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 SEPTEMBER 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.
494,031 shares of Common Stock, $50 par value, outstanding
as of September 30, 1995.
Class A Voting - 75,673
Class B Non-Voting - 418,358
CT COMMUNICATIONS, INC.
INDEX
Page No.
PART I. Financial Information
Balance Sheets --
Sept. 30, 1995 and December 31, 1994 2-3
Statements of Income --
Three and Nine Months Ended Sept. 30, 1995 and 1994 4
Statements of Cash Flows --
Nine Months Ended Sept. 30, 1995 and 1994 5
Notes to Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
PART II. Other Information 12
-1-
PART I. FINANCIAL INFORMATION
CT COMMUNICATIONS, INC.
Consolidated Balance Sheets
Unaudited
ASSETS
September 30, December 31,
1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 3,205,868 $ 8,346,235
Short-term investments 4,101,847 4,473,565
Securities available-for-sale (note 4) 1,080,890 954,628
Accounts receivable, net of allowance
for doubtful accounts of $100,000 8,762,192 7,044,969
Materials and supplies 1,792,498 1,422,406
Prepaid expenses 100,899 238,579
Deferred income taxes 468,200 468,200
Total current assets 19,512,394 22,948,582
Investments (note 5) 29,286,731 23,097,634
Property, plant & equipment: (note 6)
Telephone plant in service:
Land, buildings, and general equipment 18,921,984 17,883,647
Central office equipment 44,951,116 38,396,870
Poles, wire, cables and conduit 63,812,796 60,153,447
Construction in progress --- 464,065
127,685,896 116,898,029
Less accumulated depreciation 69,459,033 63,057,606
Net property, plant, and equipment 58,226,863 53,840,423
TOTAL ASSETS $ 107,025,988 $ 99,886,639
(Continued)
-2-
Consolidated Balance Sheets, (Continued)
LIABILITIES & STOCKHOLDERS' EQUITY
Unaudited
September 30, December 31,
1995 1994
CURRENT LIABILITIES:
Current portion of long-term debt &
redeemable preferred stock (note 6) $ 652,500 $ 1,540,000
Accounts payable 9,048,524 8,141,677
Customer deposits and advance billings 1,079,035 989,810
Accrued payroll 405,257 387,526
Accrued pension cost 1,099,199 967,699
Other accrued liabilities 1,206,002 377,860
Income taxes payable 606,507 1,174,359
Total current liabilities 14,097,024 13,578,931
Long-term debt (note 6) 4,229,000 4,714,000
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 1,977,097 3,251,202
Investment tax credits 1,151,338 1,397,388
Regulatory liability 3,047,956 3,047,956
Postretirement benefits other than pension 7,710,691 6,468,528
Other 1,103,098 1,103,098
14,990,180 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 33,491,204 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
418,358 shares in 1995 and 416,256
in 1994 20,917,900 20,812,800
Premium on common voting stock 237,444 237,444
Premium on common nonvoting stock 2,135,703 1,715,302
Other capital 298,083 298,083
Unrealized gain on securities available-
for-sale (note 4) 361,417 284,396
Equity in earnings of investment --- 260,624
Retained earnings 44,107,946 37,065,596
Total stockholders' equity 73,534,784 66,150,536
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $107,025,988 $ 99,886,639
-3-
<TABLE>
CT COMMUNICATIONS, INC.
Consolidated Statements of Income
For 3 and 9 months ended September 30, 1995 and 1994
Unaudited
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September30,
OPERATING REVENUES: 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Local service $ 5,375,407 $ 4,874,804 $15,691,350 $13,837,022
Access and toll service 6,438,006 6,087,244 18,980,097 17,970,041
Other and unregulated 2,251,026 2,139,475 6,690,654 6,275,935
Less provision for uncollectible accounts (105,624) (100,046) (208,436) (268,468)
Total operating revenues 13,958,815 13,001,477 41,153,665 37,814,530
OPERATING EXPENSES:
Plant specific 3,405,436 3,309,863 9,815,481 9,705,295
Depreciation and amortization 3,615,590 5,373,713 7,594,559 8,948,826
Customer operations 1,415,186 1,416,861 4,416,352 4,018,307
Corporate operations 1,731,375 1,449,042 5,720,225 4,815,700
Total operating expenses 10,167,587 11,549,479 27,546,617 27,488,128
Net operating revenues 3,791,228 1,451,998 13,607,048 10,326,402
OTHER INCOME (EXPENSES):
Interest, dividend income and
gain on sale 1,017,479 626,867 3,105,244 1,816,405
Other expenses, principally interest 143,667 261,924 828,431 559,951
Total other income 873,812 364,943 2,276,813 1,256,454
Income before income taxes 4,665,040 1,816,941 15,883,861 11,582,856
Income taxes 1,706,060 601,893 5,824,596 4,222,324
Net income 2,958,980 1,215,048 10,059,265 7,360,532
DIVIDENDS ON PREFERRED STOCK 23,278 23,509 69,832 70,525
EARNINGS FOR COMMON STOCK $ 2,935,702 $ 1,191,539 $ 9,989,433 $ 7,290,007
EARNINGS PER COMMON SHARE* $ 5.95 $ 2.42 $ 20.28 $ 14.82
DIVIDENDS PER COMMON SHARE* $ 2.05 $ 2.00 $ 6.05 $ 5.92
WEIGHTED AVERAGE SHARES OUTSTANDING* 493,602 491,926 492,583 491,811
*See Note (3)
</TABLE>
-4-
CT COMMUNICATIONS, INC.
Statements of Cash Flows
For 9 months ended September 30, 1995 and 1994
Unaudited
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,059,265 $ 7,360,532
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,594,559 8,948,826
Deferred income taxes and tax credits (1,520,155) (2,053,506)
Loss on retirement of non-regulated property 5,178 4,907
Loss (gain) on disposition of investments (148,680) (321,776)
(Increase) decrease in:
Receivables, net (1,717,223) 617,491
Materials and supplies (370,092) (452,117)
Other assets 137,680 (927,866)
Increase (decrease) in:
Accounts payable 906,847 (350,056)
Federal and state income taxes payable (567,852) ---
Accrued liabilities 2,308,761 2,101,189
Total adjustments 6,629,023 7,567,092
Net cash provided by operating
activities 16,688,288 14,927,624
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to non-regulated property and equipment (216,332) (312,694)
Capital additions to telephone plant (11,881,214) (6,264,705)
Salvage value of telephone plant retired, net (136,779) (65,105)
Purchases of investments (8,365,165) (4,913,877)
Proceeds from sale of investments 2,634,747 324,746
Net cash used in investing activities (17,964,743)(11,231,635)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 500,449 46,300
Repayment of long-term debt (1,372,500) (72,500)
Dividends paid on preferred stock (51,218) (51,455)
Dividends paid on common stock (2,981,007) (2,913,307)
Tax benefit from employee stock ownership
plan dividends distributed to employees 15,312 15,464
Tax benefit from exercise of stock option 25,052 6,490
Purchase of fractional shares --- (110,817)
Net cash used in financing activities (3,863,912) (3,079,825)
Net increase (decrease) in cash (5,140,367) 616,164
Cash and cash equivalents at beginning of period 8,346,235 2,661,199
Cash and cash equivalents at end of period $ 3,205,868 $ 3,277,363
See accompanying notes to financial statements.
-5-
CT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited financial state-
ments contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of
September 30, 1995, and the results of operations for the three months
and nine months then ended and cash flows for the nine months
then ended.
2. The results of operations for the three months and nine months ended
September 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 nine
months ended September 30, 1995.
........Voting Class A........
Shares Par Value Premium
Outstanding at December 31, 1994
and at September 30, 1995........ 75,673 $3,783,650 $237,444
Weighted average shares outstanding
for the nine months ending
September 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.......... 2,102 105,100 395,349
Tax benefit from exercise
of stock option..... --- --- 25,052
Outstanding at September 30, 1995. 418,358 $20,917,900 $2,135,703
Weighted average shares outstanding
for nine months ending
September 30, 1995..............492,583
-6-
4. SECURITIES AVAILABLE-FOR-SALE
September 30, 1995
Gross Unrealized
Securities Market
Available-for-Sale Cost Gains Losses Value
Equity Securities $488,405 $969,265 $376,780 $1,080,890
5. INVESTMENTS
9/30/95 12/31/94
State, county, and municipal investments $ 13,588,863 $ 14,552,592
Carolina Personal Communications 3,928,796 ---
ITN Charter stock 777,200 777,200
U.S. Intelco stock 279,277 279,277
U.S. Telecom East 3,462,974 2,582,802
ITC Holdings (equity method) 5,518,715 5,260,624
Investment in Ellerbe partnership (equity method) 931,278 341,038
Investment in RSA 15 partnership (equity method) 4,183,197 3,305,823
Access/On 298,000 146,500
Embion of North Carolina (equity method) 64,935 220,000
Wireless 1, Inc. 250,000 ---
Other, at cost which approximates market 105,343 105,343
33,388,578 27,571,199
Less current maturities 4,101,847 4,473,565
TOTAL $ 29,286,731 $ 23,097,634
6. LONG-TERM DEBT:
Long-term debt excluding annual maturities comprised the following:
First Mortgage Bonds: September 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 2,789,000 3,254,000
TOTAL $ 4,229,000 $ 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 and redeemable prefer-
red stock 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 other receivables.
-7-
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 nine month period ending
September 30, 1995. Current assets exceeded current liabilities by
$5,415,370 at September 30, 1995. In comparison, current assets exceeded
current liabilities by $9,369,651 at December 31, 1994.
Current assets decreased by $3,436,188 when compared to December 31,
1994. This decrease is primarily due to a decrease in cash and short-
term investments of $5,512,088, which was offset in part by an increase of
$126,262 in securities available-for-sale, an increase of $1,717,223 in
accounts receivable, and an increase of $370,092 in materials and
supplies.
Most of this decrease in cash and short-term investments 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 nine months ending on September 30, 1995,
the Company expended $4,088,766 on this venture. It is expected that
capital requirements for this new company will be an additional
$600,000 for the remainder of this year. An additional $309,000 was
advanced to U.S. Telecom East in the form of a loan, making the total
principal of such loan $2,004,534. 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 requiring
reclassification for balance sheet purposes.
Current liabilities increased only $518,093 when compared to December 31,
1994. The decrease resulting from the retiring of a matured long-term bond
in the amount of $887,500 was more than offset by a $906,847 increase in
accounts payable, which reflects recognition of an anticipated expense of
$500,000 for early replacement of telephone poles which are defective and
recording additional payables for software and central office equipment.
Other accrued liabilities increased $828,142. This increase is primarily due
to accrued property taxes of $443,000 and funds held for employees in the
Employee Christmas Club of $244,000. Income taxes payable decreased $567,852
primarily due to the timing difference in payment dates.
The Company's primary source of cash is funds provided by operations.
During the nine months ended September 30, 1995, cash provided by operations
totaled $16,691,492, as compared to $14,927,624 for the nine months ended
September 30, 1994.
-8-
Liquidity and Capital Resources (Con't.)
The primary use of cash during this period was for additions to telephone
plant - $12,097,546, purchase of investments - $8,368,369, and payment of
dividends - $3,032,225. Carolina Personal Communications, as mentioned above,
received $4,088,766 of cash expended for investments. Most of the additions
in telephone plant, $6.5 million, is for switching equipment. Expenditures
in this area are expected to continue in order to meet customer growth and
their demands for services.
At September 30, 1995, the Company's investment portfolio totaled $33.4
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 September 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 September 30, 1995 and September 30, 1994
Operating revenues increased $957,338 or 7% for the three months ended
September 30, 1995 compared to same period of 1994.
Local service revenues increased $500,603 or 8.2% during this period.
This growth is a result of improved demand for service. It is expected that
growth in this classification of revenues will continue throughout this year.
Access and toll revenues increased $350,762 or 5.8% for the three months
ended September 30, 1995 when compared to the same period of 1994 due to
significant growth in customers and demands for services.
Other and unregulated revenues increased $111,551 or 5.2% for this period.
The increased amount of non-regulated income is primarily the result of
increased sales efforts in customer premise equipment and the Company's
continued emphasis on the non-regulated area of operation.
Operating expenses, exclusive of depreciation, increased $376,231 or 6.1%.
The increase in the customer and corporate area arises from additional accruals
in the pension cost and other post employment benefits (OPEB). Since adoption,
the Company has been recovering the full accrual (SFAS 106) amount of other
postretirement expenses andbenefit costs in its rates with the various
jurisdictions. Plant specific expenditures increased due to a increased
amount of maintenance in outside plant.
-9-
Results of Operations (Con't.)
3 months ended September 30, 1995 and September 30, 1994 (Con't.)
Depreciation expenses decreased $1,758,123 or 32.7% for this period.
This decrease resulted from a special amortization by the Company during the
1994 period of $3,505,000, as authorized by the North Carolina Utilities
Commission. During the current quarter the Company recognized an additional
$1,500,000 in special amortization.
Without the special amortization, depreciation expense would have decreased
about $3,200,000. Subsequent quarters will not include these special
amortizations.
Uncollectible revenue has decreased for this period due to decreased
write-offs and greater amounts of subsequently collected accounts.
Other income increased $508,869 for this period due primarily to the
recognition of income reported from cellular operations.
9 months ended September 30, 1995 and September 30, 1994
Operating revenues increased $3,339,135 or 8.8% for the nine months ended
September 30, 1995, over the nine months ended September 30, 1994. This
increase is primarily a result of higher local service and toll revenues.
Local service revenues increased $1,854,328 or 13.4% 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 rate will slow since the calling plan was effective May 1994
and subsequent periods will be more comparable.
Toll access revenues increased $1,010,056 or 5.6% during the nine months
ended September 30, 1995, over the nine months ended September 30, 1994.
This increase is due primarily to the recognition of $440,000 in the third
quarter of 1995 of a settlement payment recovered from National Exchange
Carrier Association. 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 and unregulated revenues increased $414,719 or 6.6% during this
period in comparison to the same period of the previous year. This increase
is primarily due to increased billing and collecting revenues and increased
customer sales of premise equipment.
Operating expenses, exclusive of depreciation, for the nine month period
ended September 30, 1995 increased $1,412,756 or 7.0%. This increase arises
primarily from an increase in corporate operations because of accruals in
the pension cost and post retirement benefits other than pension.
-10-
Results of Operations (Con.t)
9 months ended September 30, 1995 and September 30, 1994 (Con't.)
Depreciation expense decreased $1,354,267 or 15.1% for the nine month
period ended September 30, 1995 as compared to the same period of 1994. This
decrease is a result of having recognized a special amortization of $3,505,000,
as authorized by the North Carolina Utilities Commission in the 1994 period.
The Company recognized an additional $1,500,000 special amortization during the
current period. Subsequent periods should be more comparable since these one-
time charges will not be included.
Corporate and customer operation expense increased $1,302,570 or 14.7%
when compared to the same period of 1994. This increase is due primarily to
accruals to increased pension cost.
Other income increased $1,020,359 for this period. This increased amount
in other is primarily the recognition of income from cellular operations. The
additional income was offset by increased other expenses due to loss on invest-
ments of $370,035 and contributions of $122,585.
-11-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The registrant is not involved in any material legal proceedings at
September 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
None
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 third quarter.
-12-
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)
/s/ ROY W. LONG
Roy W. Long
Vice President, Treasurer
and Chief Financial Officer
November 13, 1995
Date
(The above signatory has dual responsibility as duly authorized
officer and principal financial and accounting officer of the registrant.)
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
APPENDIX A TO ITEM 601(X) OF REGULATION S-K
COMMERCIAL AND INDUSTRIAL COMPANIES
ARTICLE 5 OF REGULATION S-X
</LEGEND>
<CIK> 0000023259
<NAME> CT COMMUNICATIONS INC /NC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,205,868
<SECURITIES> 1,080,890
<RECEIVABLES> 8,762,192
<ALLOWANCES> 100,000
<INVENTORY> 1,792,498
<CURRENT-ASSETS> 19,512,394
<PP&E> 127,685,896
<DEPRECIATION> 69,459,033
<TOTAL-ASSETS> 58,226,863
<CURRENT-LIABILITIES> 14,097,024
<BONDS> 4,229,000
<COMMON> 2,707,697
175,000
1,692,641
<OTHER-SE> 44,767,446
<TOTAL-LIABILITY-AND-EQUITY> 107,025,988
<SALES> 0
<TOTAL-REVENUES> 41,362,101
<CGS> 0
<TOTAL-COSTS> 27,546,617
<OTHER-EXPENSES> 986,419
<LOSS-PROVISION> 208,436
<INTEREST-EXPENSE> 335,811
<INCOME-PRETAX> 15,883,861
<INCOME-TAX> 5,824,696
<INCOME-CONTINUING> 10,059,265
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,059,265
<EPS-PRIMARY> 20.28
<EPS-DILUTED> 20.21
</TABLE>
