FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1994
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 No. 2-70020
________________________________________
Lincoln Telecommunications Company
(Exact name of registrant as specified in its charter)
Nebraska 47-0632436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1440 M Street, Lincoln, Nebraska 68508
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 402-476-5289
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 equirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock as of the latest practicable date.
Class of Common Stock Outstanding at March 31, 1994
$.25 par Value 32,352,550
PART I - FINANCIAL INFORMATION
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
The following consolidated financial statements of Lincoln Telecommunications
Company and its wholly owned subsidiaries have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (SEC) and, in
the opinion of management, include all adjustments necessary for a fair
statement of income for each period shown. All such adjustments made are of
a normal recurring nature except when noted as extraordinary or nonrecurring.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such SEC rules and regulations. Management believes that the disclosures
made are adequate and that the information is fairly presented. The results
for the interim periods are not necessarily indicative of the results for the
full year. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto in
the 1993 Annual Report on Form 10-K, which are incorporated by reference.
-1-
Item 1 - Financial Statements
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1994 December 31, 1993
(Unaudited) (Audited)
(Dollars in Thousands)
<CAPTION>
ASSETS
<S> <C> <C>
Property and equipment less
accumulated depreciation and
amortization $ 240,410 $ 246,104
Investments and other assets 45,565 47,163
Current assets 83,935 81,751
Deferred charges 20,751 20,261
--------- ---------
Total assets $ 390,661 $ 395,279
========= =========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock investment $ 180,892 $ 184,032
5% redeemable preferred stock 4,499 4,499
Long-term debt, excluding
current installments 44,000 44,000
--------- ---------
Total capitalization 229,391 232,531
--------- ---------
Current liabilities:
Notes payable to banks 36,000 41,500
Accounts payable and accrued liabilities 38,559 32,885
--------- ---------
Total current liabilities 74,559 74,385
--------- ---------
Deferred credits and other long-
term liabilities 86,711 88,363
--------- ---------
Total capitalization and liabilities $ 390,661 $ 395,279
========= =========
</TABLE>
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<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
Three Months Ended
Mar 31, 1994 Mar 31, 1993
(Dollars in Thousands Except Per Share Data)
<CAPTION>
<S> <C> <C>
Telephone operating revenues:
Local network services $ 18,706 $ 16,991
Long distance services 3,532 3,927
Access services 12,778 11,688
Directory advertising, billing
and other services 4,129 4,120
Other operating revenues 3,627 3,444
--------- ---------
Total telephone operating revenues 42,772 40,170
--------- ---------
Diversified operations revenues and sales:
Long distance services 4,782 4,942
Product sales 2,202 1,434
Other revenues 86 87
--------- ---------
Total diversified operations
revenues and sales 7,070 6,463
--------- ---------
Intercompany revenues (1,829) (1,896)
--------- ---------
Total operating revenues 48,013 44,737
--------- ---------
Operating expenses:
Depreciation 7,959 7,044
Extraordinary depreciation on cellular plant* 3,398 --
Cost of goods and services 4,530 4,071
Other operating expenses 22,336 21,576
Taxes, other than payroll and income 950 695
Intercompany expenses (1,829) (1,896)
--------- ---------
Total operating expenses 37,343 31 490
--------- ---------
Operating income 10,670 13,247
--------- ---------
Non-operating income and expense:
Income from interest and other investments 1,154 884
Charge for additional nonrecurring
depreciation on cellular equipment
in limited partnership* 2,179 --
Interest expense and other deductions 1,649 2,122
--------- ---------
Net non-operating expense 2,674 1,238
--------- ---------
-3-
LINCOLN TELECOMMUNICATIONS COMPANY
CONSOLIDATED STATEMENT OF EARNINGS (Cont.)
(UNAUDITED)
Three Months Ended
Mar 31, 1994 Mar 31, 1993
(Dollars in Thousands Except Per Share Data)
Income before income taxes and cumulative
effect of change in accounting principle 7,996 12,009
Income Taxes 3,018 3,937
--------- ---------
Income before cumulative effect of
change in accounting principle 4,978 8,072
Cumulative effect of change in accounting
principle -- (23,534)
--------- ---------
Net income (loss) 4,978 (15,462)
Preferred dividends 56 56
--------- ---------
Earnings (loss) attributable to
common shares $ 4,922 $(15,518)
========= =========
Earnings per common share:
Earnings before cumulative effect of
change in accounting principle $ .15 $ .25
Cumulative effect of change in
accounting principle -- (.73)
--------- ---------
Earnings (loss) per common share $ .15 $ (.48)
========= =========
Weighted average common shares outstanding
(in thousands) 32,576 32,534
Dividend declared per common share $ .13 $ .12
*See comments under "Cellular Activities," page 8
</TABLE>
-4-
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
Mar. 31, 1994 Mar. 31, 1993
(Dollars in Thousands)
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,978 $(15,462)
--------- ---------
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 7,966 7,058
Additional nonrecurring depreciation
on cellular equipment 3,398 --
Cumulative effect of change in
accounting principle -- 23,534
Equity in undistributed earnings of joint
venture and general partnership 3,261 842
Provision for losses on receivables 123 104
Deferred income taxes (1,979) (13,756)
Increase in note receivable from
general partnership (896) (798)
Changes in assets and liabilities
resulting from operating activities:
Receivables (2,137) (724)
Materials, supplies and other assets (78) 131
Deferred charges (496) (14,755)
Accounts payable and accrued expenses 2,727 780
Income taxes payable 2,786 1,255
Advance billings and customer deposits 161 49
Unamortized investment tax credits (265) (340)
Other deferred credits 592 29,742
--------- ---------
Total adjustments 15,163 33,122
--------- ---------
Net cash provided by
operating activities 20,141 17,660
--------- ---------
Cash flows from investing activities:
Expenditures for property and equipment (5,892) (4,322)
Net salvage on retirements 265 (26)
--------- ---------
Net capital additions (5,627) (4,348)
-5-
LINCOLN TELECOMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)
(UNAUDITED)
Three Months Ended
Mar. 31, 1994 Mar. 31, 1993
(Dollars in Thousands)
Proceeds from sale of investments and
other assets 27 35
Purchases of investments and other assets (830) (245)
Purchases of temporary investments (5,300) (13,037)
Maturities and sales of temporary investments 10,710 16,115
--------- ---------
Net cash used for
investing activities (1,020) (1,480)
--------- ---------
Cash flows from financing activities:
Dividends to stockholders (4,294) (3,633)
Proceeds from issuance of notes payable 1,000 --
Retirement of notes payable (6,500) --
Purchase of treasury stock (3,920) --
Sale of treasury stock 95 --
Retirement and conversion of long-term
debt and redemption of preferred stock -- (125)
--------- ---------
Net cash used in financing
activities (13,619) (3,758)
--------- ---------
Net increase in cash and cash equivalents 5,502 12,422
Cash and cash equivalents at beginning of year 15,341 9,585
--------- ---------
Cash and cash equivalents at end of quarter $ 20,843 $ 22,007
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 369 $ 541
========= =========
Income taxes paid $ 2,470 $ 3,060
========= =========
</TABLE>
-6-
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO FORM 10-Q
The consolidated Form 10-Q reflects the operations of Lincoln
Telecommunications Company (the Company) and its wholly owned subsidiaries.
The primary subsidiary is The Lincoln Telephone and Telegraph Company (LT&T)
which provides local and long distance telephone service in 22 southeastern
counties of Nebraska. It further provides cellular telecommunications
services in the Lincoln, Nebraska Metropolitan Statistical Area (MSA) (which
includes all of Lancaster County in Nebraska) under the name of Lincoln
Telephone Cellular. LinTel Systems Inc. (LinTel) provides telephone
answering services, sales of non-regulated telecommunication products and
services and toll services beyond LT&T's local service territory. Prairie
Communications, Inc. (Prairie) has a 50% investment in, and is the operating
partner of, a general partnership with Centel Nebraska, Inc. which manages a
limited partnership providing cellular telecommunications services in the
Omaha MSA (which includes Douglas and Sarpy Counties in Nebraska and
Pottawatomie County in Iowa). The limited partnership is doing business as
First Cellular Omaha (FCO). A joint venture with Anixter Bros., Inc., doing
business as Anixter-Lincoln, warehouses and distributes electrical wire,
cable, and communications products in a six-state area which includes
Nebraska, North and South Dakota, Wyoming, Montana and Idaho.
General
Earnings per share of common stock are based on the weighted average number
of shares of common stock outstanding during the periods presented herein.
The weighted average shares used in the calculation were 32,576,008 for the
three-month period ended March 31, 1994 and 32,534,376 for the same period in
1993 (restated to reflect the 100% stock dividend referred to below).
On April 24, 1991 the Board of Directors of the Company authorized the
Company to purchase up to 600,000 shares of its common stock from time to
time as market conditions warrant. As of March 31, 1994, 274,376 shares have
been purchased. These purchases are in addition to the purchases which the
Company has been making for purposes of satisfying participant requirements
under the Employee and Stockholder Dividend Reinvestment and Stock Purchase
Plan, satisfying Employer Matching and Stock Bonus Contributions under the
Company's 401(k) Savings and Stock Ownership Plan and satisfying participant
requirements under the Company's 1989 Stock and Incentive Plan.
Effective January 6, 1994 the Company distributed a 100% stock dividend to
common stockholders of record on December 27, 1993, which has been treated as
a stock split for financial reporting purposes. Common stock, premium on
common stock and all per share information has been retroactively adjusted to
give effect to the stock dividend for all periods presented.
-7-
On February 1, 1994 the Company entered into an agreement (Agreement) with
Sahara Enterprises, Inc. (Sahara), then an owner of approximately 16.6% of
the issued and outstanding common stock of the Company in connection with a
firm commitment underwritten public offering of shares of the Company's
common stock by Sahara (Offering). The Agreement provided (i) the Company
with a right of first refusal to purchase additional shares of Company common
stock from Sahara for 120 days following the closing of the Offering; (ii)
that, concurrently with the closing of the Offering, the Company will
purchase 250,000 shares of Company common stock from Sahara at the Offering
price less 2 percent for future use in funding the Company's stock
obligations under one or more of its employee benefit plans; and (iii) that
Sahara will indemnify and reimburse the Company against payment of an amount
not to exceed the first $200,000 of the Company's out-of-pocket expenses in
connection with the Offering.
On February 1, 1994 the Company filed a Form S-3 Registration Statement with
the Securities and Exchange Commission in connection with the Offering. On
March 24, 1994 the Offering was closed and pursuant thereto, Sahara sold
1,850,000 shares of Company common stock to the public, reducing its
ownership of the issued and outstanding Company common stock to approximately
10%. Concurrently therewith and pursuant to the Agreement, the Company
purchased 250,000 shares of Company common stock from Sahara for a purchase
price of $15.68 per share, a transaction which the Company financed with
current assets. On April 12, 1994 Sahara sold an additional 136,200 shares
of the Company's Common Stock to the public in connection with an over-
allotment option which Sahara had granted in connection with the Offering.
Exclusive of shares of common stock received by Sahara pursuant to Company
stock dividends or stock splits, Sahara (or its wholly-owned subsidiary)
beneficially owned the shares sold in the Offering and the 250,000 shares
sold to the Company concurrently therewith since the Company's formation as
a holding company effective February 23, 1981.
Cellular Activities
Due to changes in technology, customer growth, and usage demand for cellular
services in their respective markets, Lincoln Telephone Cellular and First
Cellular Omaha, have entered into an agreement with AT&T dated March 15,
1994, to purchase digital cellular telephone systems to replace the existing
analog systems serving these markets. These digital systems are expected to
increase capacity and performance in these markets. The new Omaha system was
operational in April 1994 and the Lincoln system is expected to be
operational in mid-1995.
The implementation of these system upgrades will cause the early retirement
of existing analog equipment prior to the expiration of its anticipated
useful life. As a result, in the first quarter 1994, the Company wrote down
the value of these assets by approximately $3,398,000. The after-tax impact
of this one-time non-cash charge to earnings was $2,050,000. The Company's
share of a similar charge for First Cellular Omaha was $2,179,000, producing
an after-tax impact of $1,314,000. The one-time, noncash reduction of first
quarter 1994 earnings is approximately $3,364,000 or $.104 per share. See
Non-Operating Income (Expense), Page 16.
-8-
Nebraska Public Service Commission Order
On May 28, 1991 the Nebraska Public Service Commission (NPSC) ordered LT&T to
implement several rate and service changes which became effective August 16,
1991. Increased rates for basic local service, together with reduced rates
for long distance calls and other changes included in the order, were
intended to be revenue-neutral. Results were monitored monthly and were
reviewed with the NPSC after a full year of operation. The NPSC determined
that a refund of $1 for each residential line and $2 for each business line
would be needed to achieve revenue neutrality. The refunds were provided as
credits on customers' March 1993 billings. In addition, the NPSC ordered
further reductions in rates for touch call service and long distance service,
estimated to be $1,589,000 annually. These rate reductions became effective
March 1, 1993.
Changes in Accounting Principles
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Statement 109 requires a change in the method of accounting for deferred
income taxes. Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the accounting period in which the
enactment occurs.
Generally accepted accounting principles for regulated enterprises adopting
Statement 109 required, in the case of LT&T, the recognition of deferred
regulatory charges and deferred regulatory credits of $15,856,000 and
$14,743,000, respectively. In September 1993, an additional deferred
regulatory charge of $1,223,000 was recognized to account for the 1% increase
in the federal income tax rate, retroactive to January 1, 1993. The adjusted
net effect of these regulatory charges and credits of $2,336,000 was recorded
on the financial statements as of January 1, 1993 and September 30, 1993 as
an increase to deferred income tax liabilities and will be amortized into
income tax expense on the financial statements over a ten year period.
Total income tax expense for the three-month periods ended March 31, 1994 and
1993 was $3,018,000 and $3,937,000, respectively, and was comprised solely of
income taxes on income from continuing operations. Income tax expense
(benefit) attributable to income from continuing operations for the quarters
ended March 31, 1994 and 1993 consists of:
-9-
First Quarter Ended March 31,
1994 1993
Current
U.S. Federal $ 4,290,000 $ 3,596,000
State and local 958,000 824,000
------------- -------------
5,248,000 4,420,000
Deferred
U.S. Federal (1,682,000) (225,000)
State and local (283,000) 82,000
------------- -------------
(1,965,000) (143,000)
Investment tax credits (265,000) (340,000)
------------- -------------
$ 3,018,000 $ 3,937,000
============= =============
Income tax expense differed from the amounts computed by applying the U. S.
Federal income tax rate of 35 percent to pretax income from continuing
operations as stated in the following:
First Quarter Ended March 31,
1994 1993
Computed "expected" tax
expense $ 2,798,000 $ 4,083,000
Increase (reduction) in
income taxes resulting from:
State and local taxes, net
of Federal tax benefit 439,000 598,000
Non-taxable interest income (30,000) (20,000)
Amortization of regulatory
deferred charges 479,000 444,000
Amortization of regulatory
deferred liability (473,000) (502,000)
Amortization of investment
tax credits (265,000) (340,000)
Effect of 109 adoption on
non-regulated income -- (305,000)
Other, net 70,000 (21,000)
------------ -------------
$ 3,018,000 $ 3,937,000
============= =============
-10-
The significant components of deferred income tax expense (benefit) attribut-
able to income from continuing operations for the three-month periods ended
March 31, 1994 and 1993 were the following:
First Quarter Ended March 31,
1994 1993
Deferred tax expense (benefit) $(1,971,000) $ (85,000)
Amortization of regulatory deferred charges 479,000 444,000
Amortization of regulatory deferred liability (473,000) (502,000)
------------- -------------
$(1,965,000) $ (143,000)
============= =============
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1994 and December 31, 1993 are presented below:
March 31, 1994 December 31, 1993
Deferred tax assets:
Accumulated post-retirement
benefit cost $16,139,000 $15,946,000
Regulatory deferred credits 5,627,000 5,884,000
Other 2,500,000 2,438,000
------------- -------------
Total gross deferred tax assets 24,266,000 24,268,000
Less valuation allowance 0 0
------------- -------------
Net deferred tax assets $24,266,000 $24,268,000
============= =============
Deferred tax liabilities:
Plant and equipment, principally
due to depreciation differences $39,400,000 $40,720,000
Regulatory deferred charges 3,908,000 4,036,000
Other 1,952,000 2,486,000
------------- -------------
Total gross deferred tax
liabilities 45,260,000 47,242,000
------------- -------------
Net deferred tax liabilities $20,994,000 $22,974,000
============= =============
As a result of the nature and amount of the temporary differences which give
rise to the gross deferred tax liabilities and the Company's expected taxable
income in future years, no valuation allowance for deferred tax assets as of
December 31, 1993 and March 31, 1994 was necessary.
-11-
Postretirement Benefits
In addition to the Company's defined benefit pension plan, the Company
sponsors a health care plan that provides postretirement medical and other
benefits to employees who meet minimum age and service requirements upon
retirement.
In respect to these benefits, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," as of January 1, 1993. The new standard
requires accounting for these benefits during the active employment of the
participants. The Company elected to record the accumulated postretirement
benefit obligation in the first quarter 1993. After taxes, this one-time
charge amounted to $23,534,000, net of income tax benefit of $14,890,000.
The following table presents the plan's status reconciled with amounts
recognized in the Company's consolidated balance sheet at December 31, 1993:
Accumulated Postretirement Benefit Obligation:
Retirees $29,851,000
Fully eligible active plan participants 10,202,000
Other active plan participants 7,328,000
-------------
$47,381,000
Plan assets at fair market value --
Unrecognized net loss (7,054,000)
-------------
Accrued postretirement benefit cost
recognized in the balance sheet $40,327,000
=============
For purposes of measuring the benefit obligation, a discount rate of 8.0% and
an 11.7% annual rate of increase in the per capita cost of covered benefits
(i.e., health care cost trend rate) was assumed for 1993. This rate of
increase was assumed to decrease gradually to 5.5% by the year 2004.
The Company has not designated any assets to fund plan obligations. Net
periodic postretirement benefit costs for the quarters ended March 31, 1994
and 1993 include the following components:
First Quarter Ended March 31,
1994 1993
Service cost $ 107,000 $ 75,000
Interest cost 924,000 908,000
Amortization of unrecognized loss 42,000 --
------------ ------------
Net periodic postretirement
benefit costs $ 1,073,000 $ 983,000
============ ============
-12-
For purposes of measuring the benefit cost, a discount rate of 9.5% and a 12%
annual rate of increase in the health care cost trend rate was assumed for
1993. This rate of increase was assumed to decrease gradually to 6.5% by the
year 2002. The health care cost trend rate assumptions have a significant
effect on the amounts reported.
-13-
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Total capital additions to telephone plant for 1994 are projected to be
$31,457,000. During the three-month periods ended March 31, 1994 and 1993,
cash provided by operating activities, less dividends paid, exceeded capital
additions.
Short-term borrowings of $16,000,000 were completed December 31, 1991, and a
borrowing of $1,000,000 was completed on February 25, 1994. Of these
borrowings, $10,000,000 remained outstanding at March 31, 1994. Additional
short-term borrowings of $35,000,000 were completed July 6, 1993. The latter
borrowings of $35,000,000 were used to fund the call of long-term First
Mortgage Bond Issues G, I and J. The long-term debt interest savings, net of
premium and bond discount and issuance cost amortization expenses, will
exceed $2,511,000 for 1994. Short-term debt for the latter borrowings was
reduced to $26,000,000 by March 31, 1994. No long-term borrowings are
presently anticipated for 1994.
Results of Operations
Revenues
First Quarter 1994
Increase (Decrease)
Over First Quarter 1993
Telephone Operating Revenues:
Local network services 10.1%
Long distance services (10.1%)
Access services 9.3%
Directory advertising, billing
and other services .2%
Other operating revenues 5.3%
Total telephone operating revenues 6.5%
Diversified Operations Revenues and Sales:
Long distance services (3.2%)
Product sales 53.6%
Other revenue (1.1%)
Total diversified operations
revenues and sales 9.4%
Intercompany revenues 3.5%
Total operating revenues 7.3%
All comparisons hereinafter made are of the first quarter for 1994 with the
same period in 1993. The adjustments included are all of a normal recurring
nature except when noted as extraordinary or nonrecurring.
-14-
Local network services revenue increased $1,715,000 (10.1%). An important
element is the growth in revenue from LT&T's cellular services. Cellular
service revenue increased $790,000 (62.7%). Cellular access lines grew 6,349
(70.9%) between March 31, 1993 and March 31, 1994. Basic local services
revenue increased $666,000 (5.8%) led by growth of 10.8% and 6.0% in revenue
from centrex and small business services, respectively. Residential and
business telephone access lines in service grew 2.5% from March 31, 1993.
Revenue from Custom Calling-CLASS services increased $137,000 (83.7%).
Long distance services revenue decreased $395,000 (10.1%). The decrease is
due primarily to a mandated rate reduction by the NPSC effective March 1,
1993.
Access services revenue increased $1,090,000 (9.3%). Both interstate and
intrastate access services revenues significantly increased principally due
to increased traffic.
Total revenues from diversified operations grew by $607,000 (9.4%), led by a
growth of $768,000 (53.6%) from sales of telecommunications products and
services by LinTel.
Overall, total operating revenues for telephone operations and diversified
operations increased $3,276,000 (7.3%) for the three-month period ended
March 31, 1994 over the same period in 1993.
Operating Expenses
First Quarter 1994
Increase (Decrease)
Over First Quarter 1993
Depreciation 13.0%
Additional nonrecurring depreciation
on cellular equipment --
Cost of goods and services 11.3%
Other operating expenses 3.5%
Taxes, other than payroll
and income 36.7%
Intercompany expenses 3.5%
Total operating expenses 18.6%
All comparisons hereinafter made are of the first quarter for 1994 with the
same period in 1993. The adjustments included are all of a normal recurring
nature except when noted as extraordinary or nonrecurring.
In addition to a one-time non-cash charge of $3,398,000 for additional
nonrecurring depreciation on cellular equipment in the first quarter 1994,
(see "Cellular Activities" on Page 8), depreciation expense increased
$915,000 (13.0%). On March 16, 1994, the NPSC authorized new depreciation
rates for telephone plant, retroactive to January 1, 1994. These new
depreciation rates will generate approximately $2,700,000 of additional
depreciation expense during 1994.
-15-
Cost of goods and services increased $459,000 (11.3%). The cost of system
sales increased $580,000 (146.7%) as a result of increased sales by LinTel.
Taxes, other than payroll and income, increased $255,000 (36.7%) due to
repayment of refunds to counties and subdistricts in final settlement of 1989
and 1990 property taxes which were received in first quarter 1993.
Overall, total operating expenses increased $5,853,000 (18.6%) for the
three-month period ended March 31, 1994 over the same period in 1993.
Non-Operating Income (Expense)
First Quarter 1994
Increase (Decrease)
Over First Quarter 1993
Income from interest and
other investments 30.5%
Charge for additional nonrecurring
depreciation on cellular equipment
in limited partnership --
Interest expense and other
deductions (22.3%)
Net non-operating expense 116.0%
Income from interest and other investments increased $270,000 (30.5%) for the
first quarter. The increase is attributable to a combination of three
factors; 1) LT&T's interest income increased $80,000 (26.6%) over the first
quarter 1993 as a result of increases in short-term investments of
$4,400,000; 2) the Company's interest income from Prairie increased $98,000
to $896,000 in the first quarter; and 3) Prairie's portion of Omaha Cellular
General Partnership's operating loss decreased $74,000 (13.4%) over the same
period in 1993.
The Company recorded a one-time non-cash charge of $2,179,000 for the effect
of the additional nonrecurring depreciation on cellular equipment at First
Cellular Omaha in the first quarter 1994. See "Cellular Activities" on
Page 8.
Interest expense and other deductions decreased $473,000 (22.3%) for the
first quarter, generally attributable to the decrease in interest expense on
funded debt of $721,000 offset by increases in interest expense of $267,000
on short-term borrowings.
Income Taxes
Income taxes decreased $919,000 (23.3%). The decrease is attributable to the
increase in expense from the additional nonrecurring depreciation on cellular
equipment and the resulting decrease in income before income taxes.
-16-
PART II - OTHER INFORMATION
Item 1-5 - Not applicable
Item 6 - a) Not applicable.
b) Reports on Form 8-K.
During the quarter ended March 31, 1994, the
Registrant filed the following Form 8-K Reports:
1) January 21, 1994, Current Report on Form 8-K;
2) February 1, 1994, Current Report on Form 8-K;
3) February 14, 1994, Current Report on Form 8-K,
amended on March 4, 1994, Current Report on
Form 8-K/A; and further amended on March 11, 1994
by Current Report on Form 8-K/A;
4) March 16, 1994, Current Report on Form 8-K.
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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.
Lincoln Telecommunications Company
----------------------------------
(Registrant)
May 13, 1994 /s/ Robert L. Tyler
Date..................... ......................................
(Signature)
Robert L. Tyler, Senior Vice President-
Chief Financial Officer
May 13, 1994 /s/ Michael J. Tavlin
Date..................... ......................................
(Signature)
Michael J. Tavlin, Vice President-
Treasurer
____________________________
*See General Instruction G
**Print name and title of the signing officer under his signature.
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