FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
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 0-19179
CT COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1837282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
68 Cabarrus Avenue, East
P.O. Box 227, Concord, N.C. 28025
(Address of principal executive offices) (Zip Code)
(704) 788-0244
(Registrant's telephone number, including area code)
(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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
492,186 shares of Common Stock, $50 par value, outstanding
as of June 30, 1995.
Class A Voting - 75,673
Class B Non-Voting - 416,513
CT COMMUNICATIONS, INC.
INDEX
Page No.
PART I. Financial Information
Balance Sheets --
June 30, 1995 and December 31, 1994 2-3
Statements of Income --
Three and Six Months Ended June 30, 1995 and 1994 4
Statements of Cash Flows --
Six Months Ended June 30, 1995 and 1994 5
Notes to Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. Other Information 11-12
PART I. FINANCIAL INFORMATION
CT COMMUNICATIONS, INC.
Consolidated Balance Sheets
Unaudited
ASSETS
June 30, December 31,
1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 3,224,764 $ 8,346,235
Short-term investments 3,853,789 4,473,565
Securities available-for-sale (note 4) 1,089,230 954,628
Accounts receivable, net of allowance
for doubtful accounts of $100,000 7,382,618 7,044,969
Materials and supplies 1,594,561 1,422,406
Prepaid expenses 223,289 238,579
Deferred income taxes 468,200 468,200
Total current assets 17,836,451 22,948,582
Investments (note 5) 30,335,036 23,097,634
Property, plant & equipment: (note 6)
Telephone plant in service:
Land, buildings, and general equipment 18,702,765 17,883,647
Central office equipment 43,312,229 38,396,870
Poles, wire, cables and conduit 62,316,989 60,153,447
Construction in progress --- 464,065
124,331,983 116,898,029
Less accumulated depreciation 66,279,328 63,057,606
Net property, plant, and equipment 58,052,655 53,840,423
TOTAL ASSETS $106,224,142 $ 99,886,639
(Continued)
Consolidated Balance Sheets, (Continued)
LIABILITIES & STOCKHOLDERS' EQUITY
Unaudited
June 30, December 31,
1995 1994
CURRENT LIABILITIES:
Current portion of long-term debt &
redeemable preferred stock (note 6) $ 1,540,000 $ 1,540,000
Accounts payable 9,610,201 8,141,677
Customer deposits and advance billings 1,071,415 989,810
Accrued payroll 468,230 387,526
Accrued pension cost 1,055,367 967,699
Other accrued liabilities 991,925 377,860
Income taxes payable 563,320 1,174,359
Total current liabilities 15,300,458 13,578,931
Long-term debt (note 6) 4,384,000 4,714,000
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 2,566,248 3,251,202
Investment tax credits 1,233,358 1,397,388
Regulatory liability 3,047,956 3,047,956
Postretirement benefits other than pension 7,286,714 6,468,528
Other 1,103,098 1,103,098
15,237,374 15,268,172
Redeemable preferred stock, $100 par value:
4.8% series; authorized 5,000 shares;
issued and outstanding 1,875 175,000 175,000
Total liabilities 35,096,832 33,736,103
STOCKHOLDERS' EQUITY:
Preferred Stock not subject to mandatory redemption:
5% series, $100 par value; 15,087 shares
outstanding 1,508,700 1,508,700
4.5% series, $100 par value; 2,000 shares
outstanding 200,000 200,000
Discount on 5% preferred stock (16,059) (16,059)
Common stock (note 3):
Voting, $50 par value; outstanding
75,673 shares in 1995 and 1994 3,783,650 3,783,650
Nonvoting, $50 par value; outstanding
416,513 shares in 1995 and 416,256 in 1994 20,825,650 20,812,800
Premium on common voting stock 237,444 237,444
Premium on common nonvoting stock 1,757,269 1,715,302
Other capital 298,083 298,083
Unrealized gain on securities available-
for-sale (note 4) 366,504 284,396
Equity in earnings of investment --- 260,624
Retained earnings 42,166,069 37,065,596
Total stockholders' equity 71,127,310 66,150,536
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $106,224,142 $ 99,886,639
<TABLE>
CT COMMUNICATIONS, INC.
Consolidated Statements of Income
For 3 and 6 months ended June 30, 1995 and 1994
Unaudited
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
OPERATING REVENUES: 1995 1994 1995 1994
Local service $ 5,217,216 $ 4,688,838 $10,315,943 $ 8,962,218
Access and toll service 6,753,910 4,988,584 12,542,091 11,882,797
Other and unregulated 2,153,371 2,041,739 4,439,628 4,136,460
Less provision for uncollectible accounts (65,884) (59,138) (102,812) (168,422)
Total operating revenues 14,058,613 11,660,023 27,194,850 24,813,053
OPERATING EXPENSES:
Plant specific 3,184,904 3,533,315 6,410,045 6,395,432
Depreciation and amortization 2,019,807 1,797,058 3,978,969 3,575,113
Customer operations 1,607,455 1,316,046 3,001,166 2,601,446
Corporate operations 2,293,230 1,163,834 3,988,850 3,366,658
Total operating expenses 9,105,396 7,810,253 17,379,030 15,938,649
Net operating revenues 4,953,217 3,849,770 9,815,820 8,874,404
OTHER INCOME (EXPENSES):
Interest, dividend income and
gain on sale 1,361,107 598,057 2,087,765 1,189,538
Other expenses, principally interest 393,928 148,994 684,764 298,027
Total other income 967,179 449,063 1,403,001 891,511
Income before income taxes 5,920,396 4,298,833 11,218,821 9,765,915
Income taxes 2,063,258 1,556,056 4,118,536 3,620,431
Net income 3,857,138 2,742,777 7,100,285 6,145,484
DIVIDENDS ON PREFERRED STOCK 23,296 23,446 46,655 46,955
EARNINGS FOR COMMON STOCK $ 3,833,842 $ 2,719,331 $ 7,053,630 $ 6,098,529
EARNINGS PER COMMON SHARE* $ 7.79 $ 5.53 $ 14.33 $ 12.40
DIVIDENDS PER COMMON SHARE* $ 2.00 $ 1.92 $ 4.00 $ 3.84
WEIGHTED AVERAGE SHARES OUTSTANDING* 492,133 491,793 492,066
491,753
*See Note (3)
</TABLE>
CT COMMUNICATIONS, INC.
Statements of Cash Flows
For 6 months ended June 30, 1995 and 1994
Unaudited
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,100,285 $ 6,145,484
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,978,969 3,574,201
Deferred income taxes and tax credits (848,984) (419,422)
Loss on retirement of non-regulated property 4,785 701
Loss (gain) on disposition of investments --- (321,776)
Other --- (136)
(Increase) decrease in:
Receivables, net 337,649 1,307,599
Materials and supplies 172,155 (31,699)
Other assets (15,290) (524,066)
Increase (decrease) in:
Accounts payable 1,550,129 (1,960,259)
Federal and state income taxes payable (611,039) ---
Accrued liabilities 1,600,623 1,626,604
Total adjustments 6,168,997 3,251,747
Net cash provided by operating activities 13,269,282 9,397,231
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to non-regulated property and equipment (129,416) (43,064)
Capital additions to telephone plant (8,119,080) (4,386,408)
Salvage value of telephone plant retired, net (37,538) (41,967)
Purchases of investments (7,816,047) (3,119,153)
Proceeds from sale of investments --- 324,746
Net cash used in investing activities (16,102,081) (7,265,846)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 34,977 43,700
Repayment of long-term debt (330,000) (60,000)
Dividends paid on preferred stock (46,718) (46,955)
Dividends paid on common stock (1,968,404) (1,929,449)
Tax benefit from employee stock ownership
plan dividends distributed to employees 15,312 15,464
Tax benefit from exercise of stock option 6,161 6,490
Net cash used in financing activities (2,288,672) (1,970,750)
Net increase (decrease) in cash (5,121,471) 160,635
Cash and cash equivalents at beginning of period 8,346,235 2,661,199
Cash and cash equivalents at end of period $ 3,224,764 $ 2,821,834
See accompanying notes to financial statements.
CT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial
position as of June 30, 1995, and the results of operations for the
six months then ended and cash flows for the six months then ended.
2. The results of operations for the six months ended June 30, 1995 and
1994 are not necessarily indicative of the results to be expected
for the full year.
3. The following is a summary of common stock transactions during the
six months ended June 30, 1995.
.........Voting Class A.........
Shares Par Value Premium
Outstanding at December 31, 1994
and June 30, 1995............... 75,673 $ 3,783,650 $237,444
Weighted average shares outstanding
for the six months ending
June 30, 1995................... 75,673
.......Non-Voting Class B........
Shares Par Value Premium
Outstanding at December 31, 1994.. 416,256 $20,812,800 1,715,302
Issuance of common stock.......... 257 12,850 41,967
Outstanding at June 30, 1995...... 416,513 $20,825,650 $1,757,269
Weighted average shares outstanding
for six months ending
June 30, 1995.................. 416,393
4. SECURITIES AVAILABLE-FOR-SALE
June 30, 1995
Gross Unrealized
Securities Market
Available-for-Sale Cost Gains Losses Value
Equity Securities $488,405 946,765 345,940 1,089,230
5. INVESTMENTS
6/30/95 12/31/94
State, county, and municipal investments $ 15,903,160 $ 14,552,592
Carolina Personal Communications 3,325,846 ---
ITN Charter stock 777,200 777,200
U.S. Intelco stock 279,277 279,277
U.S. Telecom East 3,153,565 2,582,802
ITC Holdings (equity method) 5,424,221 5,260,624
Investment in Ellerbe partnership (equity method) 871,008 341,038
Investment in RSA 15 partnership (equity method) 3,704,185 3,305,823
Access/On 298,000 146,500
Embion of North Carolina (equity method) 97,020 220,000
Wireless 1, Inc. 250,000 ---
Other, at cost which approximates market 105,343 105,343
34,188,825 27,571,199
Less current maturities 3,853,789 4,473,565
TOTAL $ 30,335,036 $ 23,097,634
6. LONG-TERM DEBT:
Long-term debt excluding annual maturities comprised the following:
First Mortgage Bonds: June 30, 1995 December 31, 1994
6 1/4% Series F, due 3/1/97 $ 1,440,000 $ 1,460,000
Note payable to a bank @ 7.25%
due in installments until 2001 2,944,000 3,254,000
TOTAL $ 4,384,000 $ 4,714,000
A substantial amount of the Company's telephone plant is pledged as
collateral to the first mortgage bonds. Annual maturities and sinking
fund requirements of the long-term debt outstanding amounts to
$1,540,000 in 1995; $640,000 in 1996; $2,060,000 in 1997; $620,000 in 1998 and
1999; and $599,000 thereafter.
7. Other receivables consist mainly of amounts due from interexchange
carriers for access services which is a regulated activity. There are
no related party items included in the other receivables caption.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The liquidity of the Company decreased during the six month
period ending June 30, 1995. Current assets exceeded current
liabilities by $2,535,993 at June 30, 1995. In comparison, current
assets exceeded current liabilities by $9,369,651 at December 31,
1994.
Current assets decreased by $5,112,131 when compared to
December 31, 1994. This decrease is primarily due to a decrease in
cash and short-term investments of $5,741,247, an increase of
$134,602 in securities available-for-sale, an increase of $337,649
in accounts receivable and an increase of $172,155 in materials and
supplies.
Most of this decrease is a result of substantial expenditures
made in non-current investments, primarily Carolina Personal
Communications. Cash and short-term investments were unusually high
at December 31, 1994 in anticipation of funding this new venture in
1995. During the six months ending on June 30, 1995, the Company
expended $3,485,816 on this venture. It is expected that capital
requirements for this new company will be an additional $1.2 million
for the remainder of this year. An additional $500,000 was advanced
to U.S. Telecom East in the form of a loan. This loan will convert
to equity upon maturity if not retired. The Company also invested
$250,000 in Wireless 1, Inc., a Louisiana based wireless cable TV
broadcaster. Other amounts of the cash and short-term investments
were invested in assets having maturities of greater than one year
and causing reclassification for balance sheet purposes.
Current liabilities increased $1,721,527 when compared to
December 31, 1994. Most of this increase is a result of increased
accounts payable of $1,468,524. This increase in accounts payable
is a result of recognizing an ongoing expense in the amount of
$500,000 for early replacement of telephone poles which are
defective, and recording additional payables for software and
central office equipment.
The Company's primary source of liquidity is funds provided by
operations. During this six months ended June 30, 1995, cash
provided by operations totaled $13,269,282.
The primary use of cash during this period was for additions to
telephone plant - $8,248,496, purchase of investments - $7,816,047,
and payment of dividends - $2,015,122. Carolina Personal
Communications, as mentioned above, received $3,485,816 of cash
expended for investments. Purchase of municipal bonds generated
$2,117,707 of this expenditure and the remainder was spent on other
investments. Most of the additions in telephone plant, $4.7
million, is for switching equipment.
At June 30, 1995, the Company's investment portfolio totaled
34.2 million, all of which could be pledged to secure additional
borrowing if needed for liquidity purposes. There are no plans to
borrow additional funds at this time. At June 30, 1995, the Company
had available lines of credit totaling $13,500,000, none of which
was outstanding. Management believes the liquidity is adequate to
meet the operational needs of the Company.
Results of Operations
3 months ended June 30, 1995 and June 30, 1994
Operating revenues increased $2,398,590 or 20.6% for the three
months ended June 30, 1995 compared to same period of 1994.
Local service revenues increased $528,378 or 10.6% during this
period. This growth is a result of improved demand for service and
the new calling plan which allocates more revenues to local service.
It is expected that growth in this classification of revenues will
continue throughout this year at a slower rate since the calling
plan was effective in May of last year.
Access and toll revenues increased $1,765,326 or 35.4% for the
three months ended June 30, 1995 when compared to the same period of
1994. Most of this increase is a result of a one time settlement
related to a prior period from the National Exchange Carrier
Association (NECA) in the amount of approximately $1.5 million.
This settlement was related to the additional expenses generated by
an amortization of telephone plant as ordered by the North Carolina
Utilities Commission during the last half of 1994.
Without this settlement, access and toll revenues would have
increased approximately $265,000 or 5.3% for this same period.
Other and unregulated income increased $111,632 for this
period. This increase results primarily from an increase of $67,450
in non-regulated income, net. The increased amount of non-regulated
income is primarily the recognition of cellular income by recording
reported income from these operations and increased sales efforts in
customer premise equipment.
The Company is placing more emphasis on the non-regulated area
of operation and it is expected that this trend of increasing non-
regulated income will continue.
Operating expenses, exclusive of depreciation, increased
$1,072,394 or 17.8%. The increase in the customer and corporate
area arises from additional accruals in the pension cost and post
retirement benefits other than pensions. Since adoption, the
Company has been recovering the full accrual (SFAS 106) amount of
other postretirement expenses and benefit costs in its rates with
the various jurisdictions. Plant specific expenditures decreased
due to a reduced amount of maintenance in outside plant.
Depreciation expenses increased $222,749 or 12.14% for this
period. This increased amount is due to an increased depreciable
base and increased rates as authorized by the North Carolina
Utilities Commission.
Uncollectible expense has decreased for this period due to
decreased write-offs and greater amounts subsequently collected.
Other income increased $763,050 for this period. This
increased amount in other income is primarily the recognition of
cellular income reported from these operations. The additional
income was offset by increased other expenses due to loss on
investments of $337,950 and contributions of $66,500.
Results of Operations (Con't.)
6 months ended June 30, 1995 and June 30, 1994
Operating revenues increased $2,381,797 or 9.6% for the six
months ended June 30, 1995, over the six months ended June 30, 1994.
This increase is a result of higher local, access, toll and other
revenue.
Local service revenues increased $1,353,725 or 15.1% during
this period. This growth is a result of improving growth in demand
for service and a new calling plan which allocates more revenues to
local service. It is expected that this growth will slow since the
calling plan was effective May of last year and subsequent periods
will be more comparable.
Toll access revenues increased $659,294 or 5.5% during the six
months ended June 30, 1995, over the six months ended June 30, 1994.
This increase is due primarily to the prior period settlement
recovered from NECA during the second quarter of this year. Without
this $1.5 million, settlement toll and access revenues would have
decreased. This is to be expected due to the calling plan
implemented during 1994 which transfers revenues to local.
Other operating revenues increased $303,168 or 7.3% during this
period in comparison to the same period of the previous year. This
increase is a result of larger amounts of non-regulated revenues.
Operating expenses, exclusive of depreciation, for the six
month period ended June 30, 1995 increased $1,036,525 or 8.4%. This
increase arises primarily from an increase in corporate operations.
Specifically, the income is from accruals in the pension cost and
post retirement benefits other than pension.
Depreciation expense increased $403,856 or 11.3% for the six
month period ended June 30, 1995 as compared to the same period of
1994. This increased amount is due to an increased depreciable base
and increased rates as authorized by the North Carolina Utilities
Commission during 1994 and in effect for all of 1995.
Corporate and customer operation expense increased $1,021,912
or 17.2% when compared to the same period of 1994. This increase is
due primarily to accruals to increased pension cost.
Other income increased $511,490 for this period. This
increased amount in other income is primarily the recognition of
cellular income by reporting income from these operations. The
additional income was offset by increased other expenses due to loss
on investments of $337,950 and contributions of $110,960.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The registrant is not involved in any material legal proceedings at
June 30, 1995, except as previously disclosed in Item 3 of its
annual report on Form 10-K for year ended December 31, 1994 and in
Note 9 to the registrant's financial statements included therein.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting was held April 27, 1995.
All directors were reelected.
Proxies were solicted for the following matters:
(1) To elect seven directors for terms designated.
Betty Gay Bivens
John R. Boger, Jr.
L. D. Coltrane, III
Michael R. Coltrane
Ben F. Mynatt
Jerry H. McClellan
Phil W. Widenhouse
For 68,648 Authority Withheld 55 Broker Non-Vote 0
(Each nominee received the same number of votes)
(2) Approval of Restricted Stock Award Program
For 64,619 Against 1520 Abstain 2564 Broker Non-Vote 0
(3) Approval of 1995 Comprehensive Stock Option Plan
For 64,658 Against 1481 Abstain 2564 Broker Non-Vote 0
(4) Approval of 1995 Employee Stock Purchase Plan
For 64,650 Against 1463 Abstain 2590 Broker Non-Vote 0
(5) In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
For 66,137 Against 0 Abstain 2566 Broker Non-Vote 0
PART II. OTHER INFORMATION (Con't.)
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
There were no current reports on Form 8-K filed during the second
quarter.
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.
CT COMMUNICATIONS, INC.
(Registrant)
ROY W. LONG
Vice President, Treasurer
and Chief Financial Officer
August 11, 1995
Date
(The above signatory has dual responsibility as duly authorized
officer and principal financial and accounting officer of the
registrant.)
INDEX TO EXHIBITS
Exhibit No.
(per Item 601 Description
Sequential
of Reg. S-K of Exhibits Page
No.
27. Financial Data Schedule E-1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 3,224,764
<SECURITIES> 1,089,230
<RECEIVABLES> 7,382,618
<ALLOWANCES> 100,000
<INVENTORY> 1,594,561
<CURRENT-ASSETS> 17,836,451
<PP&E> 124,331,983
<DEPRECIATION> 66,279,328
<TOTAL-ASSETS> 106,224,142
<CURRENT-LIABILITIES> 15,300,458
<BONDS> 4,384,000
<COMMON> 24,609,300
175,000
1,708,700
<OTHER-SE> 42,830,656
<TOTAL-LIABILITY-AND-EQUITY> 106,224,142
<SALES> 0
<TOTAL-REVENUES> 27,194,850
<CGS> 0
<TOTAL-COSTS> 17,379,030
<OTHER-EXPENSES> 758,425
<LOSS-PROVISION> 102,812
<INTEREST-EXPENSE> 235,503
<INCOME-PRETAX> 11,218,821
<INCOME-TAX> 4,118,536
<INCOME-CONTINUING> 7,100,285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,100,285
<EPS-PRIMARY> 14.33
<EPS-DILUTED> 14.28
</TABLE>
