<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 September 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 of 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 X No
As of September 30, 1997, there were 2,684,303 shares of no par
value Common Stock outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CHORUS COMMUNICATIONS GROUP, LTD.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30 Sept. 30 Sept. 30
(Dollars in thousands, 1997 1996 1997 1996
except per share amounts)
<S> <C> <C> <C> <C>
Revenues and Sales
Local services $2,211 $1,654 $6,214 $4,610
Network access services 3,371 3,475 10,071 10,343
System sales and services 1,994 2,327 5,109 5,760
Other services and sales 2,014 1,354 5,560 4,082
Total revenues and sales 9,590 8,810 26,954 24,795
Operating Costs and Expenses
Cost of services and sales 2,694 2,669 7,643 7,079
Selling, general 2,886 2,613 8,633 7,755
and administrative
Depreciation 1,187 1,073 3,520 3,187
Total operating costs 6,767 6,355 19,796 18,021
and expenses
Operating Income 2,823 2,455 7,158 6,774
Interest expense (328) (345) (1,001) (1,012)
Other income (expense), net 114 (127) 290 (33)
Income before income taxes 2,609 1,983 6,447 5,729
and extraordinary item
Income taxes 1,070 701 2,483 2,106
Income before extraordinary item 1,539 1,282 3,964 3,623
Extraordinary item - - - (1,782)
Net Income $1,539 $1,282 $3,964 $1,841
Earnings Per Common Share
Before extraordinary item $0.57 $0.48 $1.48 $1.36
Extraordinary item (0.67)
Net Income $0.57 $0.48 $1.48 $0.69
Average common shares 2,684 2,680 2,684 2,674
outstanding (in thousands)
Dividends per share $0.27 $0.20 $0.81 $0.59
The accompanying notes are an integral part of the financial statements.
(UNAUDITED)
/TABLE
<PAGE>
CHORUS COMMUNICATIONS GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
(Dollars in thousands) 1997 1996
<TABLE>
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $2,149 $1,902
Temporary investments 3,500 3,200
Accounts receivable
Due from customers 3,214 2,699
Other, principally connecting companies 2,386 1,977
Inventories
Plant materials and supplies 635 663
Communication systems and parts 947 899
Other 395 826
Total current assets 13,226 12,166
Property, Plant and Equipment, at cost
Property, Plant and Equipment 64,160 62,547
Accumulated depreciation (28,736) (28,145)
Total property, plant and equipment 35,424 34,402
Investments and Other Assets
Cellular limited partnership interest 4,041 4,168
Personal Communication Services (PCS) license 3,385 -
Deferred charges and other assets 1,278 969
Total investments and other assets 8,704 5,137
Total assets $57,354 $51,705
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $609 $383
Short-term debt 734 -
Accounts payable 3,414 3,723
Other 1,431 1,151
Total current liabilities 6,188 5,257
Long-term debt, excluding current portion 18,151 15,477
Deferred income taxes 3,120 3,332
Other liabilities 1,517 1,154
Total liabilities 28,976 25,220
Commitments and contingencies (see notes)
Shareholders' Equity
Common stock - 25,000,000 shares authorized,
2,684,303 shares issued
at September 30, 1997 13,868 13,765
Retained earnings 14,510 12,720
Total shareholders' equity 28,378 26,485
Total liabilities and shareholders' equity $57,354 $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
Nine Months Ended
September 30, September 30,
(Dollars in thousands) 1997 1996
<TABLE>
<S> <C> <C>
OPERATIONS
Income before extraordinary item $3,964 $3,623
Adjustments to reconcile income before
extraordinary item to net cash
from operations:
Depreciation 3,520 3,187
Deferred income taxes (212) 118
Changes in current assets and
current liabilities:
Receivables - net (924) (39)
Inventories - net (20) 22
Payables - net (309) (989)
Other - net 765 672
Net cash from operations 6,784 6,594
INVESTING
Capital expenditures (4,670) (4,284)
Cellular investment 127
PCS License (787)
Temporary investments (300) (1,000)
Other - net 128 518
Net cash used in investing (5,502) (4,766)
FINANCING
Common stock issued 103 177
Dividends paid (2,174) (1,568)
Long-term debt issued 745
Long-term debt repaid (443) (846)
Increase in short-term obligations 734 1,242
Net cash used in financing (1,035) (995)
Increase in cash and cash equivalents 247 833
Cash and cash equivalents:
Beginning of period 1,902 1,220
End of period $2,149 $2,053
Cash paid during the period for
Interest $980 $984
Income taxes $2,340 $1,381
The accompanying notes are an integral part of the financial statements.
(UNAUDITED)
/TABLE
<PAGE>
CHORUS COMMUNICATIONS GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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.
<PAGE>
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 September 30, 1996
Mid-Plains 7,309 954
Pioneer 1,501 328
Combined 8,810 1,282
Nine months ended September 30, 1996
Mid-Plains 20,297 958
Pioneer 4,498 883
Combined 24,795 1,841
</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. In the interim, Mid-Plains is required to proceed with
interconnection and is currently involved in arbitration
proceedings with one of the potential competitors.
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. SUBSEQUENT EVENTS
On October 31, 1997, Chorus Properties, LLC., a recently
incorporated and wholly-owned subsidiary of Chorus, acquired a
building for $4.4 million to be used as Chorus's corporate offices.
Funding for this acquisition was provided by a $4 million mortgage
loan from AnchorBank, S.S.B. and $400,000 in short-term borrowings.
The $4 million loan is payable over 20 years with the interest
fixed for the first five years at 7.75%.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
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.
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 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.
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 $257,000 and $2,123,000 for the
third quarter and first nine months of 1997 as compared to the same
periods in 1996. The increase in the first nine months was
primarily due to an extraordinary charge in 1996 related to the
discontinuance of regulatory accounting principles. Other factors
influencing the results of operations for these two periods 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 34% to
$2,211,000 and 35% to $6,214,000 for the third quarter and first
nine months of 1997, respectively, as compared to the same periods
in 1996. The increase was principally due to Mid-Plains's
implementation of its Alternative Regulation Plan on September 1,
1996, which had the effect of increasing local service revenues by
$275,000 for the third quarter and $927,000 for the first nine
months of 1997, respectively. Additionally, Chorus experienced a
10% increase in the number of access lines in service from
September 1996 to September 1997.
NETWORK ACCESS SERVICES
Interstate and intrastate network access service revenues are based
on fees charged to interexchange carriers that use Chorus's local
network to provide long distance service to their customers.
Interstate network access service revenues increased 3.5% to
$2,221,000 and 6.6% to $6,618,000 for the third quarter and first
nine 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 a 7.6% increase in minutes of use
for the nine months of 1997, as compared to the same period in
1996, offset by slightly lower average access rates charged to the
interexchange carriers.
Intrastate network access service revenues decreased 13.5% to
$1,150,000 and 16.5% to $3,453,000 for the third quarter and first
nine months of 1997, respectively, as compared to the same periods
in 1996. The decrease was principally due to Mid-Plains's
implementation of its Alternative Regulation Plan on September 1, 1996,
which had the effect of decreasing intrastate access revenues
by $199,000 and $679,000 for the third quarter and first nine
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 decreased $333,000 and
$651,000 for the third quarter and first nine months of 1997,
respectively, as compared to the same periods in 1996. A portion
of the decline in revenues for the first nine months of 1997 is due
to a one-time settlement of commission revenues of $179,000
recorded in June 1996. The remainder of the decrease is primarily
due to lower sales volume experienced in 1997.
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 49% to $2,014,000 and 36% to $5,560,000 for the
third quarter and first nine months of 1997, respectively, as
compared to the same periods in 1996. An increase of $993,000 was
due to a temporary change in provisioning of intralata toll.
COST OF SERVICES AND SALES
Cost of services and sales increased 0.9% to $2,694,000 and 8.0% to
$7,643,000 for the third quarter and first nine months of 1997,
respectively, as compared to the same periods in 1996. The
increases were due to charges related to the provisioning of
intralata toll ($787,000) as well as growth in internal
operations.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 10% to
$2,886,000 and 11% to $8,633,000 for the third quarter and first
nine months of 1997, respectively, as compared to the same periods
in 1996. The increases included $236,000 (revised from June
estimate) related to the mergers of Mid-Plains and Pioneer into
subsidiaries of Chorus during the first nine months of 1997, as
well as growth in internal operations.
DEPRECIATION
The increase in depreciation expense of $114,000 and $333,000 for
the third quarter and first nine months of 1997, respectively, as
compared to the same periods in 1996, was due to a
shortening of estimated useful lives for various asset categories
for Mid-Plains and Chorus's increased plant investment.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operations of Chorus for the first nine
months of 1997 was $6,784,000. The net cash provided due to
external financing and sale of stock during the period was
$1,582,000. Total construction expenditures for the first nine
months of 1997 was $4,670,000.
On October 31, 1997, Chorus Properties, LLC., a recently
incorporated and wholly owned subsidiary of Chorus, acquired an
office building for $4.4 million. Funding for this acquisition
was provided by a $4 million mortgage loan from AnchorBank, S.S.B.
and $400,000 in short-term borrowings. The $4 million loan is
payable over 20 years with the interest fixed for the first five
years at 7.75%. It is anticipated for the remainder of 1997 that
Chorus's capital requirements for its construction program,
retirement of long-term debt, dividend payments and investment in
PCS Wisconsin, LLC., will be provided for with cash flow from
operations and the issuance of debt.
At November 10, 1997, Chorus had available unused lines-of-credit
of $7,829,000. Chorus has experienced no difficulty in obtaining
funds for its construction program or other purposes. However,
competition could have a negative impact on Chorus's future
operations and cash flows.
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 discussed in
Note 3 to the financial statements, and Part II, Item 1. Legal
Proceedings, the Public Service Commission of Wisconsin has
authorized two competitors to provide services in Mid-Plains's
service territory. The company has appealed the decision in the
circuit court.<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
On June 26, 1997, the Public Service Commission of Wisconsin (the
"Commission") 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. In the interim, Mid-Plains is required
to proceed with interconnection and is currently involved in
arbitration proceedings with one of the potential competitors.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended September 30, 1997.
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: November 14, 1997 /s/Dean W. Voeks
Dean W. Voeks
Chief Executive Officer
Date: November 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 September 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-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2149
<SECURITIES> 0
<RECEIVABLES> 5600
<ALLOWANCES> 0
<INVENTORY> 1582
<CURRENT-ASSETS> 13226
<PP&E> 64160
<DEPRECIATION> 28736
<TOTAL-ASSETS> 57354
<CURRENT-LIABILITIES> 6188
<BONDS> 0
0
0
<COMMON> 13868
<OTHER-SE> 14510
<TOTAL-LIABILITY-AND-EQUITY> 57354
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<TOTAL-REVENUES> 9590
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</TABLE>
