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 April 30, 1998
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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.
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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: (973) 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 June 12, 1998
- ---------------------------- ----------------------------
Common Share, $.05 par value 6,905,954 *
* Reference is made to Note B of Notes to Condensed Consolidated
Financial Statements
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 Statements of Earnings
Three months ended April 30, 1998 and 1997
(unaudited) 3
Condensed Consolidated Balance Sheets
April 30, 1998 (unaudited), and
January 31, 1998 4-5
Condensed Consolidated Statements of Cash Flows
Three months ended April 30, 1998 and 1997
(unaudited) 6
Notes to Condensed Consolidated Financial
Statements (unaudited) 7 - 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 -11
PART II. OTHER INFORMATION
Items 1-5 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended
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April 30,
1998 1997
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Net Sales $ 31,881,593 $ 26,332,527
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Costs and Expenses
Cost of Sales 25,134,905 20,267,445
Selling, general and administrative 6,335,981 5,016,887
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31,470,886 25,284,332
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Operating Income 410,707 1,048,195
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Other Income (Expense)
Interest income 25,886 25,510
Other income 50,581 5,523
Interest expense (48,515) (35,052)
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Total Other Income (Expense) 27,952 (4,019)
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Earnings before provision for income taxes 438,659 1,044,176
Provision for Income Tax (175,440) (421,400)
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NET EARNINGS $ 263,219 $ 622,776
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* BASIC EARNINGS PER COMMON SHARE $ .04 $ .10
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* DILUTED EARNINGS PER COMMON SHARE $ .04 $ .09
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Dividends Per Share NONE NONE
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See notes to condensed consolidated financial statements.
*Reference is made to Note B of Notes to Condensed Consolidated
Financial Statements
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
QUARTER ENDING
APRIL 30, JANUARY 31,
1998 1998
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(Unaudited) (Note)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,215,745 $ 3,416,904
Securities available for sale 646,800 578,293
Accounts receivable 21,042,672 20,346,988
Note receivable 347,883 117,590
Deferred income taxes 231,556 151,256
Prepaid expenses and
other current assets 2,891,091 2,497,707
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TOTAL CURRENT ASSETS 29,375,747 27,108,738
PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION AND AMORTIZATION 13,547,994 12,405,924
OTHER ASSETS:
Deferred line installation costs, less
accumulated amortization 283,918 298,304
Other assets 591,572 432,275
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875,490 730,579
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$43,799,231 $40,245,241
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NOTE: The balance sheet at January 31, 1998 has been taken from
the audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
(Continued)
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 30, JANUARY 31,
1998 1998
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(Unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long term debt $ 496,300 $ 487,000
Accounts payable 18,670,788 16,356,427
Other current and accrued liabilities 2,015,662 1,757,375
Salaries and wages payable 605,482 572,112
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TOTAL CURRENT LIABILITIES 21,788,232 19,172,914
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OTHER LONG-TERM LIABILITIES 318,525 331,754
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LONG-TERM DEBT 1,963,488 2,092,201
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DEFERRED INCOME TAXES 145,681 50,491
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SHAREHOLDERS' EQUITY
Common stock 213,254 207,059
Additional paid-in capital 10,347,106 9,656,488
Retained earnings 10,439,002 10,175,784
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20,999,362 20,039,331
Treasury stock (1,547,331) (1,547,331)
Accumulated other comprehensive income 131,274 105,881
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Total Shareholders' Equity 19,583,305 18,597,881
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$ 43,799,231 $ 40,245,241
NOTE: The balance sheet at January 31, 1998 has been taken from
the audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
April 30,
1998 1997
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OPERATING ACTIVITIES
Net earnings $ 263,219 $ 622,776
Adjustment for non-cash charges 974,726 738,240
Changes in assets and liabilities 1,022,940 254,781
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Net cash provided by
operating activities 2,260,885 1,615,797
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INVESTING ACTIVITIES:
Maturities of securities
available for sale 25,000 -
Purchase of securities available for sale (51,273) -
Note receivable (234,550) -
Collection of notes receivable 4,257 4,010
Purchase of property and equipment (1,770,971) (852,434)
Additions to deferred line
installation costs (11,907) (84,834)
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Net cash used in investing activities (2,039,444) (933,258)
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FINANCING ACTIVITIES:
Exercise of stock options 319,313 282,272
Repayments of bank borrowings (119,413) -
Tax benefit of options exercised 377,500 -
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Net cash provided by
financing activities 577,400 282,272
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NET INCREASE IN CASH
AND CASH EQUIVALENTS 798,841 964,811
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD $ 3,416,904 $ 2,589,187
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,215,745 $ 3,553,998
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SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest $ 48,515 $ 35,051
Income taxes $ 30,000 $ 20,000
See notes to condensed consolidated financial statements.
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, 1998.
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, 1998 are not necessarily indicative of the results which may be
expected for the year ending January 31, 1999.
Note B - Stock Split
On July 15, 1998, the Registrant will distribute 3,452,977 shares of
Common Stock $.05 par value, in connection with a 2 for 1 stock split to
record holders as of June 30, 1998. All references in the accompanying
financial statements to the number of Common Shares and per-share amounts
have been restated to reflect the announced stock split.
Note C: Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
Three Months Ended
April 30,1998 April 30,1997
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Numerator:
Income available to
common shareholders used in basic
and diluted income per share$ $ 263,219 $ 622,776
Denominator:
Weighted-average number of Common 6,884,674 6,094,536
Shares used in basic income per share
Effect of diluted securities:
Common stock options 487,004 652,238
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Weighted-average number of Common 7,371,678 6,746,774
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Shares and diluted potential Common Shares
used in diluted income per share
Basic income per share $ 0.04 $ 0.10
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Diluted income per share $ 0.04 $ 0.09
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Note D - Adoption of New Accounting Standard
Effective February 1, 1998, the Registrant adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("FAS 130"). This statement established standards for the reporting and
presentation of comprehensive income and its components. Net unrealized
gain on available for sale securities is the item that is to be added to
net earnings to arrive at comprehensive income. The adoption of FAS 130
had no significant effect on the Registrant's financial position or net
earnings.
The Registrant's comprehensive income is as follows:
Quarter ended April 30 1998 1997
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Net earnings $ 263,219 $ 622,766
Unrealized gain (loss) on available for
sale securities 25,393 (3,357)
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Comprehensive income $ 288,612 $ 619,409
The components of accumulated other comprehensive income, net of related
taxes at April 30, 1998 and January 31, 1998 is as follows:
April 30, January 31,
1998 1998
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Unrealized gain on available for sale
securities $ 131,274 $ 105,881
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Accumulated comprehensive income $ 131,274 $ 105,881
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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 $31,882,000 for the first quarter of the
current fiscal year, an increase of approximately $5,549,000, or 21.1%,
as compared to the first quarter of the prior fiscal year. This increase
was attributable to the addition of the New York switch, continued sales
and marketing efforts by the Registrant, and increased carrier revenue.
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 227,475,000 minutes of calling as compared to approximately
195,087,000 minutes of calling for the comparable quarter of the prior
year, resulting in an increase of approximately 32,388,000 minutes, or
16.6%. The overall average revenue per minute decreased slightly in the
current fiscal quarter as compared to the prior fiscal year's quarter.
Retail revenue per minute has decreased slightly (5%); however this was
partially offset by the increased international traffic rate per minute.
Cost of sales increased approximately $4,870,000 or 24.0% to
approximately $25,135,000 for the current quarter. The increase was
unfavorable in relation to the 21.1% increase in sales. While the
Registrant realized lower line rates due to access reform, and continued
to negotiate lower line rates from its suppliers, the gross margin for
the current quarter decreased to approximately 21.2% as compared to
approximately 23.0% for the same quarter of the prior fiscal year. This
decrease in the gross margin is reflective of an increase in operating
costs of approximately $425,000, which consisted of additional salaries
and depreciation to support the New York and Miami switches and the
Network Operations Center.
Selling, general and administrative expense for the current fiscal
quarter were approximately $6,336,000, an increase of approximately
$1,319,000, or 26.3%. compared to the first quarter of the prior fiscal
year. This increase results from an increase in sales commissions of
approximately $254,000 as the result of higher sales volume; increase in
the sales department salaries of approximately $140,000; administrative
salaries of approximately $140,000; legal and professional fees of
approximately $230,000; consulting fees of approximately $100,000;
additional rent expense of approximately $150,000; general selling
expense of approximately $188,000; additional depreciation of
approximately $46,000; and other administrative costs of approximately
$71,000.
Diluted earnings per share from continuing operations decreased to $.04 per
share for the current quarter as compared to $.09 per share for the quarter
ended April 30, 1997.
Liquidity and Capital Resources
At April 30, 1998, the Registrant had working capital of approximately
$7,588,000, a decrease of approximately $348,000 as compared to January
31, 1998. The ratio of current assets to current liabilities at April
30, 1998 was 1.4:1, equal to the ratio of 1.4:1 at January 31, 1998. The
decrease in working capital at April 30, 1998 was primarily attributable
to increases in accounts payable of approximately $2,314,000, other
current and accrued liabilities of approximately $258,000, and salaries
and wages payable of approximately $33,000. This was offset by increases
in cash of approximately $799,000; securities available for sale of
approximately $68,000, accounts receivable of approximately $696,000;
notes receivable of approximately $230,000, deferred taxes of
approximately, $80,000, and prepaid expenses of approximately $393,000.
The Registrant continues to maintain a strong liquid position.
The increase in cash of approximately $799,000 was the result primarily
of earnings of approximately $263,000, an increase in accounts payable
and other current and accrued liabilities of approximately $2,573,000,
non-cash charges of approximately $975,000, and approximately $319,000
from the exercise of stock options, partially offset by an increase in
accounts receivable of approximately $696,000, the purchase of property
and equipment for approximately $1,771,000, an increase in prepaid
expenses and other current assets of approximately $394,000, an increase
in notes receivable, $230,000 and a decrease of approximately $133,000 in
salaries and wages payable, and repayment on bank borrowings of
approximately $119,000.
Capital expenditures during the first three months of fiscal year 1999
were approximately $1,771,000 and were financed from funds provided by
operations. Approximately $1,525,000 of these expenditures were
applicable to the purchase and installation of the new switch in Miami,
Florida. Other additions were capital purchases for enhanced switching
equipment at the Newark, New Jersey facility of approximately $100,000;
and approximately $146,000 for additional data processing equipment to
enhance the current LAN/WAN network.
Capital expenditures for the balance of fiscal 1999 are estimated at
approximately $12,730,000 as follows:
Capital expenditures for the balance of the fiscal year are expected
to be used for: a new billing system, $3,000,000; LAN/WAN
softwear and hardware upgrades, $1,000,000; installation
of switch equipment to enter the local market; $2,230,000,
various improvements to current switch operations, $1,000,000;
and the purchase of an IRU to London, $5,500,000.
As of April 30, 1998, 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
$8,000,000 and $5,000,000 for the purchase of machinery and equipment,
primarily switching equipment, and is secured by the Registrant's
machinery and equipment. In addition the Registrant has drawn down
$2,459,788 of a prior loan committment at an interest rate of
7.71% payable over five years.
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
THREE MONTHS ENDED APRIL 30, 1998
ITEMS 1 - 5 Not applicable
ITEM 6 Exhibits and reports on Form 8-K
(a) Exhibits - 27 Financial Data Schedule
(b) Reports on Form 8-K were filed for the three
months ended April 30, 1998 as follows:
April 2, 1998 and April 7, 1998
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, 1998 By /S/ Warren H. Feldman, Esq.
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Warren H. Feldman, Esq.
Chairman and Chief Executive Officer
Date June 12, 1998 By /S/ Thomas P. Gunning
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Thomas P. Gunning
Vice President, Secretary, Treasurer
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, 1998 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THREE MONTHS ENDED APRIL 30, 1998
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-30-1998
<CASH> 4,215,745
<SECURITIES> 646,800
<RECEIVABLES> 22,380,776
<ALLOWANCES> 990,221
<INVENTORY> 0
<CURRENT-ASSETS> 29,375,747
<PP&E> 20,135,932
<DEPRECIATION> 6,587,938
<TOTAL-ASSETS> 43,799,231
<CURRENT-LIABILITIES> 21,788,232
<BONDS> 1,963,488
<COMMON> 213,254
0
0
<OTHER-SE> 19,352,051
<TOTAL-LIABILITY-AND-EQUITY> 43,799,231
<SALES> 31,881,593
<TOTAL-REVENUES> 31,881,593
<CGS> 25,134,905
<TOTAL-COSTS> 25,134,905
<OTHER-EXPENSES> 6,132,742
<LOSS-PROVISION> 203,239
<INTEREST-EXPENSE> 48,515
<INCOME-PRETAX> 438,659
<INCOME-TAX> 175,440
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 263,219
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
