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 MARCH 31, 1996
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.
494,952 shares of Common Stock outstanding as of
March 31, 1996.
Class A Voting - 75,673
Class B Non-Voting - 419,279
CT COMMUNICATIONS, INC.
INDEX
Page No.
PART I. Financial Information
Balance Sheets --
March 31, 1996 and December 31, 1995 2-3
Statements of Income --
Three Months Ended March 31, 1996 and 1995 4
Statements of Cash Flows --
Three Months Ended March 31, 1996 and 1995 5
Notes to Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. Other Information 10
-1-
PART I. FINANCIAL INFORMATION
CT COMMUNICATIONS, INC.
Consolidated Balance Sheets
Unaudited
ASSETS
March 31, December 31,
1996 1995
Current assets:
Cash and cash equivalents $ 4,646,648 $ 4,751,204
Short-term investments 1,966,991 2,711,699
Accounts receivable, net of allowance
for doubtful accounts of $100,000
in 1996 and 1995 7,371,496 8,878,698
Refundable income taxes --- 176,228
Materials and supplies 1,966,585 1,803,419
Deferred income taxes 71,324 71,324
Prepaid expenses and other assets 367,263 533,385
Total current assets 16,390,307 18,925,957
Investment securities 9,672,323 9,074,888
Investments in affiliates 24,062,741 21,788,955
Property, plant, and equipment:
Telephone plant in service:
Land, buildings, and general equipment 18,166,117 17,400,228
Central office equipment 48,997,139 47,037,535
Poles, wire, cables and conduit 66,483,187 65,849,055
Construction in progress 98,773 14,483
133,745,216 130,301,301
Less accumulated depreciation 74,343,281 72,325,624
Net property, plant, and equipment 59,401,935 57,975,677
TOTAL ASSETS $109,527,306 $107,765,477
(Continued)
See accompanying notes to consolidated financial statements.
-2-
Consolidated Balance Sheets, (Continued)
LIABILITIES & STOCKHOLDERS' EQUITY
Unaudited
March 31, December 31,
1996 1995
Current liabilities:
Current portion of long-term debt and
redeemable preferred stock $ 2,072,500 $ 652,500
Accounts payable 7,652,455 8,852,272
Customer deposits and advance billings 1,114,323 1,080,773
Accrued payroll 284,999 468,390
Accrued pension cost 1,113,776 1,143,033
Other accrued liabilities 415,328 500,654
Income taxes payable 1,492,800 ---
Total current liabilities 14,146,181 12,697,622
Long-term debt 2,479,000 4,074,000
Deferred credits and other liabilities:
Deferred income taxes 905,908 1,568,455
Investment tax credits 1,120,129 1,148,850
Regulatory liability 2,633,285 2,633,285
Postretirement benefits other than pension 8,410,017 8,104,965
Other 1,103,098 1,103,098
14,172,437 14,558,653
Redeemable preferred stock, $100 par value:
4.8% series; authorized 5,000 shares;
issued and outstanding 1,750 shares
in 1996 and 1995 162,500 162,500
Total liabilities 30,960,118 31,492,775
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:
Voting, 75,673 shares outstanding 4,021,094 4,021,094
Nonvoting, outstanding 419,279
shares in 1996 and 418,667 in 1995 23,303,498 23,114,777
Other capital 298,083 298,083
Unearned compensation (209,031) (60,752)
Unrealized gain on securities available-
for-sale 1,123,232 1,196,766
Retained earnings 48,337,671 46,010,093
Total stockholders' equity 78,567,188 76,272,702
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $109,527,306 $107,765,477
See accompanying notes to consolidated financial statements.
-3-
CT COMMUNICATIONS, INC.
Consolidated Statements of Income
For 3 months ended March 31, 1996 and 1995
Unaudited
1996 1995
Operating revenues:
Local service $ 5,658,533 $ 5,098,727
Access and toll service 6,246,415 5,788,181
Other and unregulated 2,582,102 2,286,257
Less provisions for uncollectible
accounts (72,237) (36,928)
Total operating revenues 14,414,813 13,136,237
Operating expenses:
Plant specific 3,816,762 3,225,141
Depreciation and amortization 2,225,619 1,959,162
Customer operations 1,623,221 1,393,711
Corporate operations 2,113,100 1,695,620
Total operating expenses 9,778,702 8,273,634
Net operating revenues 4,636,111 4,862,603
Other income (expenses):
Equity in income of affiliates 791,359 461,009
Interest, dividend income and
gain on sale 164,459 95,075
Other expenses, principally interest (122,508) (120,261)
Total other income 833,310 435,823
Income before income taxes 5,469,421 5,298,426
Income taxes 2,136,821 2,055,279
Net income 3,332,600 3,243,147
Dividends on preferred stock 23,209 23,359
Earnings for common stock $ 3,309,391 $ 3,219,788
Earnings per common share $ 6.69 $ 6.54
Dividends per common share $ 2.05 $ 2.00
Weighted average shares outstanding 494,690 491,998
See accompanying notes to consolidated financial statements.
-4-
CT COMMUNICATIONS, INC.
Consolidated Statements of Cash Flows
For 3 months ended March 31, 1996 and 1995
Unaudited
1996 1995
Cash flows from operating activities:
Net income $ 3,332,600 $ 3,219,788
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,225,619 1,992,069
Deferred income taxes and tax credits (691,268) (125,866)
Postretirement benefits 305,052 409,928
Loss on sale of investments 17,774 12,609
Undistributed income of affiliates (791,359) (304,893)
Decrease in accounts receivable 1,507,202 12,316
Increase in materials and supplies (163,166) (173,073)
Decrease(increase) in other assets 166,122 (60,475)
Decrease in accounts payable (1,383,208) (1,697,704)
Increase in customer deposits and
advance billings 33,550 40,976
(Decrease)increase in accrued liabilities (114,493) 278,368
Increase in income taxes payable 1,669,028 1,517,217
Net cash provided by operating activities 6,113,453 5,121,260
Cash flows from investing activities:
Capital expenditures in telephone plant (3,590,878) (3,350,600)
Salvage value - telephone plant retired (60,999) (25,209)
Purchases of investments in affiliates (1,713,100) (540,772)
Purchases of investment securities (811,048) (1,601,066)
Maturities of investment securities 820,000 ---
Partnership capital distribution 230,673 ---
Net cash used in investing activities (5,125,352) (5,517,647)
Cash flows from financing activities:
Repayment of long-term debt (175,000) (175,000)
Dividends paid (1,019,152) (988,692)
Proceeds from common stock issuance 24,624 26,736
Other 76,871 5,990
Net cash used in financing activities (1,092,657) (1,130,966)
Net increase (decrease) in cash and
cash equivalents (104,556) (1,527,353)
Cash and cash equivalents-beginning of period 4,751,204 8,346,235
Cash and cash equivalents-end of period $ 4,646,648 $ 6,818,882
See accompanying notes to consolidated financial statements.
-5-
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
March 31, 1996, and the results of operations for the three months then
ended and cash flows for the three months then ended.
2. The results of operations for the three months ended March 31, 1996 and
1995 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
three months ended March 31, 1996.
.....Voting.....
Shares Value
Outstanding at December 31, 1995
and March 31, 1996.............. 75,673 $4,021,094
Weighted average shares outstanding
for the three months ending
March 31, 1996.................. 75,673
..Non-Voting Class B..
Shares Value
Outstanding at December 31, 1995.. 418,667 $23,114,777
Issuance of common stock.......... 612 177,099
Tax benefit from the
exercise of options. --- 11,622
Outstanding at March 31, 1996..... 419,279 $23,303,498
Weighted average shares outstanding
for three months ending
March 31, 1996................. 419,017
On April 25, 1996, the Board of Directors declared a three for one
stock split (two new shares for each share held) payable May 30, 1996 to
shareholders of record May 3, 1996. This creates an additional 151,346
shares of common voting and 838,670 shares of non-voting Class B. These
share amounts are not reflected in
any share data presented herein.
-6-
4. SECURITIES AVAILABLE-FOR-SALE
March 31, 1996
Gross Unrealized
Securities Amortized Fair
Available-for-Sale Cost Gains Losses Value
State, county and municipal
debt securities $ 8,959,544 36,076 67,021 8,928,599
Equity securities 843,505 2,206,340 339,130 2,710,715
Total $ 9,803,049 2,242,416 406,151 11,639,314
Amortized Cost Fair Value
Current $ 1,981,168 $ 1,966,991
Due after one through five years 4,352,624 4,348,343
Due after five through ten years 2,625,752 2,613,265
Equity securities 843,505 2,710,715
Total $ 9,803,049 $11,639,314
5. INVESTMENTS IN AFFILIATED COMPANIES
3/31/96 12/31/95
ITC Associates Partnership (equity method) $ 5,519,832 $ 5,519,832
RSA 15 Partnership (equity method) 5,326,572 4,844,472
BellSouth Carolinas PCS, LP (equity method) 5,492,456 4,597,756
U.S. Telecom Holdings (equity method) 3,520,833 3,520,833
Wireless 1 - Carolinas (equity method) 998,400 240,000
ITC Holdings (cost method) 658,354 658,354
ITN Charter (cost method) 789,347 789,347
U.S. Intelco (cost method) 279,277 279,277
Ellerbe Partnership (equity method) 977,544 898,959
Access On (equity method) 271,035 271,035
Embion of North Carolina (equity method) 123,748 63,747
Other (cost method) 105,343 105,343
TOTAL $ 24,062,741 $ 21,788,955
6. LONG-TERM DEBT:
Long-term debt excluding annual maturities comprised the following:
First Mortgage Bonds: March 31, 1996 December 31, 1995
6 1/4% Series F, due 3/1/97 $ --- $ 1,440,000
Note payable to a bank @ 7.25%
due in installments until 2001 2,479,000 2,634,000
TOTAL $ 2,479,000 $ 4,074,000
Annual maturities and sinking fund requirements of the long-term debt
outstanding amounts to $640,000 in 1996; $2,060,000 in 1997; $620,000 in
1998, 1999 and 2000; and $154,000 thereafter.
-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 three month
period ended March 31, 1996. Current assets exceeded current
liabilities by $2,244,126 at March 31, 1996. In comparison, current
assets exceeded current liabilities by $6,228,335 at December 31, 1995.
Current assets decreased $2,535,650 when compared to December 31,
1995. This decrease is primarily due to a decrease in cash and short-
term investments of $849,264, a decrease in accounts receivable and
refundable income taxes of $1,683,430, an increase in materials and
supplies of $163,166 and a decrease in prepaid expenses and other
assets of $166,122.
Current liabilities increased $1,448,559 during the three months
ended March 31, 1996. This increase is primarily from the
reclassification of long-term debt to current liabilities for the March
1, 1997 maturity of First Mortgage bonds in the amount of $1,420,000.
Accounts payable decreased $1,199,817 due to payments made to
creditors. Other accrued liabilities and income taxes payable
increased $1,407,474 due primarily to the accrual of income taxes
payable in the amount of $1,492,800, due to timing difference of
payments. These tax amounts were deposited to the state and Federal
governments on April 15, 1996.
The Company's primary source of liquidity is funds provided by
operations. During the three months ended March 31, 1996, cash
provided by operations totaled $6,113,453.
The primary use of cash during this period was for additions to
telephone plant - $3,590,878, purchase of investments in affiliates and
investment securities - $2,524,148, and payment of dividends -
$1,019,152. Cash and cash equivalents decreased by $104,556 during
this period.
At March 31, 1996, the Company's investment portfolio totaled
$35.7 million that could be pledged to secure additional borrowing if
needed for liquidity purposes. There are no plans to borrow additional
funds at this time. At March 31, 1996, 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.
It is anticipated that the Company will be able to meet its
financial needs for capital through internal operations.
-8-
Results of Operations
3 months ended March 31, 1996 and March 31, 1995
Operating revenues increased $1,278,576 or 9.7% for the three
months ended March 31, 1996 when compared to the same period of 1995.
Local service increased $559,806 or 11.0% which is a result of growth
in customers and demand for service.
Access and toll service, net of toll settlements, increased by
$458,234 or 7.9%. These increases are a result of growth in the
customer base.
Other and unregulated revenues increased $295,845 or 12.9% over
the same period of the prior year. This is a result of increased
efforts in selling non-regulated equipment and services. It is
expected that these revenues will continue to respond favorably to
increased marketing and sales efforts.
Uncollectible expense increased for this period due to a
correction in the amount of write offs from the quarter ended December
31, 1994 which reduced the first quarter 1995 amount by $47,496.
Without this correction, uncollectible expense would have only
decreased $12,187, which is primarily due to increased efforts at
collection.
Operating expenses, exclusive of depreciation, increased
$1,238,611 or 19.6% when compared to the period ended March 31, 1995.
This increase arises from increased expenditure in the plant specific
area of operations of $591,621, an increase of 18.3%; increased
customer operations expenditure of $229,510, an increase of 16.5%; and
increased corporate operations expenditure of $417,480, an increase of
24.6%. These expenditures increased primarily because of increased
maintenance on cable facilities in the outside plant; increased
activity in the customer service area of operation; and increased
general and administrative expense which is primarily due to an
increase in other post employment benefits (OPEB).
Depreciation expenses increased $266,457 or 13.6% for this period.
This increased amount is due to an increased depreciable base and
increased rates as authorized by The North Carolina Utilities
Commission.
Other income increased by $397,487 for the quarter ended March 31,
1996 as compared to the same period of 1995. Most of this increase is
from increased income in the equity of affiliates of $330,350. This
is primarily recognition of income from cellular operations. Interest
and gain on sale of investments increased by $69,384 when compared to
the same period of 1995.
-9-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The registrant is not currently involved in any material legal
proceedings except as previously reported in Item 3 of its Annual
Report on Form 10-K for the year ended December 31, 1995 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
(A) Exhibits
Exhibit No. Description of Exhibit
27 Financial Data Schedule
(B) Reports on Form 8-K.
None
-10-
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
May 13, 1996
Date
(The above signatory has dual responsibility as duly authorized
officer and principal financial and accounting officer of the
registrant.)
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Appendix A to Item 601(c) of Regulation S-K
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,646,648
<SECURITIES> 1,966,991
<RECEIVABLES> 7,471,496
<ALLOWANCES> 100,000
<INVENTORY> 1,966,585
<CURRENT-ASSETS> 16,390,307
<PP&E> 133,745,216
<DEPRECIATION> 74,343,281
<TOTAL-ASSETS> 109,527,306
<CURRENT-LIABILITIES> 14,146,181
<BONDS> 2,479,000
<COMMON> 24,747,600
162,500
1,708,700
<OTHER-SE> 52,107,888
<TOTAL-LIABILITY-AND-EQUITY> 109,527,306
<SALES> 0
<TOTAL-REVENUES> 14,487,050
<CGS> 0
<TOTAL-COSTS> 9,778,702
<OTHER-EXPENSES> 321,792
<LOSS-PROVISION> 72,237
<INTEREST-EXPENSE> 122,508
<INCOME-PRETAX> 4,636,111
<INCOME-TAX> 2,136,821
<INCOME-CONTINUING> 3,332,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,332,600
<EPS-PRIMARY> 6.69
<EPS-DILUTED> 6.63
</TABLE>
