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 October 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
---------------- -----------------
Commission File Number 0-2180
TOTAL-TEL USA COMMUNICATIONS, INC.
----------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1656895
- ------------------------------- -------------------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Clove Road, 8th Floor, Little Falls, NJ 07424
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 812-1100
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 December 13, 1995
- ---------------------------- --------------------------------
Common Share, $.05 par value 1,449,751 shares
TOTAL-TEL USA COMMUNICATIONS, INC.
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AND SUBSIDIARIES
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THIRD QUARTER REPORT ON FORM 10-Q
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INDEX
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Page No.
PART I. FINANCIAL INFORMATION
Condensed Consolidated Statement of Earnings
Nine months ended October 31, 1995 and 1994
(unaudited) and three months ended
October 31, 1995 and 1994 (unaudited) 3
Condensed Consolidated Balance Sheets
October 31, 1995 (unaudited), and
January 31, 1995 4-5
Condensed Consolidated Statements of Cash Flows
Nine months ended October 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 12
<TABLE>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
(Unaudited)
<CAPTION>
Nine months ended Three months ended
----------------- ------------------
October 31, October 31,
----------- -----------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
---- ---- ---- ----
Net Sales $35,589,435 $20,452,888 $13,454,112 $ 8,297,475
----------- ----------- ----------- -----------
Costs and Expenses
Cost of Sales 24,631,159 14,439,273 9,010,975 5,901,943
Selling, general and administrative 9,031,414 5,030,615 3,495,237 1,968,718
----------- ----------- ----------- -----------
33,662,573 19,469,888 12,506,212 7,870,661
----------- ----------- ----------- -----------
Operating Income 1,926,862 983,000 947,900 426,814
----------- ----------- ----------- -----------
Other Income (Expense)
Interest income 121,187 104,564 25,202 41,765
Other income 15,454 81,427 9,322 60,435
Interest expense (5,811) (1,496) (902) (561)
----------- ----------- ----------- -----------
Total Other Income 130,830 184,495 33,622 101,639
----------- ----------- ----------- -----------
Earnings before provision for income taxes 2,057,692 1,167,495 981,522 528,453
Provision for Income Tax 804,000 490,250 387,700 221,750
----------- ----------- ----------- -----------
NET EARNINGS $ 1,253,692 $ 677,245 $ 593,822 $ 306,703
----------- ----------- ----------- -----------
NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $0.76 $0.41 $0.36 $0.19
----------- ----------- ----------- -----------
Weighted Average Shares Outstanding 1,642,257 1,634,764 1,651,535 1,631,201
----------- ----------- ----------- -----------
Dividends Per Share NONE NONE NONE NONE
----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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<CAPTION>
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
(Unaudited) (Note)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 2,983,531 $ 1,347,625
Securities available for sale 1,443,793 1,923,424
Accounts receivable 8,157,337 5,939,634
Note receivable 25,000 653,792
Deferred income taxes 304,200 263,000
Prepaid expenses and other current assets 456,886 420,309
----------- -----------
TOTAL CURRENT ASSETS 13,370,747 10,547,784
PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION AND AMORTIZATION 5,097,904 3,924,139
OTHER ASSETS:
Deferred income taxes 105,500 44,000
Deferred line installation costs, less
accumulated amortization 251,533 220,985
Other assets 514,065 372,665
----------- - ----------
871,098 637,650
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$19,339,749 $15,109,573
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NOTE: The balance sheet at January 31, 1995 has been derived from
the audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
(Continued)
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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<CAPTION>
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
(Unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 5,917,231 $ 4,120,841
Other current and accrued liabilities 1,520,263 1,098,884
Salaries and wages payable 664,230 296,659
----------- -----------
TOTAL CURRENT LIABILITIES 8,101,724 5,516,384
----------- -----------
OTHER LONG-TERM LIABILITIES 266,478 110,814
----------- -----------
DEFERRED INCOME TAXES 590,681 389,581
----------- -----------
SHAREHOLDERS' EQUITY
Common stock 93,240 93,240
Additional paid-in capital 3,621,324 3,621,324
Retained earnings 8,289,432 7,035,740
----------- -----------
12,003,996 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 61,557 27,177
----------- -----------
Total shareholders' equity 10,380,866 9,092,794
----------- -----------
$19,339,749 $15,109,573
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NOTE: The balance sheet at January 31, 1995 has been derived from
the audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
TOTAL TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
<CAPTION>
Nine months ended
-----------------
October 31,
-----------
1995 1994
------ ------
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 1,253,692 $ 677,246
Adjustment for non-cash charges 1,436,100 703,859
Changes in assets and liabilities (201,756) (131,681)
---------- -----------
Net cash provided by operating activities 2,488,036 1,249,424
----------- -----------
INVESTING ACTIVITIES:
Net maturities of securities available for sale 422,897 --
Net decrease in short-term investments -- 465,808
Collection of notes receivable 628,792 127,835
Purchase of property and equipment (1,810,697) (1,881,767)
Additions to deferred line installation costs (93,122) (79,173)
Other -- (81,392)
----------- -----------
Net cash used in investing activities (852,130) (1,448,689)
----------- -----------
FINANCING ACTIVITIES:
Exercise by employee of stock option -- 49,275
----------- ----------
Net cash provided by financing activities -- 49,275
----------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,635,906 (149,990)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,347,625 1,368,471
----------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,983,531 $ 1,218,481
----------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest $ 5,811 $ 1,496
Income taxes $ 595,000 $ 435,000
See notes to condensed consolidated financial statements.
</TABLE>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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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 "Company")
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 nine month period ended October 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
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULT OF OPERATIONS
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Results of Operations
- ---------------------
Net sales were approximately $35,589,000 for the first nine months of the
current fiscal year, an increase of approximately $15,136,000, or 74%, as
compared to the first nine months of the prior fiscal year. Net sales for
the third quarter of the current fiscal year were approximately $13,454,000,
an increase of approximately $5,157,000 or 62.2% compared to the third
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 1996.
For the current fiscal nine months, the telephone service billed
approximately 253,047,000 minutes of calling as compared to approximately
139,089,000 minutes of calling for the comparable nine months of the prior
year, resulting in an increase of approximately 113,958,000 minutes, or
81.9%. For the third fiscal quarter of the current fiscal year, the
Registrant billed approximately 100,036,000 minutes of calling as compared
to approximately 56,539,000 minutes of calling for the third quarter of the
prior fiscal year, an increase of 43,497,000 minutes or 76.9%. The average
revenue per minute decreased in the current fiscal nine month period and
third quarter of the current fiscal year as compared to the prior fiscal
year's nine month period and prior fiscal year's third quarter, primarily
as a result of the intense price competition in the long distance
telecommunications industry.
Cost of sales increased approximately $10,192,000 or 70.6% to approximately
$24,631,000 for the current nine months and increased approximately
$3,109,000 or 52.7% to approximately $9,011,000 for the third quarter of the
current fiscal year. Both of these increases were favorable in relation to
the 74% increase in the sales volume for the nine month period and the 62.2%
increase in the third quarter. The gross margin for the current nine months
increased to approximately 30.8% as compared to approximately 29.4% for the
first nine months of the prior fiscal year and to approximately 33% for the
third quarter of the current fiscal year as compared to approximately 28.9%
for the third quarter of the prior fiscal year. The increase in gross
margins is primarily attributable to the resolution by the Registrant in the
third quarter of the current fiscal year of certain disputed vendor charges
which resulted in a decrease in cost of sales of approximately $450,000.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(Continued)
Selling, general and administrative expense for the current nine months was
approximately $9,031,000, an increase of approximately $4,000,000, or 79.5%,
as compared to the first nine months of the prior fiscal year and
approximately $3,495,000 for the third quarter of the current fiscal year,
an increase of approximately $1,526,000 or 77.5% as compared to the third
quarter of the prior fiscal year. The increase in these expenses for the
nine months ended October 31, l995 as compared to the first nine months of
the prior year are due primarily to increased sales commissions of
approximately $1,141,000, sales and administrative salaries of approximately
$2,035,000, provision for bad debts of approximately $418,000 and data
processing services of approximately $106,000. The increase in these
expenses for the third quarter of the current fiscal year as compared to the
third quarter of the prior fiscal year is due primarily to increased sales
commissions of approximately $351,000, sales and administrative salaries of
approximately $644,000 and provision for bad debts of approximately
$261,000.
The slight increase in interest income for the nine month period of fiscal
year 1995 was principally due to increased interest rates partially offset
by a reduction of the funds invested. The reduction in funds invested was
due to capital expenditures in connection with the purchase and installation
of the Registrant's upgraded switching platform and furniture and fixtures
purchased for the new office location.
Earnings per share increased to $.76 per share for the current nine months
as compared to $.41 per share for the nine months ended October 31, l994,
and was $.36 per share for the third quarter of the current fiscal year as
compared to $.19 per share for the quarter ended October 31, l994.
Liquidity and Capital Resources
- -------------------------------
At October 31, l995, the Registrant had working capital of $5,269,023, an
increase of $237,623 or 4.7% as compared to January 31, 1995. The ratio of
current assets to current liabilities at October 31, 1995 was 1.7:1, as
compared to a current ratio of 1.9:1 at January 31, 1995. The slight
increase in working capital at October 31, 1995 was primarily attributable
to an increase in cash of $1,635,906, accounts receivable of $2,217,703 and
an increase in prepaid expenses and other current assets of $36,570,
partially offset by an increase in accounts payable of $1,796,390, other
current and accrued liabilities of $421,379, salaries and wages payable of
$367,571, a decrease in securities available for sale of $479,631 and in
notes receivable of $628,792.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(Continued)
The increase in cash of approximately $1,636,000 was the result of an
increase in accounts payable and other current liabilities of approximately
$2,585,000, non cash charges of approximately $1,436,000, earnings of
approximately $1,254,000, collection of notes receivable of approximately
$629,000 and maturities of securities available for sale of approximately
$423,000, partially offset by an increase in accounts receivable, before
allowance for bad debts, of approximately $2,826,000, the purchase of
equipment of approximately $1,811,000, additions to deferred line
installation costs of approximately $93,000 and an increase in prepaid
expense and other current assets of approximately $37,000.
Capital expenditures during the first nine months of the current fiscal year
totaled approximately $1,811,000 and were financed from funds provided by
operations. Approximately $753,000 of these expenditures were applicable
to the switching system to maintain the speed and quality of the network.
Approximately $54,000 was expended for leasehold improvements to the
Registrant's facilities in Newark, New Jersey and Belleville, New Jersey.
Approximately $126,000 was expended for equipment at customers locations.
In addition, approximately $602,000 was expended for the local area network
in the Little Falls, New Jersey office to improve management information
systems and operating efficiencies, and approximately $255,000 for furniture
and fixtures. Capital expenditures for the remainder of the current fiscal
year are estimated at approximately $650,000 and it is anticipated that
approximately $500,000 of these de the Registrant's switching equipment
which should substantially increase its calling capabilities. In addition,
approximately $150,000 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 and current working capital.
As of October 31, 1995, the Registrant had no bank borrowings. The
Registrant has established a line of credit in the amount of $500,000 with
a major New Jersey bank.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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PART II - OTHER INFORMATION
---------------------------
ITEMS 1 - 3 Not applicable
ITEM 4 Submission of matters to a vote of security shareholders:
(a) Annual meeting of shareholders was held on
September 20, 1995.
(b) The following directors were elected at the meeting:
Marc Balmuth
Solomon Feldman
Warren H. Feldman, Esq.
Jay J. Miller, Esq.
Jerold L. Zaro, Esq.
(c) - (d) Not applicable.
ITEM 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 October 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 December 13, 1995 By /s/ Warren H. Feldman
------------------------------------------
Warren H. Feldman, Esq.
President and Chief Executive Officer
Date December 13, 1995 By /s/ Thomas P. Gunning
------------------------------------------
Thomas P. Gunning
Controller, Chief Financial Officer, Secretary,
and Principal Accounting Officer
TOTAL-TEL USA COMMUNICATIONS, INC.
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EXHIBIT 27 - FINANCIAL DATA SCHEDULE
------------------------------------
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF OCTOBER 31, 1995 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 2,983,531
<SECURITIES> 1,443,793
<RECEIVABLES> 9,191,638
<ALLOWANCES> 1,034,301
<INVENTORY> 0
<CURRENT-ASSETS> 13,370,747
<PP&E> 10,070,383
<DEPRECIATION> 4,972,479
<TOTAL-ASSETS> 19,339,749
<CURRENT-LIABILITIES> 8,101,724
<BONDS> 0
<COMMON> 93,240
0
0
<OTHER-SE> 10,287,626
<TOTAL-LIABILITY-AND-EQUITY> 19,339,749
<SALES> 35,589,435
<TOTAL-REVENUES> 35,726,076
<CGS> 24,631,159
<TOTAL-COSTS> 24,631,159
<OTHER-EXPENSES> 8,427,577
<LOSS-PROVISION> 603,837
<INTEREST-EXPENSE> 5,811
<INCOME-PRETAX> 2,057,692
<INCOME-TAX> 804,000
<INCOME-CONTINUING> 1,253,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,253,692
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
