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, l997
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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.
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(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
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(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, 1997
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Common Share, $.05 par value 3,113,102
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, 1997 and 1996 3
(unaudited)
Condensed Consolidated Balance Sheets
April 30, 1997 (unaudited), and
January 31, 1997 4-5
Condensed Consolidated Statements of Cash Flows
Three months ended April 30, 1997 and 1996
(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
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TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
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(Unaudited)
Three months ended
April 30,
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1997 1996
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<S> <C> <C>
Net Sales $ 26,332,527 $ 17,370,047
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Costs and Expenses
Cost of Sales 20,267,445 12,588,507
Selling, general and administrative 5,016,887 3,974,820
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25,284,332 16,563,327
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Operating Income 1,048,195 806,720
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Other Income (Expense)
Interest income 25,510 23,619
Other income 5,523 15,743
Interest expense (35,052) --
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Total Other Income (Expense) (4,019) 39,362
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Earnings before provision for income taxes 1,044,176 846,082
Provision for Income Tax (421,400) (342,700)
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NET EARNINGS $622,776 $503,382
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NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ .18 $ .15
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Weighted Average Shares Outstanding 3,394,014 3,338,026
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Dividends Per Share NONE NONE
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See notes to condensed consolidated financial statements.
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TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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APRIL 30, JANUARY 31,
1997 1997
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(Unaudited) (Note)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 3,553,998 $ 2,589,187
Securities available for sale 1,006,121 1,010,594
Accounts receivable 16,265,812 13,933,652
Note receivable 159,696 163,706
Deferred income taxes 246,900 263,600
Prepaid expenses and other current assets 686,263 583,223
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TOTAL CURRENT ASSETS 21,918,790 18,543,962
PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION AND AMORTIZATION 11,550,156 11,065,689
OTHER ASSETS:
Notes Receivable 86,383 86,383
Deferred line installation costs, less
accumulated amortization 340,672 281,392
Other assets 568,203 516,635
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995,258 884,410
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$34,464,204 $30,494,061
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NOTE: The balance sheet at January 31, 1997 has been taken from
the audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
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TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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APRIL 30, JANUARY 31,
1997 1997
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(Unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 13,275,349 $ 10,222,260
Other current and accrued liabilities 2,430,760 2,222,141
Salaries and wages payable 356,983 613,477
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TOTAL CURRENT LIABILITIES 16,063,092 13,057,878
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OTHER LONG-TERM LIABILITIES 258,295 259,220
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LONG-TERM DEBT 2,940,000 2,940,000
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DEFERRED INCOME TAXES 847,801 850,301
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SHAREHOLDERS' EQUITY
Common stock 196,075 187,792
Additional paid-in capital 3,912,728 3,572,026
Retained earnings 11,801,243 11,178,467
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15,910,046 14,938,285
Treasury stock (1,547,301) (1,547,251)
Receivable from shareholder (100,000) (100,000)
Unrealized gain on securities available for sale 92,271 95,628
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Total shareholders' equity 14,355,016 13,386,662
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$ 34,464,204 $ 30,494,061
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NOTE: The balance sheet at January 31, 1997 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,
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 622,776 $ 503,382
Adjustment for non-cash charges 738,240 602,587
Changes in assets and liabilities 254,781 (392,872)
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Net cash provided by operating activities 1,615,797 713,097
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INVESTING ACTIVITIES:
Maturities of securities available for sale -- 371,400
Purchase of securities available for sale -- (168,631)
Note receivable employee -- (10,000)
Collection of notes receivable 4,010 2,135
Purchase of property and equipment ( 852,434) (313,699)
Additions to deferred line installation costs (84,834) (10,805)
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Net cash used in investing activities (933,258) (129,600)
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FINANCING ACTIVITIES:
Exercise of stock options 282,272 34,892
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Net cash provided by financing activities 282,272 34,892
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NET INCREASE IN CASH
AND CASH EQUIVALENTS 964,811 618,389
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD $ 2,589,187 $ 3,177,138
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,553,998 $ 3,795,527
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SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest $ 35,051 --
Income taxes $20,000 $120,000
See notes to condensed consolidated financial statements.
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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,
1997. 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, 1997 are not necessarily indicative
of the results that may be expected for the year ending January
31, 1998
Note B--New Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accountings Standards No. 128, "Earnings
per Share," which is effective for financial statements ending
after December 15, l997. This statement supersedes Accounting
Principles Board Opinion No. 15 and replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures,
and provides guidance on other computational changes. Had the
provisions of the statement been effective for the current
quarter, the following pro forma EPS amounts would have been
disclosed:
Basic EPS: $ 0.20
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Diluted EPS: $ 0.18
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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 $26,333,000 for the first quarter of
the current fiscal year, an increase of approximately $8,962,000,
or 51.6%, 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 substantially 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 195,087,000 minutes of calling as compared to
approximately 134,180,000 minutes of calling for the comparable
quarter of the prior year, resulting in an increase of
approximately 60,907,000 minutes, or 45.4%. 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 $7,679,000 or 61.0% to
approximately $20,267,000 for the current quarter. The increase
was unfavorable in relation to the 51.6% 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 23.0% as compared to
approximately 27.5% 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 primarily
attributable to increased carrier sales and price pressures in the
telecommunications industry.
Selling, general and administrative expense for the current fiscal
quarter was approximately $5,017,000, an increase of approximately
$1,042,000, or 26.2%, as compared to the first quarter of the
prior fiscal year due primarily to increased sales and
administrative salaries of $929,000 and sales commissions of
$234,000 which can be attributed to the increased sales volume in
the quarter.
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 $.18
per share for the current quarter as compared to $.15 per share
for the quarter ended April 30, l996.
Liquidity and Capital Resources
At April 30, 1997, the Registrant had working capital of
$5,855,698, an increase of $369,614 as compared to January 31,
1997. The ratio of current assets to current liabilities at April
30, 1997 was 1.4:1 the same as January 31, l997. The increase in
working capital at April 30, 1997 was primarily attributable to
increases in (i) cash of approximately $965,000 (ii) accounts
receivable of $2,332,000 and (iii) prepaid expenses and other
assets of approximately $155,000, a decrease in salaries and wages
payable of approximately $256,000, partially offset by an increase
in accounts payable of approximately $3,053,000 and an increase
in other current and accrued liabilities of approximately
$209,000. The Registrant has continued to maintain a strong
liquidity position.
The increase in cash of approximately $965,000 was the result
primarily of earnings of approximately $623,000, an increase in
accounts payable of approximately $3,053,000, non-cash charges of
approximately $738,000, and approximately $282,000 from the
exercise of stock options, partially offset by an increase in
accounts receivable of approximately $2,332,000, the purchase of
property and equipment for approximately $937,000 an increase in
prepaid expenses and other current assets of approximately
$103,000 and a decrease of approximately $256,000 in salaries and
wages payable.
Capital expenditures during the first three months of fiscal year
1998 totaled approximately $937,000 and were financed from funds
provided by operations. Approximately $283,000 of these
expenditures were applicable to the Newark, New Jersey switching
system to maintain the speed and quality of the network, $85,000
was expended for equipment at customer's locations and
approximately $376,000 on the new switch located in New York. In
addition, approximately $133,000 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 and
service vehicles.
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 fiscal 1998 are estimated
at approximately $4,200,000 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, 1997, the Registrant had an Equipment Facility and
Revolving Credit Agreement (the "Facility") with a major New
Jersey bank. This Facility provides the Registrant with an
unsecured line of credit of $4,000,000 and $6,000,000 for the
purchase of machinery and equipment, primarily switching
equipment, and is secured by the Registrant's machinery and
equipment. The Registrant has currently drawn down $2,000,000 of
the $6,000,000 and has the ability and intent to convert this to a
term loan. The Registrant has utilized $100,000 of the unsecured
line of credit for the issuance of letters of credit.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
THREE MONTHS ENDED APRIL 30, 1997
ITEMS 1 - 5 Not applicable
ITEM 6 Exhibits and reports on Form 8-K
(a) Exhibits - 27 Financial Data Schedule
(b) There were no reports on Form 8-K filed for
the three months ended April 30, 1997.
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 12, 1997 By /S/ Warren H. Feldman, Esq.
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Warren H. Feldman, Esq.
Chairman and Chief
Executive Officer
Date June 12, 1997 By /S/ Thomas P. Gunning
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Thomas P. Gunning
Vice President, Secretary,
Treasurer and Principal
Accounting Officer
TOTAL-TEL USA COMMUNICATIONS, INC.
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<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 30,1997 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THREE MONTHS ENDED APRIL 30,1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-30-1997
<CASH> 3,553,998
<SECURITIES> 1,006,121
<RECEIVABLES> 17,907,273
<ALLOWANCES> 1,641,461
<INVENTORY> 0
<CURRENT-ASSETS> 21,918,790
<PP&E> 16,078,532
<DEPRECIATION> 4,528,376
<TOTAL-ASSETS> 34,464,204
<CURRENT-LIABILITIES> 16,063,092
<BONDS> 2,940,000
<COMMON> 196,075
0
0
<OTHER-SE> 14,158,941
<TOTAL-LIABILITY-AND-EQUITY> 34,464,204
<SALES> 26,332,527
<TOTAL-REVENUES> 26,363,560
<CGS> 20,267,332
<TOTAL-COSTS> 20,267,332
<OTHER-EXPENSES> 4,777,938
<LOSS-PROVISION> 238,949
<INTEREST-EXPENSE> 35,052
<INCOME-PRETAX> 1,044,176
<INCOME-TAX> 421,400
<INCOME-CONTINUING> 622,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 622,776
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
