<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO 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 0-11053
C-TEC CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2093008
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
105 Carnegie Center
Princeton, New Jersey 08540-6215
(Address of principal executive offices)
(Zip Code)
(609) 734-3700
(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 requirement for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock ($1.00 par value), as of June 30, 1995.
Common Stock 19,049,527
Class B Common Stock 8,395,640
<PAGE>
C-TEC CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations-Quarters and Six Months Ended June 30,
1995 and 1994
Condensed Consolidated Balance Sheets-
June 30, 1995 and December 31, 1994
Condensed Consolidated Statements of
Cash Flows-Six Months Ended June 30,
1995 and 1994
Notes to Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition
PART II. Other Information
Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
C-TEC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
-------- ---------
1995 1994 1995 1994
------- -------- -------- ---------
<S> <C> <C> <C> <C>
SALES $79,210 $65,026 $152,373 $129,950
COSTS & EXPENSES, EXCLUDING
DEPRECIATION AND AMORTIZATION 50,765 40,520 98,073 76,556
DEPRECIATION AND AMORTIZATION 15,516 16,739 29,344 33,200
------- -------- -------- ---------
OPERATING INCOME 12,929 7,767 24,956 20,194
INTEREST & DIVIDEND INCOME 3,664 859 8,503 1,209
INTEREST EXPENSE (6,495) (8,004) (12,842) (16,254)
GAIN ON SALE OF PENNSYLVANIA
CABLE PROPERTIES - - - 893
GAIN ON SALE OF INVESTMENT IN
NORTHEAST NETWORKS, INC. 2,890 - 2,890 -
OTHER INCOME, NET 287 250 544 597
------- -------- -------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 13,275 872 24,051 6,639
PROVISION FOR INCOME TAXES 3,929 617 6,866 3,117
------- -------- -------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND
EQUITY IN UNCONSOLIDATED ENTITIES 9,346 255 17,185 3,522
MINORITY INTEREST IN (INCOME) OF
CONSOLIDATED ENTITIES (37) (21) (72) (47)
EQUITY IN INCOME (LOSS) OF
UNCONSOLIDATED ENTITIES 473 426 (2,129) 189
------- ------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY
CHARGE AND CUMULATIVE EFFECT OF
ACCOUNTING PRINCIPLE CHANGE 9,782 660 14,984 3,664
INCOME FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAXES 113 328 128 139
-------- -------- --------- ---------
INCOME BEFORE EXTRAORDINARY
CHARGE AND CUMULATIVE EFFECT OF
ACCOUNTING PRINCIPLE CHANGE 9,895 988 15,112 3,803
EXTRAORDINARY CHARGE - DEBT - - - (2,861)
PREPAYMENT PENALTY
CUMULATIVE EFFECT ON PRIOR YEARS
OF CHANGE IN ACCOUNTING
PRINCIPLE FOR POSTEMPLOYMENT
BENEFITS - - - (378)
-------- -------- --------- ---------
NET INCOME $9,895 $988 $15,112 $564
======== ======== ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Earnings Per Share
Quarter Ended Six Months Ended
June 30 June 30
----------- -----------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Earnings (loss) per average common share
Income from continuing operations before
extraordinary charge and cumulative effect
of accounting principle change $.36 $.04 $.55 $.22
Income from discontinued operations - .02 - -
----------- ----------- ----------- -----------
Income before extraordinary charge and
cumulative effect of accounting principle
change .36 .06 .55 .22
Extraordinary charge-debt prepayment
penalty - - - (.17)
Cumulative effect on prior years of change in
accounting principle - - - (.02)
----------- ----------- ----------- -----------
Net income $.36 $.06 $.55 $.03
---- ---- ---- ----
Average common shares outstanding 27,445,167 16,509,593 27,445,167 16,509,593
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $ 65,982 $178,195
Short term investments 108,340 127,245
Other current assets 60,689 51,749
Deferred income taxes 8,533 7,057
------- -------
Total current assets 243,544 364,246
------- -------
PROPERTY, PLANT AND EQUIPMENT
Telephone Plant 412,825 399,330
Cable Plant 252,500 192,879
Mobile Services Plant 2,632 2,456
Other Property, Plant and Equipment 14,190 12,948
------- -------
Total Property, Plant and Equipment 682,147 607,613
Accumulated Depreciation 303,069 267,185
------- -------
Net Property, Plant and Equipment 379,078 340,428
------- -------
INVESTMENTS 95,776 14,569
------ ------
INTANGIBLE ASSETS, NET 75,818 50,319
------ ------
DEFERRED CHARGES AND OTHER ASSETS 28,527 22,963
------ ------
TOTAL ASSETS $822,743 $792,525
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
debt and preferred stock 9,010 9,028
Advance billings & customer deposits 14,388 8,169
Accrued taxes 4,040 21,807
Accrued interest 5,766 5,751
Accrued contract settlements 5,975 5,150
Other current liabilities 50,913 48,978
------ ------
Total current liabilities 90,092 98,883
------ ------
</TABLE>
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
<S> <C> <C>
LONG-TERM DEBT 286,312 273,376
-------- --------
DEFERRED INCOME TAXES AND INVESTMENT
TAX CREDITS 52,300 43,600
-------- --------
OTHER DEFERRED CREDITS 29,464 26,995
-------- --------
REDEEMABLE PREFERRED STOCK - 257
-------- --------
COMMON SHAREHOLDERS' EQUITY:
Common Stock 27,823 27,823
Additional Paid-in Capital 226,984 227,034
Retained Earnings 114,957 99,845
Treasury Stock at cost, 377,842 shares
at June 30, 1995 and December 31, 1994 (5,288) (5,288)
Cumulative translation adjustments 99 -
-------- --------
Total Common Shareholders' Equity 364,575 349,414
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 822,743 792,525
======== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1995 1994
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $31,898 $33,038
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant & Equipment (32,252) (27,162)
Proceeds from the sale of equity interest in
Northeast Networks, Inc. 5,007 -
Proceeds from sale of Pennsylvania
cable properties - 1,200
Proceeds from redemption of investment in
RTB Stock - 1,141
Reduction of short-term investments 18,905 -
Acquisitions (131,021) (250)
Loan to affiliate (2,287) -
Other (610) 1,907
---------- ----------
Net Cash Used in Investing Activities (142,258) (23,164)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Penalty on early retirement of debt - (2,861)
Issuance of Long-Term Debt 8,000 141,176
Redemption of Long-Term Debt (11,505) (161,510)
Net Short-Term Borrowings 1,978 -
Other (326) 467
---------- ----------
Net Cash Used in Financing Activities (1,853) (22,728)
---------- ----------
Net Decrease in Cash and Temporary Cash
Investments (112,213) (12,854)
Cash and Temporary Cash Investments at
Beginning of Year 178,195 60,182
Cash and Temporary Cash Investments at ---------- ----------
June 30 $65,982 $47,328
========== ==========
Supplemental Disclosures of Cash Flow Information
Cash paid during the periods for:
Interest (net of amounts capitalized) $12,829 $16,196
========== ==========
Income taxes $20,842 $3,503
========== ==========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars, except per share amounts)
1. The Condensed Consolidated Financial Statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statement prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. However, in the opinion of the management of the
Company, the Condensed Consolidated Financial Statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial information. The Condensed Consolidated Financial
Statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-K for the fiscal year ended
December 31, 1994, as amended on April 3, 1995 and as further amended on July
31, 1995.
2. In 1995, the Company received official notification of final settlement from
the Internal Revenue Service relating to the examination of the Company's
consolidated federal income tax returns for 1989, 1990, and 1991. The most
significant adjustment relates to the disallowance of the claimed amortization
of certain intangible assets. As a result of this disallowance, taxes payable
for prior tax years increased approximately $5 million, net operating loss
carryforwards are reduced by approximately $25 million and AMT credits are
increased by approximately $5 million. Additionally, interest ranging from $1-
$2 million will be payable. Management had accrued an amount approximating the
financial statement effect of the above adjustments in prior periods.
3. On September 9, 1994, the Company completed the sale of its cellular
properties, which were part of its Mobile Services business segment, to
Independent Cellular Network, Inc. for approximately $190,500. At June 30, 1995
and December 31, 1994, certain holdbacks and escrows of approximately $3,000 and
$6,000, respectively, are included in other current assets and approximately
$1,500 and $2,200 respectively, are included in other assets in the accompanying
consolidated balance sheets in accordance with the payment terms of the
respective agreements. In December 1994, the Company completed the sale of its
telephone answering service operations and signed a letter of intent relative to
the disposition of its paging operations. The paging disposition was completed
in July 1995 and the Company realized a gain of approximately $2,100 before
income tax on the disposal. The telephone answering service and paging
operations constituted the remaining portion of the Company's Mobile Services
business segment. Therefore, the Company has accounted for the Mobile Services
operations as discontinued operations. Prior years financial statements have
been restated to reflect the discontinuation of the Mobile Services business
segment and all activity up to the date of disposition has been accounted for as
discontinued operations. Sales of the Mobile Services business segment were
$702 and $8,103 for the three months ended June 30, 1995 and 1994, respectively
and $1,399 and $15,165 for the six months ended June 30, 1995 and 1994,
respectively.
<PAGE>
4. On January 24, 1995, the Company purchased a forty percent equity position
in Megacable, S.A. de C.V. ("Megacable"). The aggregate consideration for the
purchase was cash of $84,115, subject to adjustments based on the fourth quarter
1995 exchange rate. The Company accounts for its investment by the equity
method of accounting. Megacable translates its assets and liabilities into U.S.
dollars at the rates in effect at the end of the fiscal period. The Company's
share of the gains or losses that result from this process are shown in the
cumulative translation adjustments account in the shareholders' equity section
of the balance sheet. Megacable translates its revenue and expense accounts
into U.S. dollars at the average exchange rates that prevailed during the
period. Therefore, the U.S. dollar value of these items on the income statement
fluctuates from period to period depending on the value of the dollar against
the peso. The excess cost over the underlying equity in the net assets of
Megacable is approximately $94 million, which excess is being amortized on a
straight-line basis over 15 years. For the quarter and six months ended June
30, 1995, the Company recorded its proportionate share of losses and
amortization of excess cost over equity in net assets of $159 and $2,297,
respectively. The Company's share of cumulative foreign currency translation
charges (credits) were $(1,153) and $1,054 for the quarter and six months ended
June 30, 1995, respectively. Summarized information for the financial position
and results of operations of Megacable, Inc. as of and for the six months ended
June 30, 1995 is as follows:
<TABLE>
<S> <C>
Assets $67,147
Liabilities $ 9,045
Stockholders' Equity $58,102
Sales $10,728
Costs and Expenses $ 7,392
Foreign Currency Transaction Losses $ 5,254
Net Loss $ (139)
</TABLE>
5. On January 31, 1995, the Company purchased the assets of Higgins Lake Cable,
Inc. The aggregate consideration for the purchase was cash of approximately
$4,600.
6. The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
June 30,
1995 1994
<S> <C> <C>
Currently payable $ 4,402 $ 5,379
Deferred 2,745 (1,893)
Investment Tax Credits (281) (369)
------- -------
Total provision from continuing operations $ 6,866 $ 3,117
Provision from discontinued operations (103) 857
------- -------
Total provision for income taxes $ 6,763 $ 3,974
======= =======
</TABLE>
The provision for income taxes is different than the amount computed by applying
the U.S. statutory federal tax rate.
<PAGE>
The differences are as follows:
<TABLE>
<CAPTION>
June 30,
1995 1994
<S> <C> <C>
Income before provision for income taxes and
cumulative effect of accounting principle
changes $21,850 $6,781
------- ------
Federal tax provision at statutory rate $7,648 $2,373
Increase (reduction) due to:
State income taxes, net of federal benefit 1,524 1,623
Amortization of investment tax credits (281) (369)
Rate differential applied
to reversing timing differences (842) (241)
Estimated nondeductible expenses - 750
Non-deductible goodwill 71 70
Tax-exempt interest (1) (152)
Equity in unconsolidated entities 323 288
Adjustments to prior years 5 (113)
Deferred tax amortization (972) (972)
Gain on disposal of investment (615) -
Other, net 6 (140)
------ ------
Provision for income taxes $6,866 $3,117
====== ======
</TABLE>
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Net operating loss carryforwards $ 4,616 $ 4,772
Investment tax credit carryforwards 342 342
Alternative minimum tax credits 6,272 13,014
Regulatory liability - deferred taxes 6,899 6,060
Benefit plans 411 536
Accruals for nonrecurring charges and
contract settlements 3,697 3,366
Reserve for bad debts 473 540
All other 6,706 3,981
------ ------
Total deferred tax assets 29,416 32,611
------ ------
Property, plant and equipment (53,309) (51,808)
Intangible assets (3,669) (4,163)
Regulatory asset - state flow-through (5,345) (3,864)
All other (4,349) (2,569)
-------- --------
Total deferred tax liabilities (66,672) (62,404)
-------- --------
Subtotal (37,256) (29,793)
-------- --------
Valuation allowance (5,633) (5,590)
-------- --------
Total deferred taxes $(42,889) $(35,383)
======== ========
</TABLE>
<PAGE>
In the opinion of management, based on the future reversal of existing
taxable temporary differences, primarily depreciation, and its expectations of
future operating results, the Company will more likely than not be able to
realize substantially all of its deferred tax assets.
The net change in the valuation allowance for deferred tax assets during 1995
was an increase of $43.
7. On May 8, 1995, the Company sold its equity position in Northeast Networks,
Inc. for cash of $5,007. The Company realized a pretax gain of approximately
$2,900 on the disposal.
8. In March 1995, the Company made a $5,000 nonrefundable deposit on its
acquisition of Twin County Trans Video, Inc. The transaction is subject to
regulatory approval and certain other conditions. The transaction is expected
to close in 1995.
9. In March 1995, the Company made a demand loan of $887 to Mercom, Inc., of
which the Company owns 43.63% of outstanding Common Stock. The loan bears
interest at 6.875% at June 30, 1995. Additionally, Mercom, Inc., had an
obligation of $1.4 million due on July 1, 1995 to one of its former officers.
The Company made a demand loan to Mercom, Inc., on June 30, 1995 to enable it to
satisfy this obligation. The loan bears interest at 6.875% at June 30, 1995.
10. On May 15, 1995, the Company acquired 40% of the outstanding common stock
of Twin County Trans Video, Inc. ("Twin County") in exchange for cash of
approximately $26.4 million, including a $5 million deposit made in March 1995,
and a $4 million 5% promissory note of C-TEC Cable Systems, Inc., a wholly owned
subsidiary of the Company. In addition, C-TEC paid $11 million in consideration
of a noncompete agreement. The remaining shares are subject to an escrow
agreement, pending completion of the merger, and are required to be voted under
the direction of C-TEC. C-TEC has also assumed management of Twin County. As a
result, C-TEC has control of Twin County and accordingly has fully consolidated
Twin County into the Company's financial statement since May 1, 1995. The
Company has allocated the purchase price paid to date to property, plant and
equipment and identifiable intangible assets in proportion to their fair values.
The consideration for the remaining shares, which are expected to be acquired by
year-end, will be either (i) preferred stock of C-TEC Corporation, (ii)
preferred stock of C-TEC Cable Systems, Inc. or (iii) cash. The value of the
remaining consideration, which has not yet been determined, will be allocated to
property, plant and equipment and identifiable intangible assets up to their
fair values with the excess, which may be significant, allocated to cost in
excess of the fair value of net assets acquired.
Twin County has fiscal year ending October 31. Sales and net income of Twin
County were $13,720 and $67, respectively for the six months ended April 30,
1995, and $11,224 and $385, respectively for the six months ended April 30,
1994.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(Thousands of Dollars, except per share amounts)
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1994.
Results of Operations
---------------------
C-TEC Corporation and subsidiaries, (the "Company") net income was $9,895,
or $.36 per average common share for the three months ended June 30, 1995 as
compared to a net income of $988, or .06 per average common share, for the three
months ended June 30, 1994. Higher interest and dividend income of
approximately $2,800 resulting from earnings on the proceeds of the Company's
stock rights offering and Cellular disposition in later periods of 1994
contributed toward the improvement. Additionally, interest expense decreased
approximately $1,500 primarily due to the early payment of $100 million parent
company debt in December 1994. Depreciation and amortization expense was
approximately $1,200 lower due to the expiration of a significant Cable Group
noncompete agreement in August 1994. Also during the second quarter of 1995,
the company realized a pretax gain of approximately $2,900 on the disposition of
its equity interest in Northeast Networks, Inc., an alternative access telephone
service provider in Westchester County, New York. Improved operating cash flow
(earnings before interest, depreciation, amortization and income taxes), offset
by a higher provision for income taxes resulting from the higher earnings for
the quarter, accounts for the remainder of the increase.
Sales increased nearly 22% to $79,210, for the quarter ended June 30, 1995
as compared to $65,026, for the comparable period in 1994, with the Cable and
Long Distance Groups contributing approximately $6,616 and $5,301, respectively,
to the increase.
For the six months ended June 30, 1995, net income was $15,112, or $.55 per
average common share, as compared to net income $564, or $.03 per average common
share for the same period in 1994. The most significant improvements resulted
from higher interest income of approximately $7,300, lower depreciation and
amortization of approximately $3,900 and lower interest expense of approximately
$3,400. Additionally, in 1994, the Telephone Group incurred a prepayment charge
of $2,861, net of income tax benefits, on the early repayment of long-term debt.
A higher provision for income taxes partially offset these improvements. Sales
increased approximately 17% to $152,373 from $129,950 for the six months ended
June 30, 1995 and 1994, respectively.
<PAGE>
Sales and operating income before interest, depreciation, amortization and
income taxes by operating group was as follows for the three and six months
ended June 30, 1995:
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
June 30 June 30
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales
-----
Telephone $ 63,409 $ 61,129 $31,993 $30,103
Cable 54,800 47,402 30,388 23,722
Long Distance 23,173 12,471 11,542 6,241
Communications Services 10,941 8,931 5,256 4,951
Parent and Other 50 17 31 9
-------- -------- ------- -------
$152,373 $129,950 $79,210 $65,026
======== ======== ======= =======
Operating income before
interest, depreciation,
amortization and
income taxes
------------
Telephone $ 37,756 $ 36,413 $19,461 $17,458
Cable 25,388 23,395 14,522 11,330
Long Distance (935) (3,289) (399) (2,602)
Communication Services (1,668) (276) (1,277) (114)
Corporate Overhead and Other (6,241) (2,849) (3,862) (1,566)
-------- -------- ------- -------
$ 54,300 $ 53,394 $28,445 $24,506
======== ======== ======= =======
</TABLE>
Telephone Group
---------------
Sales of the Telephone Group increased $1,890 or 6.3% for the second
quarter of 1995 as compared to the same period in 1994. The increase is due to
higher local network service revenue, resulting from an increase in access
lines. Additionally, network access revenue increased due to growth in access
lines and a higher average rate per line. Operating expenses, excluding
depreciation and amortization, were relatively stable as compared to the same
period in 1994.
For the six months ended June 30, 1995, sales of the Telephone Group
increased $2,280, or 3.7% as compared to the same period in 1994 due primarily
to increases in local network service and network access revenues offset by
decreases in long distance toll revenue, occurring primarily in the first
quarter of 1995. Operating expenses, excluding depreciation and amortization,
were relatively stable as compared to the six moths ended June 30, 1994.
Cable Group
-----------
Sales of the Cable Group increased $6,616, or 27.9% for the three months
ended June 30, 1995 as compared to the same period in 1994 primarily due to
higher basic revenue resulting from approximately 15,000 additional subscribers
over the same period in 1994 and to sales increases of approximately $4,400
resulting from the acquisition of Twin County Trans Video, Inc. effective May 1,
1995. Twin County serves approximately 74,000 subscribers in the Greater Lehigh
Valley area of Pennsylvania. Operating expenses, excluding depreciation and
amortization, increased approximately $3,400, or 27.6% primarily due to
operating expenses associated with the addition of Twin County Trans Video, Inc.
subscribers and to higher basic programming costs resulting from additional
subscribers, rate increases and new channels.
<PAGE>
For the six months ended June 30, 1995, the Cable Group had increased sales
of $7,398, or 15.6% as compared to the six months ended June 30, 1994 primarily
for the reasons referred to above. Operating expenses, excluding depreciation
and amortization increased approximately $5,400, or 22.5% primarily due to
operating expenses associated with the addition of Twin County Trans Video, Inc.
subscribers and to higher basic programming costs. Additionally, customer
service and technical service expenses increased due to additional personnel and
general and administrative expense increased primarily due to higher insurance
and franchise fee expense.
Long Distance Group
-------------------
Sales of the Long Distance Group increased approximately $5,301, or
84.9%, for the quarter ended June 30, 1995 as compared to the same period in
1994 primarily due to higher revenues of approximately $3,100 from resale of
AT&T Tariff 12 services to another long distance reseller. The Group's
arrangement for sales of this product to this long distance reseller terminated
during the second quarter of 1995. Increases in switched business sales of $944
and 800 service sales of $660, due to increases in customers, account for the
majority of the increase. Operating expenses, excluding depreciation and
amortization, increased approximately $3,100, or 35.0% for the three months
ended June 30, 1995 as compared to the same period in 1994 primarily due to
increased expenses of $2,932 associated with the Tariff 12 sales. Higher carrier
expense, resulting primarily from higher switched and 800 service sales,
primarily accounts for the remainder of the increase.
For the six months ended June 30, 1995, sales of the Long Distance Group
increased $10,702 or 85.8% primarily due to higher Tariff 12 sales of
approximately $5,880 and higher switched business and 800 service sales of
$1,980 and $1,417, respectively. Operating expenses, excluding depreciation and
amortization, increased approximately $8,300, or 53.0% for the six months ended
June 30, 1995 as compared to the same period in 1994. The primary increases
occurred in expenses associated with the Tariff 12 sales of $5,571 and carrier
expense of $2,803
Communications Services Group
-----------------------------
Sales of the Communications Services Group for the quarter ended June
30, 1995 were relatively stable as compared to sales for the comparable period
in 1994. Operating expenses, excluding depreciation and amortization, increased
approximately $1,500 or 29.0% due to higher costs of sales resulting from
changes in sales mix.
For the six months ended June 30, 1995 sales of the Communication
Services Group increased $2,010, or 22.5%, primarily due to increases in
premise distribution systems projects for a college and a commercial bank.
Operating expenses, excluding depreciation and amortization, increased
approximately $3,400 or 37.0% due to increases costs of sales resulting from
increases in sales volume and changes in sales mix.
Corporate Overhead and Other
----------------------------
For the three and six month periods ended June 30, 1995, corporate
overhead and other increased as compared to the same periods in 1994 primarily
due to
<PAGE>
expenses related to new business initiatives and higher salary expense due to
both increased rates and additional personnel.
Depreciation and Amortization
-----------------------------
Depreciation and amortization decreased $1,223 and $3,856 for the three
and six months ended June 30, 1995, respectively as compared to the same periods
in 1994. The decrease is related to lower amortization resulting from the
expiration in August 1994 of a significant noncompete agreement of the Cable
Group.
Interest and Dividend Income
----------------------------
Interest and dividend income increased $2,805 for the quarter ended
June 30, 1995 and $7,294 for the six months ended June 30, 1995. The increase is
primarily the result of investment earnings on the proceeds received from the
sale of the Company's Cellular operations in September 1994 and from the
Company's stock rights offering which concluded in December 1994. These
transactions, net of the Company's $84 million investment in Megacable S.A. de
C.V. in January 1995, and $38 million investment in Twin County Trans Video,
Inc. in May 1995 are primarily responsible for higher average invested balances
for the three and six month periods. The weighted average interest rate has also
increased over the three and six month periods ended June 30, 1994. For the six
month period, the average invested balance increased over $150,000 as compared
to the same period in 1994 while the weighted average interest rate increased
over 50% for the majority of the invested portfolio. Additionally, contributing
to the increase were dividends received on the Telephone Group's investment in
Rural Telephone Bank (RTB) Class C Stock, which was converted from non-dividend
paying RTB Class B Stock in connection with the early retirement of certain debt
of the Telephone Group in March 1994.
Other
-----
The Company disposed of its equity position in Northeast Networks, Inc.
during the second quarter of 1995 and realized a gain of $2,890.
The Company's equity in the loss of unconsolidated entities increased
$2,318 for the six months ended June 30, 1995 as compared to the same period in
1994 due to the Company's forty percent share of the first quarter 1995 loss of
Megacable, which was significantly impacted by foreign currency transaction
losses resulting from the devaluation of the peso. The peso has subsequently
been experiencing a recovery in value although there is no assurance that such
recovery will continue.
Financial Condition
-------------------
Cash and temporary cash investments and short-term investments decreased
primarily as a result of the Company's $84 million investment in Megacable S.A.
de C.V. in January 1995 and its $38 million investment in Twin County Trans
Video, Inc. in May 1995.
Other current assets increased primarily as a result of higher inventory
balances at the Telephone and Communications Services Groups due to construction
projects in progress. Additionally, other current assets increased as a result
of the required prepayment by the Telephone Group of its 1995 Pennsylvania Gross
Receipts Tax. The unamortized balance was $1,085 at June 30, 1995. Interest
and dividends receivable, included in other current assets, increased $1,740 at
June 30, 1995 over December 31, 1994.
Investments increased primarily as a result of the Company's $84 million
investment in Megacable S.A. de C.V. in January 1995 in exchange for a forty
percent interest.
<PAGE>
Intangible assets increased as a result of the Company's investment in Twin
County Trans Video, Inc. and the allocation of a portion of the purchase price
paid to date to identifiable intangible assets.
Deferred charges and other assets increased as a result of the regulatory
accounting treatment of deferred state income taxes by the Telephone Group. The
Telephone Group is permitted to recognize only state income taxes actually paid
as a cost of service. Accordingly, a regulatory asset is established for the
tax effect of temporary differences to be recovered from rate payers when such
taxes are actually paid.
Advance billings and customer deposits increased due to advance billings of
Twin County Trans Video, Inc. which is consolidated with the Company since May
1995.
Accrued taxes decreased primarily due to payment of state taxes accrued on
the gain resulting from the sale of the Company's cellular operations in 1994.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
---- ----
<S> <C> <C>
Cash and Temporary Cash Investments and
Short-term investments $174,322 $305,440
Working Capital $153,452 $265,363
Long-Term Debt (including current maturities) $295,322 $282,385
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
1995 1994
---- ----
<S> <C> <C>
Net cash provided by
operating activities $ 31,898 $ 33,038
Operating income before depreciation
and amortization (excluding Mobile Services
business segment in 1994) $ 54,300 $ 53,394
Investing Activities:
Additions to property, plant and equipment
(excluding Mobile Services business segment
in 1994) $ 32,252 $ 27,162
Acquisitions $131,021 $ 250
-------- --------
Total $163,273 $ 27,412
</TABLE>
The Company remains in a strong liquidity position at June 30, 1995 despite
declines in cash, temporary cash investments, short-term investments and
working capital over December 31, 1994 primarily due to the Company's $84
million investment in Megacable S.A. de C.V. and its $38 million investment in
Twin County Trans Video, Inc. Long term debt increased primarily as a result
<PAGE>
of debt of Twin County Trans Video, Inc. which is consolidated with the Company
since May 1995.
Net cash provided by operating activities represented 98.9% and 121.6% of
additions to property, plant and equipment for the six months ended June 30,
1995 and 1994, respectively. This decline is largely the result of a
significant increase in additions to property, plant and equipment by the
Telephone and Cable Groups compared to the six months ended June 30, 1994. The
increase at the Telephone Group is a result of delays experienced in the
construction schedule in 1994 due to inclement weather. Capital expenditures
for the Telephone Group for 1995 are currently expected to approximate the 1994
level. The increase at the Cable Group is the result of the Group's network
upgrades to enable it to provide enhanced telecommunication services over its
network. The Cable Group's capital expenditures are currently expected to
remain ahead of the 1994 level throughout 1995.
The Company intends to utilize its available cash balance to finance the
pending acquisition of Buffalo Valley Telephone Company, to develop full service
networks using certain of the Company's cable television and telephone systems
or other platforms such as leased or overbuilt facilities and for potential
acquisitions, joint ventures and similar strategic investments in the
telecommunications industry.
At June 30, 1995, the Company owns 43.63% of the outstanding stock of
Mercom, Inc. In April 1995, Mercom, Inc. filed a registration statement with
the Securities and Exchange Commission to register up to 2,393,530 shares of its
Common Stock, that were offered for sale to shareholders in a rights offering.
The registration statement became effective on July 13, 1995.
Under the terms of rights offering, Mercom, Inc. distributed transferable
rights to holders of shares of Common Stock on July 20, 1995. The rights were
distributed pro rata to each shareholder based on the number of shares held on
the record date. Each right entitled the holder to purchase one share of Common
Stock at a price of $3.60 per share. In addition, holders of rights were
entitled to subscribe, pursuant to an oversubscription privilege, for shares of
Common Stock that were allocated for sale pursuant to the rights offering but
were not sold because rights were not exercised.
C-TEC Corporation exercised all of the rights it received in respect to the
shares it holds, and oversubscribed, pursuant to the oversubscription privilege
available to all shareholders, for all other shares of Common Stock being
offered. In August 1995, C-TEC has committed to invest up to approximately $8.6
million in Mercom through the exercise of its rights and oversubscription
privilege. The rights offering concluded on August 10, 1995.
REGULATORY ISSUES
CABLE TELEVISION CONSUMER PROTECTION
AND COMPETITION ACT
The Company, like other operators of cable television systems, is subject to
regulation at the federal, state and local levels. Many aspects of such
regulation are currently the subject of judicial proceedings and administrative
or legislative proceedings or proposals. On October 5, 1992, Congress passed The
Cable Television Consumer Protection and Competition Act of 1992 (the "Act")
which regulated certain subscriber rates and a number of other matters in the
cable industry, such as mandatory carriage of local broadcast stations and
retransmission consent, and which will increase the administrative costs of
complying with such regulations. The most significant provision of the Act
requires the Federal Communications Commission (the "FCC") to establish rules to
ensure that rates for basic services are reasonable for subscribers in areas
without effective competition as defined in the Act. Few municipalities served
by the Company are subject to effective competition. The FCC has delegated the
responsibility of regulation of the basic tier to the applicable franchise
authority, provided such authority becomes certified to regulate by the FCC.
<PAGE>
The FCC's initial rules regulating cable television rates were effective
September 1, 1993 and the revised rate regulations were effective May 15, 1994.
All cable television rates except pay-per-view and premium channels are subject
to competitive benchmarks established by the FCC. Under the revised regulation,
cable operators' regulated rates generally must be reduced to 83 percent of
their September 30, 1992 levels adjusted forward by inflation and permitted
external costs. The reduction reflects the 17 percent "competitive
differential" between rates of systems that were and systems that were not
subject to effective competition on September 30, 1992, based on the results of
the FCC's statistical analysis of the data it had collected and evaluated in
establishing the initial benchmark rates. Under both the initial and revised
scheme of benchmark/price cap regulation, once the cable operator has reached
the regulated rate level, its rates remain capped at that level. Future rate
adjustments are permitted based on certain external costs incurred by the cable
operator, inflation and the cost of adding channels. External costs include
programming costs excluding retransmission consent fees prior to October 6,
1994, as well as subscriber related taxes and franchise fees and other franchise
requirements. A system with rates above the benchmarks may utilize a cost-of-
service showing to justify its rates and avoid a rate reduction. Equipment
charges for basic tier services are also subject to roll back to the level
representing the cost of the equipment including a reasonable profit. In cases
where equipment has been included as part of a service tier at no additional
cost, it must be unbundled and a separate charge will be allowed. The FCC in
its revised rate regulation issued additional criteria which addressed whether
the manner in which regulated program services were moved to unregulated a la
carte services enhanced subscriber choice or were an evasion of the FCC's rate
regulation. If the a la carte tier enhanced customer choice and satisfied the
criteria established by the FCC, the tier would be considered unregulated.
Additionally, the FCC issued its going forward rules, effective January 1,
1995. Under the new going forward rules, operators may continue to pass through
the cost of new channels plus a 7.5 percent mark-up. Alternatively, under the
new rules, which generally apply only to cable programming service tiers,
operators have the option of imposing a $0.20 per channel per month mark-up
(limited to $1.20 over the next two years and $1.40 over the next three years)
for new channels. In addition, under the new alternative, operators may pass
through increases in cable programming service costs (from May 15, 1994 through
December 31, 1996) only in an amount not to exceed $0.30 per subscriber per
month. Under the new rules, operators also may add unregulated "new product
tiers," composed of new channels and/or channels that duplicate existing
channels. Operators must choose to make adjustments based on either the new
rules or the old rules for all channel additions after May 14, 1994.
On June 5, 1995, the FCC released the text of a small systems rate relief
Order. The Order provides that "small systems" (i.e. those with 15,000 or fewer
subscribers) owned by "small cable companies" (i.e. serving 400,000 or fewer
subscribers) may file a very streamlined cost-of-service analysis to justify
their rates. The Company anticipates that some of its Michigan operations
may be classified as small systems under these new rules. The full text of the
Order is expected to be released in August, 1995.
<PAGE>
Impact to the Company
In determining the impact of the initial FCC basic rate benchmark rules on a
company's current system revenues, cable companies were permitted, prior to
September 1, 1993, to restructure their rates and channel offerings as long as
the overall rate per subscriber was not increased. The Company restructured its
rates and channel offerings in 1993 and 1994 to comply with rate regulation and
minimize the negative impact on revenues.
The Company is continuing to evaluate the effect of FCC regulations on its
rates. All existing rates as well as future rate increases for basic cable
service must be approved by the local municipality if it has certified to
regulate basic cable service rates. To date, approximately 49% of the Company's
municipalities have filed to regulate basic cable service rates with 36% of
these municipalities currently certified to regulate basic rates.
In November 1993, the FCC issued letters of inquiry to the Company and other
cable operators to investigate the way in which regulated program services were
moved to unregulated a la carte offerings and whether these and other changes
were in compliance with the original Act. The Company continues to believe it
is in full compliance with the original Act. However, on December 30, 1994, the
FCC issued a Memorandum Opinion and Order which ordered that C-TEC's a la carte
packages in two Michigan communities as they existed on November 17, 1993, are
subject to rate regulation as of September 1, 1993, and the channels composing
them must be counted by C-TEC as rate regulated channels for purposes of rate
justification, as of that date. The order also terminated the remaining 14
inquiries regarding other C-TEC Michigan franchises since these franchises
withdrew their complaints and accepted the Company's settlement offer, discussed
below. The Company submitted an application for review of the Memorandum
Opinion and Order with the FCC on January 30, 1995. The Company accrued for the
potential a la carte liability in 1994.
The Company has been challenged on it's existing regulated rate structure by
additional communities in Michigan which were not a part of the FCC's letters of
inquiry and is involved in ongoing negotiations with these communities. The
Company accrued an amount which represents its best estimate of it's subscriber
refund liability in Michigan in 1994. This amount represents a reduction of the
limited basic rate by $.30 cents per month for each subscriber from December 31,
1994 back to the date of initial regulation. The proposed settlement with the
Michigan communities is an effort to resolve the regulatory issues and avoid
possible extended litigation. Communities representing approximately 76% of the
Company's Michigan subscriber base have accepted the proposed settlement offer
which precludes challenges for various periods extending beyond 1995. The
Company has either settled challenges or accrued for anticipated exposures
related to initial rate regulation which was effective September 1993. The FCC
issued new rate regulation guidelines which were effective May 1994. During the
first quarter of 1995, the Company commenced basic rate increase notifications
to all of its Michigan subscribers. The rate increase was implemented in April
1995. The increase was in conformity with the settlement agreements discussed
previously and the FCC's going forward rules. Five Michigan communities to date
have filed complaints with the FCC relative to the April rate increase on the
basic cable service tier. Six Michigan subscribers to date have filed complaints
with the FCC relative to the April increase on the cable programming service
tier. The Company believes that it is in compliance with the amended rate
regulation provisions; however, there is no assurance that there will not be
challenges to its rates.
<PAGE>
The Company's remaining cable systems in New York and New Jersey are regulated
by the respective state regulatory commissions. These commissions have
certified with the FCC to regulate basic cable service rates on behalf of all
communities in those states. In August 1994, the State of New Jersey Board of
Public Utilities (the "Board") ruled on the Company's rates which were in effect
prior to May 15, 1994. The Board approved the basic rate and ruled that the
Company's a la carte package should not be considered a regulated tier. The
Board did, however, order a two dollar reduction in the rate charged for
converter rental. In 1994, the Company accrued for a refund liability back to
September 1, 1993. Additionally, the Company has changed its rate for converter
rental for future periods to reflect the Board's decision. The State of New
Jersey again challenged the Company's rate structure, including a la carte
services, under the revised regulations. In June and July 1995, the Board ruled
on the Company's rates which were in effect subsequent to May 15, 1994, but
prior to any rate increases. The Board once again approved the basic rate and
stated that the Company continues to offer the same package of a la carte
channels previously approved by the Board. During the first quarter of 1995,
the Company commenced basic rate increase notifications to all of its New Jersey
and New York subscribers. The rate increase was implemented in April 1995 and
was in conformity with the FCC going forward rules. To date there have been
sixty-six customer complaints filed with the FCC for New Jersey and sixteen for
New York relative to the April rate increase on the cable programming service
tier. The Company believes that is in compliance with the amended rate
regulation provisions.
The Company anticipates that certain provisions of the Act that do not relate
to rate regulation, such as the provisions relating to retransmission consent
and customer service standards, will reduce the future operating margins of the
Company.
No assurance can be given at this time that the above matters will not have a
material adverse effect on the Company's business and results of operations in
the future. Also, no assurance can be given as to what other future actions
Congress, the FCC or other regulatory authorities may take or the effects
thereof on the cable industry in general or the Company in particular.
PENNSYLVANIA PUBLIC UTILITY COMMISSION
The Company's local exchange telephone subsidiary, Commonwealth Telephone
Company ("CTCo"), is subject to a rate-making process regulated by the
Pennsylvania Public Utility Commission. Consequently, the ability of the
Telephone Group to generate increased income is largely dependent on its ability
to increase its subscriber base, obtain higher message volumes and control its
expenses.
During 1993, the Pennsylvania Public Utility Commission ("PPUC"), conducted a
review of CTCo's transactions with affiliates, as well as analyzed the earnings
of CTCo. Among other things, under the terms of an agreement reached with the
PPUC concerning this review, CTCo is providing its residential customers touch-
tone service free of charge beginning February 1, 1994. The agreement also
states that, barring unforeseen regulatory changes, CTCo will not increase basic
service rates prior to January 1, 1997. The Company has not increased basic
rates since 1978. The PPUC has also required the Company to permit only income
taxes actually paid to be recognized as a cost of service. Accordingly,
subsequent to December 31, 1993 the Company does not record deferred state
income taxes on certain temporary differences. These matters do not have a
material effect on the consolidated results of operations or financial condition
of the Company.
<PAGE>
Part II - Other Information
Item 5. Other Events
The Board of Directors of C-TEC (the "C-TEC Board") has adopted a
resolution unanimously approving and recommending to C-TEC's
shareholders, for approval at a shareholders' meeting to be held
on September 14, 1995, (a) amendments to the C-TEC Articles of
Incorporation (i) increasing the authorized number of shares of
C-TEC Common Stock to 85,000,000, (ii) increasing the authorized
number of shares of C-TEC Class B Stock to 15,000,000, and (iii)
authorizing a new class of 25,000,000 shares of C-TEC Preferred
Stock in such series and with such rights and preferences as the
C-TEC Board may determine from time to time, and (b) proposals for
the issuance of (i) 4,100,000 shares of C-TEC Preferred Stock
Series A with an aggregate stated value of $41,000,000 and
1,100,000 shares of C-TEC Preferred Stock Series B with an
aggregate stated value of 11,000,000 in connection with the merger
of Twin County Trans Video, Inc. and (ii) C-TEC Series AA
Convertible Preferred Shares in connection with the pending merger
of Buffalo Valley Telephone Company.
In August 1995, the Company filed a registration statement with
the Securities and Exchange Commission to register up to 452,000
shares of Preferred Stock that are proposed to be used as
consideration, in part, for the pending acquisition of Buffalo
Valley Telephone Company ("BVT"). Pursuant to the merger
agreement, BVT would be merged (the "merger") with and into a
subsidiary of the Company, with the subsidiary being the surviving
corporation. Each BVT Common Share outstanding as of the
effective time of the merger would be converted into or become a
right to receive either (i) cash in the amount of $61 or (ii) one
share of C-TEC Series AA Convertible Preferred Stock, par value
$61 per share. Shareholders of BVT would be entitled to elect to
receive cash or C-TEC Series AA Convertible Stock with respect to
shares held by them, but such elections would be subject to
allocation procedures, such that the number of BVT Common Shares
which would be converted into C-TEC Series AA Convertible
Preferred Stock would equal a specified percentage of all
outstanding BVT Common Shares (the "Stock Percentage"). The merger
agreement requires the Stock Percentage, as determined by C-TEC,
to be 50% or, if larger, the minimum percentage necessary for the
merger to qualify as a tax-free exchange for federal income tax
purposes. C-TEC anticipates that the Stock Percentage will be
approximately 50%. BVT had approximately 899,000 Common Shares
outstanding at June 30, 1995.
The C-TEC Series AA Convertible Preferred Stock would be entitled
to cumulative semi-annual cash dividends at an annual rate of
$3.20 per share and would have a liquidation preference of $61 per
share, plus dividends accrued and unpaid to the liquidation date.
The C-TEC Series AA Convertible Preferred Stock would be
convertible at any time at the option of the holder into shares of
C-TEC Common Stock and would be redeemable in whole or in
<PAGE>
part, at the option of C-TEC or the holder under certain
conditions.
The C-TEC Series AA Convertible Preferred Stock would have no
voting rights, except as required by law and except if C-TEC shall
fail to pay dividends on the C-TEC Series AA Preferred Shares in
an amount equal to three full semi-annual dividends or shall fail
to redeem the shares when required.
The acquisition of Buffalo Valley Telephone Company is expected to
be completed in 1995.
The issuance of the preferred stock is subject to shareholder
approval and the merger is subject to regulatory approval and
certain other conditions. The registration statement relating to
these securities has been filed with the Securities and Exchange
Commission but has not yet become effective.
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
(27) Financial Data Schedule
(b.) Reports on Form 8-K
The Company filed a Form 8-K on April 10, 1995 with the required
financial statements and pro forma financial information related
to its acquisition of Megacable, S.A. De CV.
The Company filed a Form 8-K on June 1, 1995 to announce the
completion on May 15, 1995, of the first step in its acquisition
of Twin County Trans Video, Inc., by acquiring a 40% interest from
the shareholders in exchange for cash of approximately $26.4
million, including a $5 million deposit made previously by the
Company and a $4 million 5% promissory note of C-TEC Cable
Systems, Inc., a wholly owned subsidiary of C-TEC. In addition, C-
TEC paid $11 million in consideration of a noncompete agreement.
The acquisition of the remaining shares is expected to be
completed by year end.
The Company filed a Form 8-K on May 25, 1995 to announce the
signing of a definitive agreement for the acquisition of all
outstanding shares of Common Stock of Buffalo Valley Telephone
Company for $61 per share payable either in cash or preferred
stock. The total value of the transaction is approximately $54.8
million.
<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.
C-TEC CORPORATION
DATE: August 14, 1995 /s/ Bruce C. Godfrey
------------------------
Bruce C. Godfrey
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 65,982
<SECURITIES> 108,340
<RECEIVABLES> 44,860
<ALLOWANCES> 1,465
<INVENTORY> 7,058
<CURRENT-ASSETS> 243,544
<PP&E> 682,147
<DEPRECIATION> 303,069
<TOTAL-ASSETS> 822,743
<CURRENT-LIABILITIES> 90,092
<BONDS> 286,312
<COMMON> 22,535
0
0
<OTHER-SE> 342,040
<TOTAL-LIABILITY-AND-EQUITY> 822,743
<SALES> 0
<TOTAL-REVENUES> 152,373
<CGS> 0
<TOTAL-COSTS> 104,179
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,259
<INTEREST-EXPENSE> 12,842
<INCOME-PRETAX> 24,051
<INCOME-TAX> 6,866
<INCOME-CONTINUING> 14,984
<DISCONTINUED> 128
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,112
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
