UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 July 31, 1995
--------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-2180
TOTAL-TEL USA COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1656895
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(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Clove Road, 8th Floor, Little Falls, NJ 07424
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 812-1100
Not applicable
---------------------------------------------------------
(Former address of principal executive offices) (Zip Code)
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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at Sept. 13, 1995
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Common Share, $.05 par value 1,449,751 shares
TOTAL-TEL USA COMMUNICATIONS, INC.
AND SUBSIDIARIES
SECOND QUARTER REPORT ON FORM 10-Q
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Condensed Consolidated Statement of Earnings
Six months ended July 31, 1995 and 1994
(unaudited) and three months ended July
31, 1995 and 1994 (unaudited) 3
Condensed Consolidated Balance Sheets
July 31, 1995 (unaudited), and
January 31, 1995 4-5
Condensed Consolidated Statements of Cash Flows
Six months ended July 31, 1995 and 1994
(unaudited) 6
Notes to Condensed Consolidated Financial
Statements (unaudited) 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Items 1-5 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSDED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Six months ended Three months ended
July 31, July 31,
------------------- -------------------
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net Sales $22,135,323 $12,155,413 $11,619,711 $6,740,960
Costs and Expenses
Cost of Sales 15,620,184 8,537,330 8,219,056 4,763,515
Selling, general and administrative 5,536,177 3,061,897 2,990,285 1,653,710
---------- ---------- ---------- ---------
21,156,361 11,599,227 11,209,341 6,417,225
---------- ---------- ---------- ---------
Operating Income 978,962 556,186 410,370 323,735
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Other Income (Expense)
Interest income 95,985 62,799 65,868 31,838
Other income 6,132 20,992 5,130 13,583
Interest expense (4,909) (935) (902) (561)
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Total Other Income 97,208 82,856 70,096 44,860
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Earnings before provision for income taxes 1,076,170 639,042 480,466 368,595
Provision for Income Tax (416,300) (268,500) (186,200) (165,500)
---------- ---------- ---------- ---------
NET EARNINGS $ 659,870 $ 370,542 $ 294,266 $ 203,095
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NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $0.40 $0.23 $0.18 $0.12
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Weighted Average Shares Outstanding 1,639,278 1,629,631 1,645,421 1,629,386
---------- ---------- ---------- ---------
Dividends Per Share NONE NONE NONE NONE
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See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 31, JANUARY 31,
1995 1995
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(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,878,628 $ 1,347,625
Investments available for sale 1,701,309 1,923,424
Accounts receivable 7,124,122 5,939,634
Note receivable 25,000 653,792
Deferred income taxes 286,300 263,000
Prepaid expenses and other current assets 526,045 420,309
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TOTAL CURRENT ASSETS 11,541,404 10,547,784
PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION AND AMORTIZATION 4,870,269 3,924,139
OTHER ASSETS:
Deferred income taxes 99,800 44,000
Deferred line installation costs, less
accumulated amortization 248,184 220,985
Other assets 509,639 372,665
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857,623 637,650
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$17,269,296 $15,109,573
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NOTE: The balance sheet at January 31, 1995 has been taken from
the audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
(Continued)
</TABLE>
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 31, JANUARY 31,
1995 1995
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(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $5,398,364 $4,120,841
Other current and accrued liabilities 958,048 1,098,884
Salaries and wages payable 370,653 296,659
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TOTAL CURRENT LIABILITIES 6,727,065 5,516,384
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OTHER LONG-TERM LIABILITIES 249,806 110,814
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DEFERRED INCOME TAXES 515,281 389,581
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SHAREHOLDERS' EQUITY
Common stock 93,240 93,240
Additional paid-in capital 3,621,324 3,621,324
Retained earnings 7,695,610 7,035,740
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11,410,174 10,750,304
Treasury stock (1,584,687) (1,584,687)
Receivable from shareholder (100,000) (100,000)
Unrealized gain on securities available-for-sale 51,657 27,177
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Total shareholders' equity 9,777,144 9,092,794
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$17,269,296 $15,109,573
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NOTE: The balance sheet at January 31, 1995 has been taken from
the audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
</Table
</TABLE>
<TABLE>
<CAPTION>
TOTAL TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
-------------------------
July 31,
-------------------------
1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $659,870 $370,542
Adjustment for non-cash charges 798,437 397,579
Changes in assets and liabilities (326,691) (542,781)
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Net cash provided by operating activities 1,131,616 225,340
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INVESTING ACTIVITIES:
Net maturities of securities available for sale 189,059 --
Net decrease in short-term investments -- 722,407
Collection of notes receivable 628,792 45,223
Purchase of property and equipment (1,350,823) (497,907)
Increase in deposits -- (237,870)
Additions to deferred line installation costs (67,641) (42,945)
Other -- 18,200
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Net cash (used in) provided by investing activities (600,613) 7,108
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FINANCING ACTIVITIES:
Exercise by employee of stock option -- 49,275
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Net cash provided by financing activities -- 49,275
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NET INCREASE IN CASH
AND CASH EQUIVALENTS 531,003 281,723
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,347,625 1,368,471
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $1,878,628 $1,650,194
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SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest $ 4,909 $ 935
Income taxes $ 395,375 $ 191,538
See notes to condensed consolidated financial statements.
</TABLE>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not
include all information and notes required by generally accepted
accounting principles for complete financial statements. However,
except as disclosed herein, there has been no material change in the
information disclosed in the notes to consolidated financial statements
included in the Annual Report on Form 10-K of Total-Tel USA
Communications, Inc. and Subsidiaries (the OCompanyO) for the fiscal
year ended January 31, 1995. In the opinion of Management, all
adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the six month period ended July 31, 1995 are not necessarily
indicative of the results that may be expected for the year ending
January 31, 1996.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net sales were approximately $22,135,000 for the first six months of the
current fiscal year, an increase of approximately $9,980,000, or 82.1%,
as compared to the first six months of the prior fiscal year. Net sales
for the second quarter of the current fiscal year were approximately
$11,620,000, an increase of approximately $4,879,000 or 72.4% compared
to the second quarter of the prior fiscal year. These increases were
attributable to intensive sales and marketing efforts by the Registrant.
However, given the competitive climate in the long distance telephone
industry, there can be no assurance that this rate of growth will
continue throughout the remainder of fiscal year 1995.
For the current fiscal six months, the telephone service billed
approximately 153,011,000 minutes of calling as compared to
approximately 82,568,000 minutes of calling for the comparable six
months of the prior year, resulting in an increase of approximately
70,443,000 minutes, or 85.5%. For the second fiscal quarter of the
current fiscal year, the Registrant billed approximately 81,510,000
minutes of calling as compared to approximately 46,002,000 minutes of
calling for the second quarter of the prior fiscal year, an increase of
35,508,000 minutes or 77.2%. The average revenue per minute decreased in
the current fiscal six month period and second quarter of the current
fiscal year as compared to the prior fiscal year's six month period and
prior fiscal year's second quarter, and was primarily attributable to
the intense price competition in the long distance telecommunications
industry.
Cost of sales increased approximately $7,082,000 or 83.0% to
approximately $15,620,000 for the current six months and increased
approximately $3,456,000 or 72.5% to approximately $8,219,000 for the
second quarter of the current fiscal year. Both of these increases were
slightly unfavorable in relation to the 82.1% increase in the sales
volume for the six month period and the 72.4% increase in the second
quarter. While the Registrant was able to continue to negotiate lower
line rates from several of its major suppliers, the gross margin for the
current six months decreased slightly to approximately 29.4% as compared
to approximately 29.8% for the first six months of the prior fiscal
year, and remained stable for the second quarter of the current
fiscal year as compared to the second quarter of the prior fiscal year.
This decrease in the gross margin is reflective of the lower charge per
minute billed by the Registrant which was approximately $.005 per minute
lower for both the first six months and the second quarter of the
current fiscal year as compared to the respective periods of the prior
fiscal year.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Selling, general and administrative expense for the current six months
was approximately $5,536,000, an increase of approximately $2,474,000,
or 80.1%, as compared to the first six months of the prior fiscal year
and approximately $2,991,000 for the second quarter of the current
fiscal year, an increase of approximately $1,337,000 or 80.1% as
compared to the second quarter of the prior fiscal year. These increases
for the six months ended July 31, 1995 as compared to the first six
months of the prior year are due primarily to increased salaries of
approximately $1,116,000, sales commissions of approximately $790,000,
bad debt expense of approximately $157,000, depreciation of
approximately $174,000 and data processing service of approximately
$96,000. The increase for the second quarter of the current fiscal year
as compared to the second quarter of the prior fiscal year is due
primarily to increased salaries of approximately $639,000, sales
commissions of approximately $420,000, bad debt expense of approximately
$67,000, depreciation of approximately $88,000 and data processing
service of approximately $65,000.
The increase in interest income for the first six months of fiscal year
1996 was due to higher interest rates in effect for this period as
compared to the first six months of the fiscal year ended January 31,
1995.
Earnings per share increased to $.40 per share for the current six
months as compared to $.23 per share for the six months ended July 31,
1994, and increased to $.18 per share for the second quarter of the
current fiscal year as compared to $.12 per share for the quarter
ended July 31, 1994.
Liquidity and Capital Resources
At July 31, 1995, the Registrant had working capital of $4,814,339, a
decrease of $217,061 or 4.3% as compared to January 31, 1995. The ratio
of current assets to current liabilities at July 31, 1995 was 1.7:1, as
compared to a current ratio of 1.9:1 at January 31, 1995. The slight
decrease in working capital at July 31, 1995 was primarily attributable
to an increase in accounts payable of approximately $1,278,000, salaries
and wages payable of approximately $74,000, a decrease in investments
available for sale of approximately $222,000 and a decrease in notes
receivable of approximately $629,000 partially offset by an increase in
cash of approximately $531,000, an increase in accounts receivable of
approximately $1,184,000, an increase in prepaid expense of
approximately $106,000 and a decrease in other current and accrued
liabilities of approximately $142,000. The Registrant has continued to
maintain a strong liquidity position.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
The increase in cash of approximately $531,000 was the result primarily
of an increase in accounts payable and other current liabilities of
approximately $1,352,000, maturities of investments available for sale
of approximately $189,000, earnings of approximately $660,000, non cash
charges of $798,000, and collection of notes receivable of approximately
$629,000 partially offset by an increase in accounts receivable of
approximately $1,184,000, the purchase of equipment of approximately
$1,351,000 and an increase in other current assets of approximately
$106,000.
Capital expenditures during the first six months of the current fiscal
year totaled approximately $1,351,000 and were financed from funds
provided by operations. Approximately $569,000 of these expenditures
were applicable to the switching system to maintain the speed and
quality of the network. Approximately $34,000 was expended for
leasehold improvements to the Company's facilities in Newark, New Jersey
and Belleville, New Jersey. Approximately $118,000 was expended for
equipment at customers locations. In addition, approximately $400,000
was expended for the local area network in the Little Falls, New Jersey
office to improve management information systems and operating
efficiencies. The balance of capital expenditures was for furniture and
fixtures. Capital expenditures for the remaining current fiscal year
are estimated at approximately $1,910,000 and it is anticipated that
approximately $1,300,000 of these expenditures will be used to upgrade
the Company's switching equipment which should substantially increase
its calling capabilities. Approximately $250,000 will be expended for
office improvement, furniture and equipment in connection with the
expansion of the main office and sales office location. In addition,
approximately $360,000 is planned to be expended for new data processing
equipment and continued development of the Company's local area network.
These expenditures will be financed through a combination of funds from
operations, current working capital, bank borrowings and or equipment
leasing.
As of July 31, 1995, the Registrant required no short or long-term bank
lines of credit and during the current six month period had no bank
borrowings. The Registrant is currently negotiating a revolving line of
credit with a major New Jersey bank.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
THREE MONTHS ENDED JULY 31, 1995
ITEMS 1 - 5 Not applicable
ITEM 6 Exhibits and reports on Form 8-K
(a) Exhibits - none
(b) There were no reports on Form 8-K filed for the
three months ended July 31, 1995.
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.
TOTAL-TEL USA COMMUNICATIONS, INC.
----------------------------------
(Registrant)
Date September 14, 1995 By /s/
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Warren H. Feldman, Esq.
President and Chief Executive Officer
Date September 14, 1995 By /s/
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Thomas P. Gunning
Chief Financial Officer, Secretary,
Controller and Principal
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM TH CONSOLIDATED BALANCE SHEET AS OF
JULY 31, 1995 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JULY 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000034497
<NAME> TOTAL TEL USA COMMUNICATIONS INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-31-1995
<CASH> $1,878,628
<SECURITIES> 1,701,309
<RECEIVABLES> 7,918,327
<ALLOWANCES> 794,205
<INVENTORY> 0
<CURRENT-ASSETS> 11,541,404
<PP&E> 9,403,205
<DEPRECIATION> 4,532,936
<TOTAL-ASSETS> 17,269,296
<CURRENT-LIABILITIES> 6,727,065
<BONDS> 0
<COMMON> 93,240
0
0
<OTHER-SE> 9,683,904
<TOTAL-LIABILITY-AND-EQUITY> 17,269,296
<SALES> 22,135,323
<TOTAL-REVENUES> 22,232,531
<CGS> 15,620,184
<TOTAL-COSTS> 15,620,184
<OTHER-EXPENSES> 5,245,184
<LOSS-PROVISION> 286,084
<INTEREST-EXPENSE> 4,909
<INCOME-PRETAX> 1,076,170
<INCOME-TAX> 416,300
<INCOME-CONTINUING> 659,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 659,870
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
