<PAGE>
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 quarterly period ended June 30, 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 333-23435
CHORUS COMMUNICATIONS GROUP, LTD.
(Exact Name of Registrant as Specified in its Charter)
WISCONSIN 39-1880843
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1912 Parmenter Street, P.O. Box 620070, Middleton, Wisconsin 53562-0070
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (608)828-2000
No Change
Former name or former address, if changed since last report
Indicate by checkmark 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 _____ No X
As of June 30, 1997, there were 2,684,303 shares of no par value
Common Stock outstanding.<PAGE>
PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements
CHORUS COMMUNICATIONS GROUP, LTD.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(Dollars in thousands,
except per share amounts) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues and Sales
Local services $2,031 $1,499 $4,003 $2,956
Network access services 3,465 3,461 6,700 6,868
System sales and services 1,574 1,518 3,115 3,433
Other services and sales 1,926 1,423 3,546 2,728
Total revenues and sales 8,996 7,901 17,364 15,985
Operating Costs and Expenses
Cost of services and sales 2,434 1,977 4,949 4,410
Selling, general
and administrative 2,839 2,718 5,747 5,142
Depreciation 1,168 1,064 2,333 2,114
Total operating costs
and expenses 6,441 5,759 13,029 11,666
Operating Income 2,555 2,142 4,335 4,319
Interest expense (315) (334) (673) (667)
Other income, net 99 65 176 94
Income before income taxes and
extraordinary item 2,339 1,873 3,838 3,746
Income taxes 894 688 1,413 1,405
Income before extraordinary item 1,445 1,185 2,425 2,341
Extraordinary item - (1,782) - (1,782)
Net Income (Loss) 1,445 (597) 2,425 559
Earnings (Loss) Per Common Share
Before extraordinary item 0.54 0.44 0.90 0.87
Extraordinary item (0.66) (0.66)
Net Income (Loss) 0.54 (0.22) 0.90 0.21
Average common shares
outstanding (in thousands) 2,684 2,678 2,684 2,676
Dividends per share $0.34 $0.20 $0.54 $0.39
The accompanying notes are an integral part of the financial statements.
(UNAUDITED)
</TABLE>
<PAGE>
CHORUS COMMUNICATIONS GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) June 30, December 31,
1997 1996
<TABLE>
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents 1,831 1,902
Temporary investments 3,300 3,200
Accounts receivable
Due from customers 2,995 2,699
Other, principally connecting companies 2,413 1,977
Inventories
Plant materials and supplies 640 663
Communication systems and parts 924 899
Other 560 826
Total current assets 12,663 12,166
Property, Plant and Equipment, at cost
Property, Plant and Equipment 64,290 62,547
Accumulated depreciation (29,445) (28,145)
Total property, plant and equipment, net 34,845 34,402
Investments and Other Assets
Cellular limited partnership interest 4,041 4,168
Personal Communication Services (PCS) license 3,327 -
Deferred charges and other assets 1,006 969
Total investments and other assets 8,374 5,137
Total assets 55,882 51,705
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt 381 383
Short-term debt 279 -
Accounts payable 3,230 3,723
Other 1,415 1,151
Total current liabilities 5,305 5,257
Long-term debt, excluding current portion 18,504 15,477
Deferred income taxes 3,240 3,332
Other liabilities 1,269 1,154
Total liabilities 28,318 25,220
Commitments and contingencies (see notes)
Shareholders' Equity
Common stock - 25,000,000 shares authorized,
2,684,303 shares issued at June 30, 1997 13,868 13,765
Retained earnings 13,696 12,720
Total shareholders' equity 27,564 26,485
Total liabilities and shareholders' equity 55,882 51,705
The accompanying notes are an integral part of the financial statements.
(UNAUDITED)
</TABLE>
<PAGE>
CHORUS COMMUNICATIONS GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOW
Six Months Ended
June 30, June 30,
(Dollars in thousands) 1997 1996
<TABLE>
<S> <C> <C>
OPERATIONS
Income before extraordinary item $2,425 $2,341
Adjustments to reconcile income before
extraordinary item to net cash
from operations:
Depreciation 2,333 2,114
Deferred income taxes (92) 198
Changes in current assets and
current liabilities:
Receivables - net (732) (261)
Inventories - net (2) (35)
Payables - net (493) (978)
Other - net 608 582
Net cash from operations 4,047 3,961
INVESTING
Capital expenditures (2,899) (2,791)
Cellular investment 127 -
PCS License (729) -
Other - net 23 124
Net cash used in investing (3,478) (2,667)
FINANCING
Common stock issued 103 84
Dividends paid (1,449) (1,034)
Long-term debt issued 745 -
Long-term debt repaid (318) (560)
Increase (decrease) in short-term obligations,
excluding current maturities 279 148
Net cash used in financing (640) (1,362)
Decrease in cash and cash equivalents (71) (68)
Cash and cash equivalents:
Beginning of period 1,902 1,220
End of period $1,831 $1,152
Cash paid during the period for
Interest 670 648
Income taxes 1,122 844
The accompanying notes are an integral part of the financial statements.
(UNAUDITED)
</TABLE>
<PAGE>
CHORUS COMMUNICATIONS GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
UNAUDITED
1. CONSOLIDATED FINANCIAL STATEMENTS
The 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, although the Company believes that the disclosures
are adequate to make the information presented not misleading.
These financial statements reflect the merger of two companies
accounted for as a pooling of interest (see Note 2). It is
suggested that these financial statements be read in conjunction
with the Mid-Plains, Inc. (Mid-Plains) and Pioneer Communications,
Inc. (Pioneer) Joint Proxy Statement/Prospectus, dated March 17,
1997, and Mid-Plains' Form 10-Q as of and for the three months
ended March 31, 1997.
In the opinion of management, the information furnished reflects
all adjustments, consisting only of normal recurring accruals,
which are necessary for a fair statement of the results for the
interim periods.
2. MERGER
Effective June 1, 1997, Mid-Plains and Pioneer have merged into
subsidiaries of a new holding company, Chorus Communications Group,
Ltd. (Chorus) (the "Mergers"). Pursuant to the Mergers, Mid-Plains
shareholders received one (1) share of Chorus common stock for each
share of Mid-Plains common stock; Pioneer shareholders received
four (4) shares of Chorus common stock for each share of Pioneer
common stock. The Mergers have been accounted for as a pooling-of-
interests and, accordingly, historical financial data has been
reported as if the companies have always been one.
Combined and separate results of Mid-Plains and Pioneer during the
periods preceding the Mergers were as follows:
<TABLE>
(Unaudited) Total Revenues Net
(In thousands) and Sales Income
<S> <C> <C>
Three months ended March 31, 1997
(the most recent quarter prior to pooling)
Mid-Plains 6,796 697
Pioneer 1,572 283
Combined 8,368 980
Three months ended June 30, 1996
Mid-Plains 6,378 (883)
Pioneer 1,523 286
Combined 7,901 (597)
Six months ended June 30, 1996
Mid-Plains 12,988 4
Pioneer 2,997 555
Combined 15,985 559
</TABLE>
3. BUSINESS
Chorus through its subsidiaries provides local telephone and other
communication services and sales. In an order dated June 26, 1997,
the Public Service Commission of Wisconsin (PSC) authorized two
potential competitors of local telecommunications services to
provide services within the territory served by Mid-Plains. Prior
to this date, Mid-Plains had an exclusive franchise within its
territory. Mid-Plains disagrees with the PSC's rationale in making
its determination and has appealed the decision in the circuit
court.
4. COMMITMENTS AND CONTINGENCIES
PCS Wisconsin, LLC ("PCS-WI"), a 75% owned subsidiary of Chorus,
holds an F-block license under which PCS-WI is required by the FCC
to construct a broadband personal communications services system
(PCS) providing service to at least 25% of the population in the
license area within five years of the grant of the license. The F-
block license was granted on April 28, 1997. PCS-WI anticipates
that construction, development and introduction of PCS networks and
services will require substantial capital and operating
expenditures over the next several years.
5. SUPPLEMENTAL CASH FLOW DISCLOSURE
During the second quarter of 1997, Chorus incurred an additional
$2,598,000 in long-term debt related to the acquisition of the F-
block PCS License.
6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information," (SFAS
131"). SFAS 131 establishes standards for reporting information
about operating segments in annual financial statements and
requires reporting of selected information in interim reports. The
implementation of SFAS 131 will not have an impact on the Company's
financial position or results of operations.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("SFAS 130"). SFAS 130 establishes
standards for reporting and displaying comprehensive income and its
components in a full set of financial statements. The
implementation of SFAS 130 will not have an impact on the Company's
financial position or results of operations.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Board No. 128,
"Earnings Per Share" ("SFAS 128"). The implementation of SFAS 128
will not have a material impact in the Company's EPS calculation.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
As discussed in Note 2 to the consolidated financial statements,
effective June 1, 1997, Mid-Plains, Inc. (Mid-Plains) and Pioneer
Communications, Inc. (Pioneer) merged into subsidiaries of a new
holding company, Chorus Communications Group, Ltd. (Chorus). The
mergers have been accounted for as a pooling of interests and
accordingly, all historical data in this discussion and analysis
are reported as though the companies have always been one.
RESULTS OF OPERATIONS
Consolidated net income increased $2,042,000 and $1,866,000 for the
second quarter and first six months of 1997 as compared to the same
periods in 1996, primarily due to an extraordinary charge in 1996
related to the discontinuance of regulatory accounting principles.
Other factors influencing the results of operations are discussed
below.
LOCAL SERVICE REVENUES
Local service revenues are based on fees charged to customers for
providing local telephone exchange service within designated
franchise areas. Local service revenues increased 35% to
$2,031,000 and 35% to $4,003,000 for the second quarter and first
six months of 1997, respectively, as compared to the same periods
in 1996. The increase was principally due to Mid-Plains'
implementation of its Alternative Regulation Plan on September 1,
1996, which had the effect of increasing local service revenues by
$652,000 for the first six months of 1997. Additionally, Chorus
experienced an 8% increase in the number of access lines from June
of 1996 to June of 1997.
NETWORK ACCESS SERVICES
Interstate and intrastate network access service revenues are based
on fees charged to interexchange carriers that use Chorus' local
exchange network to provide long distance service to their
customers.
Interstate network access service revenues increased 10.9% to
$2,291,000 and 8.3% to $4,397,000 for the second quarter and first
six months of 1997, respectively, as compared to the same periods
in 1996. These revenues increased largely due to higher demand for
access services as evidenced by an increase in minutes of use of
8.0% for the six months of 1997, as compared to the same period in
1996.
Intrastate network access service revenues decreased 15.8% to
$1,174,000 and 17.9% to $2,303,000 for the second quarter and first
six months of 1997, respectively, as compared to the same periods
in 1996. The decrease was principally due to Mid-Plains'
implementation of its Alternative Regulation Plan on September 1,
1996, which had the effect of decreasing intrastate access revenues
by $238,000 and $480,000 for the second quarter and first six
months of 1997, respectively.
SYSTEM SALES AND SERVICES
System sales and services revenues are generated from the sale and
maintenance of integrated telecommunications systems primarily to
commercial users. System sales and services increased $56,000 for
the second quarter of 1997 while decreasing $318,000 for the first
six months of 1997, as compared to the same periods in 1996. A
portion of the decline in revenues for the first six months of 1997
is due to a one time settlement of commission revenues of $179,000
recorded in June of 1996.
OTHER SERVICES AND SALES
Other services and sales primarily include revenues from long
distance and internet services, directory publishing and
advertising, and billing and collection services. Other services
and sales increased 35% to $1,926,000 and 30% to $3,546,000 for the
second quarter and first six months of 1997, as compared to the
same periods in 1996. The increase was principally due to the
retailing of intralata toll, which began in December of 1996.
COST OF SERVICES AND SALES
Cost of services and sales increased 23% to $2,434,000 and 12% to
$4,949,000 for the second quarter and first six months of 1997,
respectively, as compared to the same periods in 1996. The
increases were primarily due to charges related to the retail of
intralata toll, as well as growth in internal operations.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 4% to
$2,839,000 and 12% to $5,747,000 for the second quarter and first
six months of 1997, respectively, as compared to the same periods
in 1996. The increases were primarily due to costs of $327,000
associated with the mergers of Mid-Plains and Pioneer into
subsidiaries of Chorus during the first six months of 1997, as well
as growth in internal operations.
DEPRECIATION
The increase in depreciation expense of $104,000 and $219,000 for
the second quarter and first six months of 1997, respectively, as
compared to the same periods in 1996, was primarily due to
additional plant investment.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operations of Chorus for the first six
months of 1997 was $4,047,000. The net cash provided due to
external financing and sale of stock during the same period was
$1,127,000. Total construction expenditures for the first six
months of 1997 was $2,899,000.
It is expected for 1997 that Chorus' capital requirements for its
construction program, maturity and retirement of long-term debt,
dividend payments and investment in PCS Wisconsin, LLC., will be
provided for with cash flow from operations, the issuance of debt,
and if necessary, equity financing.
At August 8, 1997, Chorus had available unused lines-of-credit of
$6,817,000. Chorus has experienced no difficulty in obtaining
funds for its construction program or other purposes. However,
management is unable to predict the potential impact of competition
on Chorus' future cash flow.
COMPETITION
The communications industry continues to undergo significant
changes, including the breakdown of barriers of protection from
competition at both the state and federal levels. As described in
Note 3 to the financial statements, the Public Service Commission
of Wisconsin has authorized two competitors to provided services in
Mid-Plains service territory. The company has appealed the
decision in the circuit court.
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
On June 26, 1997, the Public Service Commission of Wisconsin issued
a written order which had the effect of authorizing two potential
competitors to provide local telecommunications services within the
territory currently served by Mid-Plains, Inc., a subsidiary of
Chorus. In addition, the Commission held that Mid-Plains had
waived its rights under federal law to claim a rural telephone
company exemption. Mid-Plains disagrees with the rationale and
procedure used by the Commission in making its determination and as
a result has filed a petition for judicial review in the Dane
County, Wisconsin, Circuit Court. Mid-Plains is seeking a court
order reversing the holding of the Commission or in the alternative
returning the matter to the Commission for a hearing.
Item 4. Submission of Matters to a Vote of Security Holders
Special meetings of the shareholders of Mid-Plains, Inc. and
Pioneer Communications, Inc. were held on May 17, 1997 and May 16,
1997, respectively, to vote on the Agreement and Plan of Merger
("Plan of Merger") as provided in the Joint Proxy
Statement/Prospectus which was part of the Registration Statement
filed on Form S-4 by Chorus. The results of the vote were as
follows:
Mid-Plains Pioneer
For 1,519,947 123,596
Against 37,230 18,433
Abstain 12,250 845
Broker non-voters 156,916 -
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
(2) Agreement and Plan of Merger, dated December 31, 1996, by
Mid-Plains, Inc. and Pioneer Communications, Inc.(Incorporated
by reference to Form S-4, filed on February 24, 1997, File No.
333-23435)
3(i) Articles of Incorporation (Incorporated by reference to Form S-4,
filed on February 24, 1997, File No. 333-23435)
3(ii) By-laws (Incorporated by reference to Form S-4, filed on
February 24, 1997, File No. 333-23435)
(27) Financial Data Schedule
(b) Reports on Form 8-K
Chorus filed a current report on Form 8-K, dated June 9, 1997,
under Item 2, "Acquisition or Disposition of Assets." Item 2
included copies of the Articles of Merger of Mid-Plains, Inc.
and Pioneer Communications, Inc., which became wholly-owned
subsidiaries of Chorus. No financial information was included
with this report.
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.
CHORUS COMMUNICATIONS GROUP, LTD.
(Registrant)
Date: August 14, 1997 /s/ Dean W. Voeks
Dean W. Voeks
Chief Executive Officer
Date: August 14, 1997 /s/ Howard G. Hopeman
Howard G. Hopeman
Executive Vice-President and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Chorus Communications Group, Ltd. for the
quarterly period ended June 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1831
<SECURITIES> 0
<RECEIVABLES> 5408
<ALLOWANCES> 0
<INVENTORY> 1564
<CURRENT-ASSETS> 12663
<PP&E> 64290
<DEPRECIATION> 29445
<TOTAL-ASSETS> 55882
<CURRENT-LIABILITIES> 5305
<BONDS> 0
0
0
<COMMON> 13868
<OTHER-SE> 13696
<TOTAL-LIABILITY-AND-EQUITY> 55882
<SALES> 0
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<CGS> 0
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</TABLE>
