<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D .C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Quarter ended June 30, 1996 Commission file number 0-8320
MID-PLAINS, INC.
(Exact Name of Registrant as Specified in Its Charter)
WISCONSIN 39-0274450
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1912 Parmenter Street, P.O. Box 70, Middleton, Wisconsin 53562
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (608) 831-1000
Indicate by checkmark 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
As of June 30, 1996, there were 1,983,999 shares of Common Stock outstanding.
(Total number of pages - 10)
<PAGE>
MID-PLAINS, INC.
2nd QUARTER REPORT ON FORM 10-Q
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 3 - 4
Consolidated Statements of Income -
Three and Six Month Periods Ended
June 30, 1996 and 1995 5
Consolidated Statements of Cash Flow -
Six Months Ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 9 - 10
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11 - 12
Signatures 12
Exhibit 3.01 13 - 14
<PAGE>
MID-PLAINS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
June 30, December 31,
1996 1995
In Thousands
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 327 $ 560
Accounts receivable -
Due from subscribers 834 818
Customer sales and services 785 704
Other, principally connecting companies 1,794 2,073
Inventories
Plant materials and supplies 430 376
Communications systems and parts 877 903
Other 401 486
5,448 5,920
PROPERTY, PLANT AND EQUIPMENT
Telephone, in service and under
construction, at original cost 48,150 46,198
Less Accumulated depreciation (20,912) (16,663)
27,238 29,535
INVESTMENT AND OTHER ASSETS
Cellular limited partnership interest 4,374 4,374
Other 441 885
4,815 5,259
$ 37,501 $ 40,714
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 973 $ 973
Notes payable to banks 4,588 4,440
Accounts payable 2,243 2,949
Accrued taxes 263 48
Other 450 588
8,517 8,998
LONG-TERM DEBT 7,122 7,597
DEFERRED CREDITS
Income taxes 2,073 3,230
Investment tax credits 206 236
Other 814 931
3,093 4,397
SHAREHOLDERS' EQUITY
Common stock 11,744 6,610
Additional paid-in capital 0 5,059
Retained earnings 7,025 8,053
18,769 19,722
$ 37,501 $ 40,714
The accompanying notes to consolidated financial statements are an integral
part of these statements. (UNAUDITED)
</TABLE>
<PAGE>
MID-PLAINS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30
1996 1996 1996 1996
In Thousands Except For Per Share Data
<S> <C> <C> <C> <C>
OPERATING REVENUES
Telephone operations
Local network services $1,165 $1,051 $2,298 $2,034
Network access and long
distance network service 3,070 2,872 6,103 5,706
Other 710 646 1,307 1,191
System sales and services 1,434 1,450 3,280 2,834
6,379 6,019 12,988 11,765
OPERATING EXPENSES
Telephone operations
Plant operations 860 675 1,669 1,373
Depreciation 832 753 1,661 1,486
Customer operations 685 679 1,286 1,299
Corporate operations 797 552 1,454 1,141
General taxes 277 252 552 492
System sales and services
Cost of sales and services 710 908 1,926 1,747
Operating expenses 555 494 1,071 986
4,716 4,313 9,619 8,524
OPERATING INCOME 1,663 1,706 3,369 3,241
Other income 20 3 28 7
Interest expense (263) (192) (538) (405)
INCOME BEFORE INCOME
TAX EXPENSE AND
EXTRAORDINARY ITEM 1,420 1,517 2,859 2,843
Income tax expense 521 571 1,073 1,072
INCOME BEFORE
EXTRAORDINARY ITEM 899 946 1,786 1,771
EXTRAORDINARY ITEM (1,782) - (1,782) -
NET INCOME (LOSS) $ (883) $ 946 $ 4 $1,771
Average shares considered
outstanding 1,985 1,977 1,984 1,976
EARNINGS(LOSS)PER SHARE
Income before
Extraordinary Item $ .45 $.46 $ .90 $ .90
Extraordinary Item (.90) - (.90) -
Net Income (loss) $(.45) $ .46 $ .00 $ .90
Cash dividends per share $ .27 $ .25 $ .52 $ .48
The accompanying notes to consolidated financial statements are an integral
part of these statements. (UNAUDITED)
/TABLE
<PAGE>
MID-PLAINS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Six Months Ended
June 30, June 30,
1996 1995
In Thousands
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4 $1,771
Add (Deduct) adjustments to reconcile
net income to net cash provided by
operating activities:
Extraordinary item 1,782
Depreciation and amortization 1,705 1,530
Deferred income taxes (35) (53)
Change in accounts and other receivables 182 382
Change in inventories (28) (153)
Change in accounts payable (706) (363)
Change in other assets and liabilities 184 (114)
Net cash from operations 3,088 3,000
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt borrowings 2,497
Repay long-term debt (475) (2,931)
Change in notes payable to banks 148 2,699
Dividends paid (1,032) (948)
Stock purchase plan 75 85
Net cash used in financing (1,284) 1,402
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (2,559) (2,116)
Cellular Investment (1,995)
Other, net 522 (18)
Net cash used in investing (2,037) (4,129)
CASH AND CASH EQUIVALENTS
Net increase (decrease) during period (233) 273
Beginning of period 560 186
End of period $ 327 $ 459
Cash paid during the period:
Interest $ 532 $ 401
Income taxes $ 641 $ 867
The accompanying notes to consolidated financial statements are an integral
part of these statements. (UNAUDITED)
/TABLE
<PAGE>
MID-PLAINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information in footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Company believes the
disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto included
in the Company's Form 10-K for the year ended December 31, 1995.
In the opinion of the Company, the accompanying financial statements
contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position as of June 30, 1996
and December 31, 1995, and the results of operations and cash flows for
the six months ended June 30, 1996 and 1995. The results for the six
months ended June 30, 1996 are not necessarily indicative of the results
of operations which may be expected for the entire year ending
December 31, 1996.
2. On April 29, 1996, the stockholders approved amendments to the company's
Articles of Incorporation including: changing its name from Mid-Plains
Telephone, Inc. to Mid-Plains, Inc.; changing the Company's common stock
from $3.33 1/3 par value to no par value; and increasing the number of
authorized shares of common stock from 3,000,000 to 25,000,000. As a
result, the common stock and additional paid-in capital accounts of the
company have been modified.
The number of shares issued and outstanding was 1,983,999 and 1,974,400
at June 30, 1996 and December 31, 1995 respectively.
3. Mid-Plains has made a commitment to borrow $5,000,000 from the State of
Wisconsin Investment Board by November 28, 1996 in the form of a ten-year
first mortgage note.
4. On a regular basis management has evaluated the continued applicability
of accounting for its telecommunications operations under Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulations" (SFAS 71).
In the second quarter of 1994, Mid-Plains eliminated certain regulatory
assets of $360,000 and regulatory liabilities of $574,000 related to
employee and retiree benefits which management concluded would not be
realized as a result of the 1994 enactment of the Wisconsin
Telecommunications Act of 1993.
These changes in estimates increased 1994 net income by $130,000.
In the second quarter of 1996, Mid-Plains concluded that generally
accepted accounting principles (GAAP) prescribed by SFAS 71 was no
longer appropriate due to a number of factors including: the Federal
Telecommunications Act of 1996; Mid-Plains application pending before
the Public Service Commission of Wisconsin (PSCW) for authority to
implement an alternative plan to traditional rate-of-return regulation;
and recognizing potential increased competition.
As a result of the discontinuation of applying SFAS 71, Mid-Plains
recorded a second quarter extraordinary non-cash after-tax charge of
$1,782,000. The following table is a summary of the extraordinary
charge.
<TABLE>
In Thousands
Pretax After tax
<S> <C> <C>
Increase in the accumulated
depreciation balance $ 3,036 $ 1,845
Non-plant assets and liabilities (121) (63)
$ 2,915 $ 1,782
</TABLE>
The adjustment of $3,036,000 to net telecommunications plant was
necessary as the estimated useful lives historically acceptable to the
PSCW did not keep up with the rapid pace of technological changes in the
industry and differed significantly from those used by unregulated
enterprises. Plant balances were adjusted by increasing the accumulated
depreciation balance.
The increase to the accumulated depreciation balance was supported by a
depreciation analysis that identified inadequate accumulated depreciation
levels which Mid-Plains believes developed over the years primarily as a
result of the systematic under depreciation of assets resulting from the
regulatory process. An impairment analysis was performed that did not
identify any additional amounts not recoverable from future operations.
When adjusting its net telecommunications plant, Mid-Plains gave effect
to shorter, more economic realistic lives. The following is a summary of
average lives of the affected telephone plant before and after the
discontinuance of SFAS 71.
Asset Category Before After
Digital Switching Equipment 13 10
Underground Metallic Cable 28 20
Buried Metallic Cable 23 19
<PAGE>
MID-PLAINS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net income decreased $1,829,000 and $1,767,000 for the second quarter
and first six months of 1996, as compared to the same periods in 1995
primarily due to the discontinuance of regulatory accounting principles
discussed below. Other factors influencing the results of operations
are also discussed below.
Telephone operating revenues increased $376,000 and $777,000 for the
second quarter and first six months of 1996, respectively, as compared
to the same periods in 1995. The increases were due primarily to
growth in the number of access lines served by the company. Access
lines have grown 8.7% from June of 1995.
Telephone operating expenses, which include plant, depreciation and
amortization, customer, corporate and general taxes, increased $540,000
and $831,000 for the second quarter and first six months ended June 30,
1996, respectively, as compared to the same periods in 1995. The
increases in plant, customer and corporate expenses were due primarily
to growth in internal operations. The increase in depreciation of
$79,000 and $175,000 for the second quarter and the first six months
ended June 30, 1996, respectively, was due to additional plant
investment.
System sales and service revenues decreased $16,000 and increased
$446,000 for the second quarter and first six months ended June 30,
1996, respectively, as compared to the same periods in 1995. Cost of
sales, as a percentage of operating revenues decreased from 62.6 % to
49.5% and from 61.6% to 58.7% for the second quarter and first six
months ended June 30, 1996, respectively, as compared to the same
periods in 1995. These items were primarily affected by a one time
settlement of commission revenues of $179,000 recorded in June of 1996.
Operating expenses increased $61,000 and $85,000 for the second quarter
and first six months ended June 30, 1996, respectively, as compared to
the same periods in 1995 due primarily to commission expense on the
settlement discussed above.
Interest expense increased $71,000 and $133,000 for the second quarter
and first six months ended June 30, 1996 respectively, as compared to
the same periods in 1995 due to increased borrowings.
LIQUIDITY AND CAPITAL COMMITMENTS
The Company plans to meet its 1996 cash requirements with cash
flows from operations and debt financing. As discussed in Note 3,
Mid-Plains will borrow $5,000,000 in long-term debt by November 28,
1996, to be used to reduced short-term debt. Unused bank lines of
credit available to the Company are currently $2.4 million.
EXTRAORDINARY ITEM - DISCONTINUANCE OF REGULATORY ACCOUNTING
PRINCIPLES
As described in Note 4 to the consolidated financial statements,
Mid-Plains discontinued applying Statement of Financial Accounting
Standards No 71 (SFAS 71), "Accounting for the Effects of Certain
Types of Regulation" in the second quarter of 1996. Mid-Plains
determined that it no longer met the criteria for following SFAS 71
due to changes in the legislative, regulatory and competitive
environments. Future business transactions will be recorded
following their economic substance, and regulatory assets and
liabilities pursuant to SFAS 71 will no longer be recognized.
As a result of discontinuation of SFAS 71, Mid-Plains expects 1996
and 1997 depreciation expense to approximate 1995 levels.
Depreciation expense in 1998 and beyond will likely be decreased as
the effect of central office equipment upgrading is completed.
Although Mid-Plains recorded assets and net equity were reduced as
a result of this discontinuance of application of SFAS 71, no
material impact on current and future cash flows is anticipated.
<PAGE>
MID-PLAINS TELEPHONE, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Shareholders was held April 29, 1996. The
matters voted on were as follows:
Proposal 1. The shareholders approved the nomination of Eugene
A. Johnson and Harold L. (Lee) Swanson to serve the
company as directors for a three-year term.
Proposal 2. The shareholders ratified the appointment of
Kiesling Associates LLP as independent public
accountants.
Proposal 3. The shareholders approved the Company's Restated
Articles of Incorporation which included the
following effects on the Company's Articles of
Incorporation: (a) a change in the Company's name
from Mid-Plains Telephone's, Inc. to Mid-Plains,
Inc.; (b) a change in the Company's common stock
from par value of $3.33 1/3 per share to no par
value per share; (c) an increase in the number of
authorized shares of common stock from 3,000,000 to
25,000,000; and (d) a change in the number of
directors from 7 to a range of not less than 5 nor
more than 13, as from time to time may be fixed by
the Board of Directors.
<TABLE>
The results of the voting for each proposal were as follows:
Against Broker
For or Withheld Abstain Non-Votes
<S> <C> <C> <C> <C>
Proposal 1. Johnson 1,624,703 9,257 - 20,974
Swanson 1,612,873 21,087 - 20,974
Proposal 2. 1,596,728 2,198 35,034 20,974
Proposal 3. 1,528,789 75,197 29,974 20,974
</TABLE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3.01 - Restated Articles of Incorporation
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for
the six months ended June 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.
MID-PLAINS, INC.
(Registrant)
Date August 14, 1996 /s/ Howard G. Hopeman
Howard G. Hopeman, Vice-President and
Chief Financial Officer
Date August 14, 1996 /s/ Fredrick E. Urben
Fredrick E. Urben, Vice-President,
Administration & Human Relations,
Secretary & Treasurer<PAGE>
<PAGE>
MID-PLAINS, INC. EXHIBIT 3.01
RESTATED
ARTICLES OF INCORPORATION
OF
MID-PLAINS TELEPHONE, INC.
ARTICLE I. The undersigned has executed these Restated
Articles of Incorporation for the purpose of forming a for-profit
corporation to engage in any lawful act authorized by Chapter 180,
Wisconsin Statutes.
ARTICLE II. The name of said corporation shall be Mid-Plains,
Inc.
ARTICLE III. The corporation shall be authorized to issue
25,000,000 shares of no par value common stock.
ARTICLE IV. The Board of Directors of the corporation shall
consist of such number of directors, not less than 5 nor more than
13, as shall, from time to time, be fixed by the Board of
Directors. The Board of Directors shall be divided into three
classes as nearly equal in number as may be, with the term of
office of one class expiring each year. When the number of
directors is changed, any newly created directorships or any
decrease in directorships shall be so apportioned among the classes
as to make all classes as nearly equal in number as possible.
Subject to the foregoing, at each annual meeting of shareholders
the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the
third succeeding annual meeting. Only shareholders shall be
eligible to be elected as a director.
ARTICLE V. Any unissued capital stock may be issued and
disposed of to such persons and upon such terms as the Board of
Directors may determine, and no shareholder of the corporation
shall have any pre-emptive right in or right to subscribe for any
shares of stock issued by this corporation.
ARTICLE VI. The registered office of the corporation is 1912
Parmenter Street, Middleton, Wisconsin 53562-3139.
ARTICLE VII. The name of the registered agent of the above
registered office is Fredrick E. Urben, Secretary of the
corporation.
The foregoing Restated Articles of Incorporation for Mid-Plains, Inc.
supersede and take the place of the existing Articles
of Incorporation and any amendments thereto. Furthermore, the
undersigned, the duly appointed acting Secretary of Mid-Plains,
Inc., does hereby certify that the foregoing Restated Articles of
Incorporation for Mid-Plains, Inc. is a true and accurate portrayal
of the Restated Articles of Incorporation for Mid-Plains Telephone,
Inc. adopted by the shareholders of Mid-Plains Telephone, Inc.
pursuant to sec. 180.1007, Wisconsin Statutes.
Fredrick E. Urben
Fredrick E. Urben, Secretary
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 327
<SECURITIES> 0
<RECEIVABLES> 3413
<ALLOWANCES> 0
<INVENTORY> 1307
<CURRENT-ASSETS> 5448
<PP&E> 48150
<DEPRECIATION> 20912
<TOTAL-ASSETS> 37501
<CURRENT-LIABILITIES> 8517
<BONDS> 0
0
0
<COMMON> 11744
<OTHER-SE> 7025
<TOTAL-LIABILITY-AND-EQUITY> 37501
<SALES> 0
<TOTAL-REVENUES> 6379
<CGS> 0
<TOTAL-COSTS> 4716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 263
<INCOME-PRETAX> 1420
<INCOME-TAX> 521
<INCOME-CONTINUING> 899
<DISCONTINUED> 0
<EXTRAORDINARY> 1782
<CHANGES> 0
<NET-INCOME> (883)
<EPS-PRIMARY> (.45)
<EPS-DILUTED> (.45)
<PAGE>
</TABLE>
