 or 6%, for the three months ended June 30, 1994, compared to the same period in 1993. For the six months ended June 30, 1994, other income, net, increased approximately $252,000 or 90%, compared to the same period in 1993. The net year to date increase was due primarily to an increase of $957,000 in the Company's income attributable to its interest in Sacramento-Valley Limited Partnership, offset by increased interest expense on long-term debt of $484,000 due to larger borrowings and a decrease in the allowance for funds used during construction of $353,000. Income Taxes: Income tax expense for the three months ended June 30, 1994 decreased $471,000 or 11%, compared to the same period in 1993. For the six months ended June 30, 1994, income tax expense decreased $536,000 or 7%, compared to the same period in 1993. The net decrease was due to a decrease in income subject to income tax. The effective federal and state income tax rate was approximately 40% for the six months ended June 30, 1994 and 1993. Liquidity and Capital Resources: As reflected in the accompanying Condensed Consolidated Statements of Cash Flows, net cash provided by operating activities amounted to $18.6 million and $14.3 million for the six month periods ended June 30, 1994 and 1993, respectively. The increase in 1994 is due primarily to a reduction in accounts receivable as a result of completion in certain contracts with Pacific Bell. During the six months ended June 30, 1994, the Company used cash flows from operations and existing cash, cash equivalents and short-term investments to fund capital expenditures of $7.3 million pertaining to on-going plant construction projects. Cash flows to meet the remaining 1994 budgeted capital expenditures of approximately $10.1 million are anticipated to be met from both positive net cash generated from operations and existing cash, cash equivalents and short-term investments. The Company filed an application with the P.U.C. to obtain approval for the issuance of up to 400,000 shares of its common stock to the Roseville Telephone Company Retirement Supplement Plan (the "Plan"). Assuming all necessary approvals are obtained, and all shares for which approvals have been sought are issued and sold, proceeds of up to $10 million from the issuance of common stock to the Plan are anticipated. These proceeds would be used for future capital expenditures, participation in more recent wireless technologies, and general corporate purposes. 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 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 affect the Company prospectively and are not expected to effect the Company's interim financial statements at and for the six months ended June 30, 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 $5.3 million. In July 1994, the P.U.C. issued a Draft Decision in this investigation. See "Part I, Item 2"; "Management's Discussion and Analysis of Financial Condition and Results of Operations". The Company expects a final decision to be issued in September 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 and legislative initiatives occurring at the federal level that may have a material impact on the Company. These proceedings include implementation of revised separations procedures, modification of interstate access rate structures, and expanded interconnection through physical or virtual collocation. These proceedings, as well others aimed at increasing competition within various telecommunication markets, including cable television, may broaden the scope of competition in the provision of interstate services, the effects of which 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. Item 6. Exhibits and Reports on Form 8-K a) None. b) No reports on Form 8-K were filed during the second 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: August 12, 1994 By: Brian H. Strom, President and Chief Executive Officer Date: August 12, 1994 By: Michael D. Campbell, Vice-President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----