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
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, l996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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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
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(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 June. 10, 1996
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Common Share, $.05 par value 2,936,330 shares (post split)
TOTAL-TEL USA COMMUNICATIONS, INC.
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AND SUBSIDIARIES
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FIRST 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
Three months ended April 30, 1996 and 1995
(unaudited) 3
Condensed Consolidated Balance Sheets
April 30, 1996 (unaudited), and
January 31, 1996 4-5
Condensed Consolidated Statements of Cash Flows
Three months ended April 30, 1996 and 1995
(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
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
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Three months ended
April 30,
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1996 1995
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<S> <C> <C>
Net Sales $17,370,047 $10,515,612
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Costs and Expenses
Cost of Sales 12,588,507 7,401,128
Selling, general and administrative 3,974,820 2,545,892
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16,563,327 9,947,020
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Operating Income 806,720 568,592
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Other Income (Expense)
Interest income 23,619 30,117
Other income 15,743 1,002
Interest expense - (4,007)
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Total Other Income 39,362 27,112
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Earnings before provision for income taxes 846,082 595,704
Provision for Income Tax (342,700) (230,100)
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NET EARNINGS $503,382 $365,604
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NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $0.15 $0.11
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Weighted Average Shares Outstanding 3,338,026 3,230,126
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Dividends Per Share NONE NONE
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 30, JANUARY 31,
1996 1996
(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $3,795,527 $3,177,138
Securities available for sale 772,381 966,935
Accounts receivable 10,037,654 8,741,918
Note receivable 37,000 27,000
Deferred income taxes 332,600 314,600
Prepaid expenses and other current assets 589,810 392,974
------------------------------
TOTAL CURRENT ASSETS 15,564,972 13,620,565
PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION AND AMORTIZATION 6,042,311 6,011,005
OTHER ASSETS:
Deferred income taxes 88,146 90,281
Deferred line installation costs, less
accumulated amortization 237,462 247,019
Other assets 435,487 426,164
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761,095 763,464
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$22,368,378 $20,395,034
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $7,903,015 $6,604,459
Other current and accrued liabilities 1,670,046 1,775,256
Salaries and wages payable 627,930 441,516
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TOTAL CURRENT LIABILITIES 10,200,991 8,821,231
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OTHER LONG-TERM LIABILITIES 300,112 313,742
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DEFERRED INCOME TAXES 624,431 560,481
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SHAREHOLDERS' EQUITY
Common stock 93,671 93,440
Additional paid-in capital 3,634,766 3,600,105
Retained earnings 9,093,711 8,590,329
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12,822,148 12,283,874
Treasury stock (1,547,251) (1,547,251)
Receivable from shareholder (100,000) (100,000)
Unrealized gain on securities available for sale 67,947 62,957
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Total shareholders' equity 11,242,844 10,699,580
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$22,368,378 $20,395,034
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NOTE: The balance sheet at January 31, 1996 has been taken from
the audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOTAL TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
Three months ended
April 30,
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1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $503,382 $365,604
Adjustment for non-cash charges 602,587 359,784
Changes in assets and liabilities (392,872) 307,299
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Net cash provided by operating activities 713,097 1,032,687
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INVESTING ACTIVITIES:
Maturities of securities available for sale 371,400 152,161
Purchase of securities available for sale (168,631) -
Note receivable employee (10,000) -
Collection of notes receivable 2,135 22,612
Purchase of property and equipment (313,699) (503,457)
Additions to deferred line installation costs (10,805) (24,585)
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Net cash used in investing activities (129,600) (353,269)
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FINANCING ACTIVITIES:
Exercise of stock options 34,892 -
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Net cash provided by financing activities 34,892 -
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NET INCREASE IN CASH
AND CASH EQUIVALENTS 618,389 679,418
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,177,138 1,347,625
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $3,795,527 $2,027,043
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SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest $ - 2,187
Income taxes $120,000 $235,375
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 "Company") for the fiscal
year ended January 31, 1996. 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 three month period ended April 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending
January 31, 1997.
Note B -- Stock Split
On July 1, l996, the Company will distribute
1,463,165 shares of Common Stock $.05 par value, in connection with a 2
for 1 stock split to record holders as of June 15, l996. All references
in the accompanying financial statements to the number of Common Shares
and per-share amounts have been restated to reflect the
proposed stock split.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
Results of Operations
Net sales were approximately $17,370,000 for the first quarter of the
current fiscal year, an increase of approximately $6,854,000, or 65.2%,
as compared to the first quarter of the prior fiscal year. This
increase was attributable to continued, intensive sales and marketing
efforts by the Registrant, an expanded agency sales network, and
increased carrier sales. 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 the current
fiscal year.
For the current fiscal quarter, the telephone service billed
approximately 134,180,000 minutes of calling as compared to
approximately 71,501,000 minutes of calling for the comparable quarter
of the prior year, resulting in an increase of approximately 62,679,000
minutes, or 87.7%. The average revenue per minute decreased slightly in
the current fiscal quarter as compared to the prior fiscal year's
quarter, and was primarily attributable to the intense competition faced
by the Registrant.
Cost of sales increased approximately $5,188,000 or 70.1% to
approximately $12,589,000 for the current quarter. The increase was
unfavorable in relation to the 65.2% increase in sales. While the
Registrant was able to continue to negotiate lower line rates from
several of its major suppliers, the gross margin for the current quarter
decreased to approximately 27.5% as compared to approximately 29.6% for
the same 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 $.0179 per minute lower for the
current fiscal quarter compared to the same quarter of the prior fiscal
year and was primarily attributable to increased carrier sales.
Selling, general and administrative expense for the current fiscal
quarter was approximately $3,975.000, an increase of approximately
$1,429,000, or 56.1%, as compared to the first quarter of the prior
fiscal year due primarily to increased sales and administrative salaries
of $566,000, sales commissions of $293,000, provision for bad debts of
$76,000, and advertising costs of $87.000, all of which can be
attributed to the increased sales volume in the quarter.The Registrant
has also provided $120,000 for legal expenses for a suit to which
it is a party.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Earnings per share from continuing operations increased to $.15 per
share for the current quarter as compared to $.11 per share for the
quarter ended April 30, l995.
Liquidity and Capital Resources
At April 30, 1996, the Registrant had working capital of $5,363,981, an
increase of $564,647 as compared to January 31, 1996. The ratio of
current assets to current liabilities at April 30, 1996 was 1.5:1 the
same as January 31, l996. The increase in working capital at April 30,
1996 was attributable to increases in (i) cash of approximately $618,000
(ii) accounts receivable of $1,296,000 and (iii) prepaid expenses and
other current assets of approximately $197,000, a decrease in other
current and accrued liabilities of $105,000, partially offset by an
increase in accounts payable of approximately $1,299,000 a decrease in
investments available for sale of approximately $195,000 and an increase
in salaries and wages payable of $186,000. The Registrant has continued
to maintain a strong liquidity position.
The increase in cash of approximately $618,000 was the result primarily
of earnings of approximately $503,000, an increase in accounts payable
of approximately $1,299,000, non-cash charges of approximately $360,000,
maturities of investments available for sale of approximately $371,000
and approximately $35,000 from the exercise of stock options, partially
offset by an increase in accounts receivable of approximately
$1,296,000, the purchase of property and equipment for approximately
$314,000 an increase in prepaid expenses and other current assets of
approximately $197,000 for the purchase of investments available for
sale of approximately $169,000.
Capital expenditures during the first three months of fiscal year 1997
totaled approximately $314,000 and were financed from funds provided by
operations. Approximately $105,000 of these expenditures were
applicable to the switching system to maintain the speed and quality of
the network and $61,000 was expended for equipment at customer's
locations. In addition, approximately $140,000 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.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Capital expenditures for the balance of 1997 are estimated at
approximately $3,200,000 and are expected to be used for the following:
To provide further enhancements to the signaling and
switching system, to enhance the interconnection to
the Bell Companies and other long distance carriers and to
increase switching capacity to allow for growth; for office
improvements, furniture and equipment in connection
with the expansion of the main office and sales office
operation; for new data processing equipment to complement and expand
the present system of the Registrant; improvement
to the new facility located in Belleville, New
Jersey; continued development of the local network for the new
sales and administrative offices in Little Falls, New Jersey; for
additional vehicles for service technicians.
As of April 30, 1996, the Registrant had a bank line of credit of
$500,000, and no bank borrowings. The Registrant is currently in the
process of negotiating a substantially increased line of credit with a
major New Jersey bank, a portion of which would be available for capital
expenditures.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
THREE MONTHS ENDED APRIL 30, 1996
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 April 30, 1996.
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.
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(Registrant)
Date June 10, 1996 By /S/ Warren H. Feldman, Esq.
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Warren H. Feldman, Esq.
President and Chief Executive Officer
Date June 10, 1996 By /S/ Thomas P. Gunning
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Thomas P. Gunning
Chief Financial Officer,
Secretary, Controller
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
TOTAL-TEL USA COMMUNICATIONS, INC.
Exhibit 27 - FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF
APRIL 30, 1996 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> APR-30-1996
<CASH> 3,795,527
<SECURITIES> 772,381
<RECEIVABLES> 11,300,429
<ALLOWANCES> 1,262,775
<INVENTORY> 0
<CURRENT-ASSETS> 15,564,972
<PP&E> 11,391,891
<DEPRECIATION> 5,349,560
<TOTAL-ASSETS> 22,368,378
<CURRENT-LIABILITIES> 10,200,991
<BONDS> 0
<COMMON> 93,671
0
0
<OTHER-SE> 11,149,173
<TOTAL-LIABILITY-AND-EQUITY> 22,368,378
<SALES> 17,370,047
<TOTAL-REVENUES> 17,409,409
<CGS> 12,588,507
<TOTAL-COSTS> 12,588,507
<OTHER-EXPENSES> 3,763,097
<LOSS-PROVISION> 211,723
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 846,082
<INCOME-TAX> 342,700
<INCOME-CONTINUING> 503,382
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 503,382
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
