FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITY EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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, NC 28025
(Address of principal executive offices) (Zip Code)
(704)722-2500
(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.
18,837,564 shares of Common Stock outstanding as of May 1, 2000.
<PAGE>
CT COMMUNICATIONS, INC.
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets --
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Income --
Three Months Ended March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 2000 and 1999 6
Consolidated Statements of Comprehensive Income --
Three Months Ended March 31, 2000 and 1999 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
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PART I. FINANCIAL INFORMATION
CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2000 1999
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 7,004,215 $ 1,561,778
Accounts receivable, net of
allowance for doubtful
accounts of $107,500 14,750,851 14,859,359
Notes receivable 1,513,500 1,513,500
Other accounts receivable 737,755 2,260,038
Materials and supplies 2,877,088 2,551,724
Deferred income taxes 154,669 154,669
Prepaid expenses and
other assets 5,297,837 1,107,238
------------ ------------
Total current assets 32,335,915 24,008,306
------------ ------------
Investment securities 80,840,517 81,950,045
Investments in affiliates 30,712,231 31,683,635
Property and equipment:
Land, buildings and general equipment 41,594,387 38,873,719
Central office equipment 87,267,898 83,054,096
Poles, wires, cables and conduit 98,031,299 95,335,716
Construction in progress 771,337 2,426,293
------------ ------------
227,664,921 219,689,824
Less accumulated depreciation 108,160,396 105,514,615
------------ ------------
Net property and equipment 119,504,525 114,175,209
------------ ------------
Intangibles, net 6,333,300 5,878,015
------------ ------------
TOTAL ASSETS $269,726,488 $257,695,210
============ ============
See accompanying notes to consolidated financial statements.
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CT COMMUNICATIONS, INC.
Consolidated Balance Sheets, (Continued)
March 31, December 31,
2000 1999
---- ----
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Redeemable Preferred Stock $ 12,500 $ 12,500
Accounts payable 7,159,300 6,955,346
Customer deposits and advance billings 2,490,750 2,094,334
Accrued payroll 1,072,605 2,450,067
Income taxes payable 2,811,252 1,019,221
Accrued pension cost 955,287 1,020,639
Short-term debt 4,000,000 -
Other accrued liabilities 1,408,511 2,321,594
------------ ------------
Total current liabilities 19,910,205 15,873,701
------------ ------------
Long-term debt 25,000,000 20,000,000
------------ ------------
Deferred credits and other liabilities:
Deferred income taxes 33,931,213 34,507,475
Investment tax credits 660,589 689,310
Postretirement benefits other than pension 10,490,538 10,551,111
Other 713,902 795,011
------------ ------------
Total deferred credits and other liabilities 45,796,242 46,542,907
------------ ------------
Redeemable Preferred Stock:
4.8% series, $100 par value; 5,000 shares
authorized; 1,250 shares issued and
outstanding in 2000 and 1999 112,500 112,500
------------ ------------
Total liabilities 90,818,947 82,529,108
Stockholders' equity:
Preferred Stock not subject to mandatory
redemption:
5% series, $100 par value; 3,356
shares outstanding in 2000 and 1999 335,600 335,600
4.5% series, $100 par value; 614
shares outstanding in 2000 and 1999 61,400 61,400
Common Stock
18,829,744 and 18,760,930 shares
outstanding in 2000 and 1999,
respectively 39,885,586 38,584,516
Other capital 298,083 298,083
Deferred compensation (1,680,239) (1,074,726)
Other accumulated comprehensive income 47,029,971 48,059,889
Retained earnings 92,977,140 88,901,340
------------ ------------
Total stockholders' equity 178,907,541 175,166,102
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $269,726,488 $257,695,210
============ ============
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CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
Three Months Ended March 31,
2000 1999
---- ----
Operating revenues $ 27,942,307 $ 25,332,224
Operating expenses 22,901,729 20,092,832
------------- ------------
Net operating revenues 5,040,578 5,239,392
------------- ------------
Other income (expenses):
Equity in income of affiliates, net 970,579 67,252
Interest, dividend income and gain on
sale of investments 3,304,787 2,003,849
Other expenses, principally interest (540,895) (849,159)
-------------- -------------
Total other income (expenses) 3,734,471 1,221,942
-------------- -------------
Income before income taxes 8,775,049 6,461,334
Income taxes 3,474,042 2,591,286
-------------- -------------
Net income 5,301,007 3,870,048
Dividends on Preferred Stock 6,386 7,212
-------------- -------------
Earnings for Common Stock $ 5,294,621 $ 3,862,836
============= =============
Basic earnings per common share $ 0.28 $ 0.21
============= ============
Diluted earnings per common share $ 0.28 $ 0.21
============= ============
Basic weighted average shares outstanding 18,786,722 18,639,294
============= ============
Diluted weighted average shares outstanding 18,914,889 18,781,250
============= ============
See accompanying notes to consolidated financial statements.
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CT COMMUNICATIONS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 5,301,007 $ 3,870,048
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,042,284 3,577,718
Postretirement Benefits (60,573) 79,292
Gain on sales of investment securities (3,100,148) (1,064,444)
Undistributed income of affiliates (970,579) (67,252)
Deferred income taxes and tax credits (28,721) (28,721)
Changes in operating assets and liabilities:
Accounts receivable 1,663,471 (3,252,477)
Materials & supplies (325,364) (79,797)
Other current assets (4,190,599) 420,196
Accounts payable 112,227 637,433
Customer deposits and advance billings 396,416 481,259
Accrued liabilities 1,972,625 (686,610)
Income taxes payable 1,792,031 2,435,650
------------- ------------
Net cash provided by operating activities 6,604,077 6,322,295
------------- ------------
Cash flows from investing activities:
Capital expenditures, net (9,032,430) (4,460,690)
Purchase of investments in affiliates (48,443) (259,407)
Purchase of investment securities (4,495,802) (1,769,967)
Proceeds from sale of investment securities 7,098,509 1,203,144
Partnership capital distribution 1,990,426 ---
Acquisitions (794,454) ---
------------- ----------
Net cash used in investing activities (5,282,194) (5,286,920)
------------- -----------
Cash flows from financing activities:
Proceeds from new debt 5,000,000 ---
Dividends paid (1,225,207) (1,213,131)
Repurchase of Common and Preferred Stock --- (26,268)
Proceeds from Common Stock issuances 345,761 282,646
------------- -----------
Net cash provided by (used in) financing activities 4,120,554 (956,753)
------------- -----------
Net increase in cash and cash equivalents 5,442,437 78,622
Cash and cash equivalents - beginning of period 1,561,778 2,924,568
------------- -----------
Cash and cash equivalents - end of period $ 7,004,215 $ 3,003,190
============= ============
See accompanying notes to consolidated financial statements.
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CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended March 31,
2000 1999
---- ----
Net income $ 5,301,007 $ 3,870,048
Other comprehensive income, net of tax
Unrealized holding gains (losses) on
available-for-sale securities 958,517 9,964,349
Less reclassification adjustment, net of
tax, for gains realized in net income (1,988,435) ---
------------- ----------
Comprehensive income $ 4,271,089 $ 13,834,397
============= ============
See accompanying notes to consolidated financial statements.
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CT COMMUNICATIONS, INC.
(Unaudited)
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, 2000 and 1999, and the results of operations
for the three months then ended and cash flows for the three months
then ended. These financial statements should be read with the
Company's 1999 form 10-K and do not include all disclosures
associated with annual financial statements.
2. In certain instances, amounts previously reported in the
1999 consolidated financial statements have been reclassified to
conform with the 2000 consolidated financial statements presentation.
Such reclassifications have no effect on net income or retained
earnings as previously reported.
3. The results of operations for the three months ended March 31, 2000 and
1999 are not necessarily indicative of the results to be expected for
the full year.
4. All common stock share amounts have been adjusted to
reflect the conversion of each share of the Registrant's Voting Common
Stock to 4.4 shares Common Stock and each share of the Registrant's
Class B Nonvoting Common Stock to 4.0 shares of the Registrant's
Common Stock, effective January 28, 1999, as well as a 2-for-1 stock
dividend paid on April 5, 2000.
5. The following is a summary of common stock transactions during the
three months ended March 31, 2000.
Shares Value
------ -----
Outstanding at December 31, 1999.... 18,760,930 $38,584,516
Purchase of common stock.... (7,052) (196,128)
Issuance of common stock.... 75,866 1,497,198
----------- -----------
Outstanding at March 31, 2000.... 18,829,744 $39,885,586
=========== ===========
Basic Diluted
----- -------
Weighted average shares outstanding for the
three months ended March 31, 2000 18,786,722 18,914,889
6. SECURITIES AVAILABLE-FOR-SALE
The amortized cost, gross unrealized holding gains, gross
unrealized holding losses and fair value for the Registrant's
investments by major security type and class of security at March 31,
2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C> <C> <C> <C>
Securities Amortized Gross Unrealized Gross Unrealized Fair
Available for Sale Cost Holding Gains Holding Losses Value
- ------------------ ---- ------------- -------------- -----
Certificate of Deposit $ 101,422 $ -- $ -- $ 101,422
Equity Securities 7,516,584 74,105,052 (781,119) 80,840,517
----------- ------------ ------------ -----------
Total $7,618,006 $ 74,105,052 $ (781,119) $80,941,939
=========== ============ ============ ===========
<CAPTION>
December 31, 1999
-----------------
<S> <C> <C> <C> <C>
Securities Amortized Gross Unrealized Gross Unrealized Fair
Available for Sale Cost Holding Gains Holding Losses Value
- ------------------ ---- ------------- --------------- -----
Certificate of Deposit $ 124,208 $ -- $ -- $ 124,208
Equity Securities 7,019,143 75,152,748 (221,846) 81,950,045
---------- ------------ -------------- -----------
Total $7,143,351 $ 75,152,748 $ (221,846) $82,074,253
========== ============ ============== ===========
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In the three months ended March 31, 2000, the Registrant sold 95,000 shares
of ITC^Deltacom, Inc. ("ITC^DeltaCom") common stock for a pre-tax gain of
$2.9 million. As of March 31, 2000, the Registrant owned over 860,000
shares of ITC^DeltaCom common stock.
7. INVESTMENTS IN AFFILIATED COMPANIES
March 31, 2000 December 31, 1999
-------------- -----------------
Equity Method:
Palmetto MobileNet, L.P. $10,695,343 $11,678,889
Wireless One of NC, LLC 8,587,389 8,613,074
Access On 30,349 41,016
BellSouth Carolinas PCS, LP 48,442 -
Cost Method:
ITC Holding Company 2,724,129 2,724,129
Maxcom
Telecomunicaciones, S.A. de C.V. 8,610,277 8,610,277
Other 16,302 16,250
------------ -----------
TOTAL $30,712,231 $31,683,635
============= ===========
8. LONG-TERM DEBT
Long-term debt consists of the following:
The Registrant has a $60.0 million line of credit with interest at LIBOR
plus a spread based on the Registrant's ratio of debt to EBITDA. The
interest rate on March 31, 2000 was 6.55%. The credit facility provides for
quarterly payments of interest until maturity on December 31, 2003. The
Registrant entered into an interest rate swap transaction to fix $10.0
million of the outstanding principal at a rate of 5.9% plus a spread,
currently 0.5%. There was $25.0 million outstanding under this line of
credit at March 31, 2000. The Registrant also has two lines of credit for
$5.0 million each. As of March 31, 2000 the Registrant had $4.0 million in
short-term debt outstanding under these credit lines.
March 31, 2000 December 31, 1999
-------------- -----------------
Total Long Term Debt: $25,000,000 $20,000,000
9. SEGMENT INFORMATION
Effective December 31, 1998, the Registrant adopted FAS 131, "Disclosures
about Segments of an Enterprise and Related Information." As a result of
the reorganization of internal reporting, the Registrant has defined and
reports five segments as follows: the incumbent local exchange carrier
("ILEC"), the competitive local exchange carrier ("CLEC"), long distance
services ("LD"), the internet service provider ("ISP") and the digital
wireless group ("DCS"). Accounting policies of the segments are the same as
those described in the summary of significant accounting policies. The
Registrant evaluates performance based on operating profit before other
income/(expenses) and income taxes. Intersegment revenues and expenses are
excluded for purposes of calculating earnings before interest, taxes,
depreciation, and amortization ("EBITDA") and segment operating
profit/(loss). Selected data by business segment for the three months ended
March 31, 2000 and 1999, is as follows:
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months ended March 31, 2000: ILEC CLEC LD ISP DCS OTHER TOTAL
External revenues 20,260,455 904,718 3,528,071 1,500,571 1,635,992 112,500 27,942,307
Intersegment revenues 1,064,299 - - - 10,874 - 1,075,173
External expenses 10,597,082 2,655,700 1,906,829 1,577,069 1,984,318 138,447 18,859,445
Intersegment expenses 64,388 15,378 699,124 280,149 16,134 - 1,075,173
EBITDA 9,663,373 (1,750,982) 1,621,242 (76,498) (348,326) (25,947) 9,082,862
Depreciation and amortization 3,376,475 91,365 253,180 301,251 14,715 5,298 4,042,284
Segment operating proft/(loss) 6,286,898 (1,842,347) 1,368,062 (377,749) (363,041) (31,245) 5,040,578
Segment Assets 127,681,931 5,165,818 4,635,586 8,255,187 1,080,992 122,906,974 269,726,488
Three Months ended March 31, 1999: ILEC CLEC LD ISP DCS OTHER TOTAL
External revenues 18,804,244 488,296 3,554,737 1,306,521 1,065,926 112,500 25,332,224
Intersegment revenues 921,014 - - - 6,826 - 927,840
External expenses 10,232,161 1,322,194 2,062,667 1,235,044 1,459,447 152,118 16,463,631
Intersegment expenses 81,283 103 670,078 164,555 11,821 - 927,840
EBITDA 8,572,083 (833,898) 1,492,070 71,477 (393,521) (39,618) 8,868,593
Depreciation and amortization 3,118,207 46,814 188,342 224,377 14,607 36,854 3,629,201
Segment operating proft/(loss) 5,453,876 (880,712) 1,303,728 (152,900) (408,128) (76,472) 5,239,392
Segment Assets 114,198,548 1,822,089 3,822,983 7,448,620 876,988 70,681,871 198,851,099
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
Three months ended March 31, 2000 and March 31, 1999
- ----------------------------------------------------
Operating revenues increased $2.6 million or 10.3% to $27.9
million for the three months ended March 31, 2000 when compared to the same
period of 1999.
Excluding intersegment revenues, ILEC revenue was $20.3 million, a
$1.5 million or 7.7% increase over the same period last year. This increase
was driven by increased demand for local service and increased custom call
feature revenue as a result of telemarketing and sales efforts, as well as
increased access revenue. Over 8,000 new access lines were connected to the
network since March 31, 1999, bringing the total number of local access
lines in the ILEC's three-county service area to over 119,000. The
Registrant is currently a party to two interconnection agreements that give
other CLECs access to the Registrant's local telephone service market. The
Registrant received additional interconnection requests from four other
CLECs in the first quarter of 2000. Some or all of these new agreements may
be finalized in 2000. If so, they are expected to provide additional
competition to the ILEC.
CLEC revenue was $0.9 million, a $0.4 million or 85.3% increase
over the same period last year. This increase was driven by the addition of
over 2,200 access lines since March 31, 1999, bringing the total lines in
service to nearly 4,400. Approximatley 1,000 of these lines are located at
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Concord Mills Mall in Concord, North Carolina, which opened in late
September, 1999. On April 20, 2000 the Board of Directors of the Registrant
approved a recommendation from the Registrant's management to expand the
competitive footprint of the CLEC to include the Greensboro and Raleigh
markets. In addition to these two markets the CLEC will seek to negotiate
"preferred provider" agreements, similar to the agreement with the Mills
Corp. for its Concord Mills Mall, with developers in other attractive
markets within the Carolinas. Expansion into these markets is projected to
begin late in 2000. The Registrant does not expect to receive significant
revenues from this expansion in 2000.
LD revenue was $3.5 million, which is comparable to revenue for
the same period last year. Despite the increase in the number of
pre-subscribed access lines and a corresponding increase in minutes,
revenue has remained flat due to the introduction of new, more competitive
LD price plans in the fourth quarter of 1999. These plans have resulted in
a decline in the average revenue per minute. The Registrant expects LD
revenue to begin to increase gradually as usage by existing customers and
the number of customers increase.
ISP revenue was $1.5 million, a $0.2 million or 14.9% increase
over the same period last year. This increase was driven by an increase in
the number of dial-up, web hosting, dedicated high speed, and digital
subscriber line (DSL) customers. There were approximately 20,200 ISP
customers at March 31, 2000, compared to approximately 14,500 at March 31,
1999. 1,845 customers were added in February 2000 through the acquisition
of Internet of Concord and approximately 900 customers were added in
September 1999 through the acquisition of Catawba Valley Internet
Partnership.
DCS revenue was $1.6 million, a $0.6 million or 53.5% increase
over the same period last year. This increase was driven by the addition of
approximately 3,700 subscribers since March 31, 1999, bringing the total
number of subscribers to approximately 11,600.
Operating expenses, exclusive of depreciation and amortization,
increased $2.4 million or 14.6% to $18.9 million for the three months ended
March 31, 2000 when compared to the same period of 1999.
Excluding intersegment expenses, ILEC operating expenses were
$10.6 million, a $0.4 million or 3.6% increase over the same period last
year. This increase was mainly due to the cost associated with rent and
leases of work equipment and buildings and additional personnel.
CLEC operating expenses were $2.7 million, a $1.3 million or
100.9% increase over the same period last year. This increase was mainly
due to additional marketing expenses and salaries and commissions. CLEC
operating expenses are expected to increase significantly in 2000 due to
the CLEC expansion program described above. These expenses are expected to
be funded through cash flows from operations, existing cash, cash equivalents
and short-term investments, sales of investment securities, and available
lines of credit.
LD operating expenses were $1.9 million, a $0.2 million or 7.6%
decrease over the same period last year. This decrease was mainly due to a
decline in access expense due to lower rates on negotiated carrier
termination contracts.
ISP operating expenses were $1.6 million, a $0.3 million or 27.7%
increase over the same period last year. This increase was mainly due to
the increase in ISP customers and additional personnel.
DCS operating expenses were $2.0 million, a $0.5 million or 36.0%
increase over the same period last year. This increase was mainly due to
the increase in DCS subscribers.
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Depreciation and amortization expense increased $0.4 million or
11.4% to $4.0 million for the three months ended March 31, 2000 when
compared to the same period of 1999. This increase reflects an increase in
depreciable assets.
Other income (expenses) increased $2.5 million when compared to
the same period last year. This increase was primarily due to:
o a $2.9 million pre-tax gain from the sale of 95,000 shares
of ITC^DeltaCom stock. This represents an increase of $1.8
million in pre-tax gains when compared to the same period
last year. At March 31, 2000, the Company owned over 860,000
shares of ITC^DeltaCom.
o lower BellSouth Carolinas PCS, LP, and
U.S. Telecom Holdings losses reflecting
a $0.9 million increase in equity in income of affiliates.
Income taxes increased $0.9 million or 34.1% to $3.5 million over
the same period last year due primarily to the increase in taxable income
of $2.3 million.
Net income increased $1.4 million or 37.0% to $5.3 million over the
same period last year.
Liquidity and Capital Resources
- -------------------------------
The liquidity of the Registrant increased during the three-month
period ended March 31, 2000. Current assets exceeded current liabilities by
$12.4 million at March 31, 2000. In comparison, current assets exceeded
current liabilities by $8.1 million at December 31, 1999.
Current assets increased by $8.3 million when compared to
December 31, 1999. This increase is primarily due to increased cash and cash
equivalents of $5.4 million due to sales of ITC^DeltaCom stock and an
increase of $4.0 million in short-term borrowings under the First Charter
National Bank line of credit; and increased prepaid expenses and other
assets of $4.2 million due to a $4.1 million up front deposit to the
Federal Communications Commission ("FCC") for additional spectrum that may
be used as a fiber optic alternative. These increases were offset in part
by a decrease in other accounts receivable of $1.5 million due to the
collection of outstanding receivables from Maxcom Telecomunicaciones,
S.A. de C.V. ("Maxcom").
Current liabilities increased by $4.0 million from December 31,
1999 to March 31, 2000. This increase is primarily attributable to
increases in customer deposits and advance billings of $0.4 million due to
increased customers and revenues; increased income taxes payable of $1.8
million due to taxes accrued on the sale of ITC^DeltaCom shares; and
increased short- term debt of $4.0 million due to the increase in the First
Charter National Bank line of credit. These increases were offset in part
by a decrease in accrued payroll of $1.4 million due to bonus payouts and a
decrease in other accrued liabilities of $0.9 million due to payment of
accrued property taxes.
The Registrant's principal sources of liquidity were cash
provided by operations of $6.6 million and proceeds from the sale of
investment securities of $7.1 million. The Registrant's other sources of
liquidity were proceeds from an increase in long-term debt of $5.0 million,
proceeds from an increase short-term debt of $4.0 million, partnership
capital distributions of $2.0 million, and proceeds from issuances of
common stock of $0.3 million.
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<PAGE>
Uses of cash during the period included capital expenditures of
$9.0 million, purchase of investment securities of $4.5 million,
short-term deposit to the FCC related to the wireless broadband network of
$4.1 million, payment of dividends of $1.2 million, and acquisitions of
$0.8 million.
At March 31, 2000, the fair market value of the Registrant's
investment securities was $80.8 million, all of which could be pledged to
secure additional borrowing or sold, if needed for liquidity purposes. The
Registrant has an unsecured revolving credit facility with a syndicate of
banks for $60.0 million, of which $25.0 million was outstanding on March
31, 2000. The interest rate on the credit facility is variable based on
LIBOR plus a spread based on the Registrant's ratio of debt to EBITDA. The
interest rate on March 31, 2000 was 6.55%. In addition, the Registrant has
a $5.0 million revolving credit facility with First Charter National Bank
at a variable interest rate based on LIBOR plus 1.25%. The interest rate
under this facility was 7.285% at March 31, 2000. The Registrant also has a
$5.0 million revolving credit facility with Rural Telephone Finance
Corporation at an interest rate not to exceed a specified prime rate plus
1.5%. At March 31, 2000, there were no amounts outstanding under this
facility.
The Registrant anticipates that all of the capital requirements in
2000 associated with its construction program, expansion of its CLEC
operations, payments associated with long-term debt and investments as
summarized above will be provided by cash flows from operations, existing
cash, cash equivalents and short-term investments, sales of investment
securities, and the available lines of credit.
Cautionary Note Regarding Forward-Looking Statements
- ----------------------------------------------------
The foregoing discussion contains "forward-looking statements," as
defined in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, about the Registrant that are based on the
beliefs of management, as well as assumptions made by, and information
currently available to management. Management has based these
forward-looking statements on its current expectations and projections
about future events and trends affecting the financial condition and
operations of the Registrant's business. These forward-looking statements
are subject to certain risks and uncertainties that could cause actual
results to differ materially from those reflected in the forward-looking
statements.
Factors that may cause actual results to differ materially from
these forward-looking statements are (1) the Registrant's ability to
respond effectively to the sweeping changes in industry conditions creased
by the Telecommunications Act of 1996, and related state and federal
legislation and regulations, (2) the Registrant's ability to recover the
substantial costs to be incurred in connection with the implementation of
its various new businesses, (3) the Registrant's ability to retain its
existing customer base against local and long distance service competition,
and to market such services to new customers, (4) the Registrant's ability
to effectively manage rapid changes in technology, and (5) the Registrant's
ability to effectively respond to the actions of its competitors.
The words and phrases such as "expects," "estimates," "intends,"
"plans," "believes," "projection," "will continue" and "is anticipated" are
intended to identify forward-looking statements. In making forward-looking
statements, the Registrant claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The Registrant undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. All forward-looking statements
should be viewed with caution.
-13-
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Registrant has an unsecured revolving credit facility with a
syndicate of banks for $60.0 million of which $25.0 million was outstanding
on March 31, 2000. The interest rate on the credit facility is variable
based on LIBOR plus a spread based on the Registrant's ratio of debt to
EBITDA. The interest rate was 6.55% on March 31, 2000. The Registrant
entered into an interest rate swap transaction to fix $10.0 million of the
outstanding principal at a rate of 5.9% plus a spread, currently 0.5%. The
interest rate swap will protect the Registrant against an upward movement
in interest rates, but subjects the Registrant to above market interest
costs if interest rates decline. The Registrant had $4.0 million
outstanding on an unsecured revolving credit loan with First Charter
National Bank on March 31, 2000. The interest rate on this credit facility
is variable based on LIBOR plus 1.25%. The interest rate was 7.285% on
March 31, 2000. Management believes that reasonably foreseeable movements
in interest rates will not have a material adverse effect on the
Registrant's financial condition or operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
11 Computation of Earnings per Share
27 Financial Data Schedule
-14-
<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.
CT COMMUNICATIONS, INC.
- ------------------------------------
(Registrant)
/s/ Amy M. Justis
- -----------------------------------
Amy M. Justis
Vice President, and
Chief Accounting Officer
May 11, 2000
- -------------------------------------
Date
(The above signatory has dual responsibility as duly authorized officer and
principal accounting officer of the Registrant.)
-15-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
11 Computation of Earnings per Share
27 Financial Data Schedule
-16-
EXHIBIT 11
CT COMMUNICATIONS, INC.
AND SUBSIDIARIES
Computation of Earnings Per Share
Three Months Ended March 31,
2000 1999
---- ----
Computation of share totals used in
computing earnings per share:
Weighted average number
of shares outstanding 18,786,722 18,639,294
Basic average shares
a-Outstanding 18,786,722 18,639,294
Incremental shares arising from
outstanding stock options 128,167 141,956
------------ ------------
b-Totals 18,914,889 18,781,250
============ ============
c-Net Income Applicable to Common Stock $ 5,294,621 $ 3,862,836
============ ============
Net Income Per Share
Basic - c/a $ 0.28 $ 0.21
============ ============
Net Income Per Share
assuming full dilution c/b $ 0.28 $ 0.21
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 7,004,215 3,003,190
<SECURITIES> 80,840,517 35,624,776
<RECEIVABLES> 17,109,606 18,151,592
<ALLOWANCES> 107,500 107,500
<INVENTORY> 2,877,088 2,411,754
<CURRENT-ASSETS> 32,335,915 25,679,410
<PP&E> 227,664,921 198,889,676
<DEPRECIATION> 108,160,396 97,618,174
<TOTAL-ASSETS> 269,726,488 198,851,099
<CURRENT-LIABILITIES> 19,910,205 19,418,307
<BONDS> 25,000,000 20,000,000
112,500 125,000
397,000 405,100
<COMMON> 39,885,586 36,715,548
<OTHER-SE> 138,624,955 95,644,229
<TOTAL-LIABILITY-AND-EQUITY> 269,726,488 198,851,099
<SALES> 0 0
<TOTAL-REVENUES> 27,942,307 25,332,224
<CGS> 0 0
<TOTAL-COSTS> 22,901,729 20,092,832
<OTHER-EXPENSES> (4,275,366) (2,071,101)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 540,895 849,159
<INCOME-PRETAX> 8,775,049 6,461,334
<INCOME-TAX> 3,474,042 2,591,286
<INCOME-CONTINUING> 5,301,007 3,870,048
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,301,007 3,870,048
<EPS-BASIC> 0.28 0.21
<EPS-DILUTED> 0.28 0.21
</TABLE>
