SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1996 Commission file number 0-8621
-------------------------------- -------------------------------
The Woodbury Telephone Company
------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-0594990
- ------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (IRS Employer Identification
or organization) Number)
299 Main Street South, Woodbury, Connecticut 06798
- -----------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (203) 263-2121
--------------
Not Applicable
--------------
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 (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.
Class Outstanding at October 31, 1996
------- -----------------------------
Common Stock, par value $2.50 per share 769,107
<PAGE>
THE WOODBURY TELEPHONE COMPANY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page number
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets-
September 30, 1996 and December 31, 1995 3-4
Condensed Statements of Income-
Nine Months ended September 30, 1996 and 1995 5
Condensed Statements of Income-
Three Months Ended September 30, 1996 and 1995 6
Condensed Statements of Cash Flows
Nine months ended September 30, 1996 and 1995 7
Notes to Condensed Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
THE WOODBURY TELEPHONE COMPANY
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1996
PART I
FINANCIAL INFORMATION
-2-
<PAGE>
<TABLE>
<CAPTION>
The Woodbury Telephone Company
Condensed Balance Sheets
ASSETS
September 30 December 31
1996 1995
(unaudited)
----------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,212,808 $ 2,238,782
Accounts receivable, less allowance
for losses of $80,000 in 1996 and
$60,000 in 1995 1,778,980 1,589,030
Other receivables 1,361,381 1,254,484
Materials and supplies-at cost 639,242 421,306
Prepaid expenses 189,256 51,689
Estimated income tax in excess of
current provision 35,130
--------------- --------------
Total current assets 6,216,797 5,555,291
Telephone plant and other property:
In service 43,016,928 41,144,840
Plant under construction 82,681 34,998
Accumulated depreciation (deduction) (22,449,934) (20,857,711)
---------------- ---------------
20,649,675 20,322,127
Other property 222,941 76,717
---------------- ---------------
20,872,616 20,398,844
Other assets:
1% Investment in Springwich Cellular
Limited Partnership 535,068 535,068
Deferred charges, less amortization 372,637 480,209
Regulatory asset 309,518 353,744
---------------- ----------------
1,217,223 1,369,021
$ 28,306,636 $ 27,323,156
================ ================
-3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30 December 31
1996 1995
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,893,466 $ 1,281,373
Advance billings and customers' deposits 294,059 286,640
Accrued interest 135,000 337,500
Income taxes 33,142
---------------- -----------------
Total current liabilities 2,322,525 1,938,655
Long-term debt 9,000,000 9,000,000
Deferred credits:
Income taxes 1,771,090 2,044,044
Investment tax credits 222,114 276,114
Regulatory liability 729,742 808,735
---------------- -----------------
2,722,946 3,128,893
Other long-term liabilities 524,378 453,872
Shareholders' equity:
Common Stock, par value $2.50 per share,
authorized 1,250,000 shares, issued and
outstanding 769,107 shares 1,922,768 1,922,768
Additional paid-in capital 1,475,394 1,475,394
Retained earnings 10,338,625 9,403,574
--------------- -----------------
13,736,787 12,801,736
--------------- -----------------
$ 28,306,636 $ 27,323,156
=============== =================
</TABLE>
See accompanying notes
-4-
<PAGE>
<TABLE>
<CAPTION>
The Woodbury Telephone Company
Condensed Statements of Income (Unaudited)
Nine months ended September 30:
1996 1995
------------- ------------
<S> <C> <C>
Operating revenues:
Local service $ 2,478,500 $ 2,288,009
Network service 7,445,594 6,399,422
Other 708,899 727,290
Provision for uncollectibles
(deduction) ( 7,838) (49,122)
------------- -------------
10,625,155 9,365,599
Operating expenses:
Maintenance 2,027,905 2,026,773
Depreciation and amortization 2,154,282 2,079,749
General office 1,283,931 1,040,565
Commercial 1,028,635 1,024,140
Other 707,136 677,006
------------ ----------
7,201,889 6,848,233
------------ -------------
3,423,266 2,517,366
Other income:
Rental of telephone equipment
and other, net 127,396 262,129
Interest 93,974 90,524
------------ -------------
221,370 352,653
------------ -------------
3,644,636 2,870,019
Interest expense 622,798 616,988
------------ -------------
Income before income taxes 3,021,838 2,253,031
Income taxes 1,210,005 921,574
------------ -------------
Net income $1,881,833 $1,331,457
============ =============
Per share of common stock:
Net income $2.36 $1.73
====== ======
Dividends $1.14 $1.14
====== ======
Average number of shares of
Common stock outstanding 769,107 769,107
-5-
</TABLE>
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
The Woodbury Telephone Company
Condensed Statements of Income (Unaudited)
Three months ended September 30:
1996 1995
-------- --------
<S> <C> <C>
Operating revenues:
Local service $ 854,433 $ 781,453
Network service 2,508,729 2,025,573
Other 237,444 261,408
Provision for uncollectibles
(deduction) 38,105 (11,976)
----------- -----------
3,638,711 3,056,458
Operating expenses:
Maintenance 688,365 708,192
Depreciation and amortization 731,238 702,308
General office 549,093 338,451
Commercial 351,337 336,543
Other 232,294 237,287
----------- -----------
2,552,327 2,322,781
----------- ----------
1,086,384 733,677
Other income:
Rental of telephone equipment
and other, net (57,011) 70,182
Interest 27,693 28,352
----------- ---------
(29,318) 98,534
----------- ----------
1,057,066 832,211
Interest expense 205,621 205,060
----------- ----------
Income before income taxes 851,445 627,151
Income taxes 373,980 286,352
----------- ----------
Net income $ 477,465 $ 340,799
============= ===========
Per share of common stock:
Net income $0.62 $0.44
===== =====
Dividends $0.38 $0.38
===== =====
Average number of shares of
Common Stock outstanding 769,107 769,107
See accompanying notes
-6-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The Woodbury Telephone Company
Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended September 30:
1996 1995
----------- ----------
<S> <C> <C>
Operating Activities
Net income $ 1,811,833 $ 1,331,458
Depreciation 2,061,150 1,972,176
Other (487,253) (511,620)
------------ -----------
Net Cash Provided By
Operating Activities 3,385,730 2,792,014
Investing Activities
Purchases of telephone plant
and other property (2,534,922) (1,779,866)
------------ -----------
Net Cash Used By Investing
Activities (2,534,922) (1,779,866)
Financing Activities
Dividends (876,782) (876,782)
------------- -----------
Net Cash Used By Financing
Activities (876,782) (876,782)
------------- -------------
Decrease In Cash And Cash
Equivalents (25,974) 135,366
Cash and cash equivalents
At beginning of period 2,238,782 1,942,924
------------- ---------------
Cash And Cash Equivalents At
End Of Period $2,212,808 $2,078,290
============= ===============
See accompanying notes.
</TABLE>
-7-
<PAGE>
THE WOODBURY TELEPHONE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
Note 1- Basis of Presentation
The accompanying unaudited condensed financial statements of The Woodbury
Telephone Company (the Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. All adjustments were of a normal recurring nature.
Operating results for the nine-month period ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1995.
The condensed balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date.
-8-
<PAGE>
THE WOODBURY TELEPHONE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Note 2-Income taxes
A reconciliation of the amount of income taxes based on the statutory federal
income tax rate to income taxes reflected in operations follows:
Nine-month period ended
September 30,1996 September 30,1995
----------- ----------
<S> <C> <C>
Amount based on statutory federal
income tax rate $ 1,027,425 $ 766,031
State income taxes, less federal
tax effect 229,357 171,005
Investment tax credit amortization (54,000) (54,000)
Other 7,223 38,538
------------- ------------
Income Taxes $ 1,210,005 $ 921,574
============= ============
</TABLE>
Note 3- Reclassification
Certain amounts in 1995 have been reclassified to conform with the 1996
presentation.
-9-
<PAGE>
THE WOODBURY TELEPHONE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1996
Note 4 - Subsequent events
On October 21, 1996, The Woodbury Telephone Company (the "Registrant")
entered into a letter of intent with Southern New England Telecommunications
Corporation ("SNETCO") pursuant to which SNETCO agreed in principle to
acquire the Registrant in a merger transaction intended to qualify as a tax
free reorganization under the Internal Revenue Code. Pursuant to the proposed
transaction, shareholders of the Regisrant would receive that number of shares
of the listed, publicly traded common stock of SNETCO having a value of $43
for each share of the common stock of the Registrant owned by them, subject to
certain adjustments based upon the average closing prices of SNETCO common stock
reported on the New York Stock Exchange preceding the closing date of the
transaction. The proposed transaction is subject, among other things, to the
approval of Registrant's shareholders.
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Form 8-K filed by the Company with the Securities and
Exchange Commission on November 4, 1996, relating to certain proposed
transactions with the Southern New England Telecommunications Corporation,
which is hereby incorporated by this reference.
Operating revenues increased by $1,259,556 (13.5%) and by $582,253 (19.1%) for
the nine and three-month periods ended September 30, 1996 respectively over
the comparable 1995 periods. Local service revenues increased by $190,491
(8.3%)for the nine months ended September 30, 1996 and by $72,980 (9.3%) for
the three months ended September 30, 1996, compared to the respective 1995
periods. The increase in each period resulted primarily from an increase of
6.3% in the number of access lines served by the Company from September 30,
1995 to September 30,1996. Also contributing to the increase in each period
was the introduction of CLASS services, such as Caller ID and Selective
Call-Forwarding, in May 1995. Network service revenues increased by$1,046,172
(16.4%) and by $483,156 (23.9%) for the nine and three-month periods
ended September 30, 1996 respectively over the comparable 1995 periods.
Increased customer use of the network to make calls beyond the local calling
area contributed to the increase in each period. In addition, for the
nine-month period in 1996, the Company recognized network service revenues of
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
approximately $145,200 resulting from the re-classification of access provided
for certain calls terminating in the Company's service area from January 1995
through February 1996. This access was previously considered inter-LATA,
subject to pooling through the National Exchange Carrier Association (NECA).
Based on information provided by the originating carriers, the access was
determined to be intra-LATA, not subject to pooling, resulting in a higher
retention of access revenues by the Company. The Company recognized these
revenues in March 1996.
Operating expenses increased by $353,656 (5.2%) for the nine-month period,
and by $229,546 (9.9%) for the three-month period ended September 30, 1996
over the comparable 1995 periods. General office expenses increased by $366,173
(39.9%) for the nine months and by $255,449 (87.7%) for the three months ended
September 30 in 1996 compared to 1995. These increases reflect the Company's
increased use of outside services to plan and implement its response to
ongoing competitive and regulatory changes in the telecommunications industry
environment, as well as legal and other costs incurred in connection with the
proposed transaction with SNETCO.
For the nine-month period ended September 30, 1996 compared to 1995, other
income decreased by $131,283 (37.2%). For the three-month period ended
September 30, 1996 compared to 1995, other income decreased by $127,852
(129.8%). For each period, the decline was due mainly to costs associated
with Internet services, which the Companay began offering on July 1, 1996.
As of September 30, 1996, current assets exceeded current liabilities by
$3,894,272, an increase of $277,636 compared to December 31, 1995. Cash
provided by operating activities for the nine months ended September 30,
1996 was $3,385,730, an increase of $593,716 over the comparable period for
1995. The Company anticipates that available cash, including that provided by
current operating activities, will be sufficient to cover expenditures and
dividends declared during the remainder of 1996.
-12-
<PAGE>
THE WOODBURY TELEPHONE COMPANY
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the nine months ended
September 30, 1996.
13
<PAGE>
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.
THE WOODBURY TELEPHONE COMPANY
DATE BY
DONALD E. PORTER
PRESIDENT AND TREASURER
DATE BY
WILLIAM R. PLATT
ASSISTANT TREASURER
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary information
from the unaudited Woodbury Telephone Company
Condensed Statements of Income for the six months
ended September 30, 1996, and the Condensed
Balance Sheets as of September 30, 1996.
</LEGEND>
<MULTIPLIER> 1
<PERIOD TYPE> 3-mos
<FISCAL YEAR END> DEC-31-1996
<PERIOD END> SEP-30-1996
<BOOK VALUE> PER BOOK
<TOTAL NET UTILITY PLANT> 20,649,675
[OTHER-PROPERTY-AND-INVEST] 758,009
[TOTAL-CURRENT-ASSETS] 6,216,797
[TOTAL-DEFERRED-CHARGES] 372,637
[OTHER-ASSETS] 309,518
<TOTAL-ASSETS> 28,306,636
<COMMON> 1,922,768
[CAPITAL-SURPLUS-PAID-IN] 1,475,394
[RETAINED-EARNINGS] 10,338,625
[TOTAL-COMMON-STOCKHOLDERS-EQ] 13,736,787
0
0
[LONG-TERM-DEBT-NET] 9,000,000
[SHORT-TERM-NOTES] 0
[LONG-TERM-NOTES-PAYABLE] 0
[COMMERCIAL-PAPER-OBLIGATIONS] 0
<LONG-TERM-DEBT-CURRENT-PORT) 0
[PREFERRED-STOCK-CURRENT] 0
[CAPITAL-LEASE-OBLIGATIONS] 0
[LEASES-CURRENT] 0
[OTHER-ITEMS-CAPITAL-AND-LIAB] 5,569,849
[TOT-CAPITALIZATION-AND-LIAB] 28,306,636
[GROSS-OPERATING-REVENUE] 10,625,155
[INCOME-TAX-EXPENSE] 1,210,005
[OTHER-OPERATING-EXPENSES] 7,201,889
[TOTAL-OPERATING-EXPENSES] 8,411,894
[OPERATING-INCOME-LOSS] 2,213,261
[OTHER-INCOME-NET] 221,370
[INCOME-BEFORE-INTEREST-EXPEN] 2,434,631
[TOTAL-INTEREST-EXPENSE] 622,798
<NET-INCOME> 1,811,833
[PREFERRED-STOCK-DIVIDENDS] 0
[EARNINGS-AVAILABLE-FOR-COMM] 1,811,833
[COMMON-STOCK-DIVIDENDS] 876,782
[TOTAL-INTEREST-ON-BONDS] 607,500
[CASH-FLOW-OPERATIONS] 3,385,730
<EPS-PRIMARY> 2.36
<EPS-DILUTED> 2.36
</TABLE>
