<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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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 0-13716
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NORTH PITTSBURGH SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 25-1485389
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4008 Gibsonia Road, Gibsonia, Pennsylvania 15044-9311
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(Address of principal executive offices)
(Zip Code)
412 443-9600
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(Registrant's telephone number, including area code)
No Change
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (l) 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, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding
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At May 1, 1995, the Registrant had 7,520,000 shares of common stock outstanding,
par value $.3125 per share, the only class of such stock issued.
<PAGE>
PART I
ITEM 1
FINANCIAL STATEMENTS
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(Thousands - Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31
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Operating revenues: 1995 1994
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<S> <C> <C>
Local network services $ 1,801 $ 1,709
Long distance and access services 9,263 8,903
Directory advertising, billing & other services 530 482
Telecommunication equipment sales 490 809
Other operating revenues 390 365
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Total Operating Revenues 12,474 12,268
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Operating expenses:
Depreciation and amortization 1,853 1,954
Network and other operating expenses 5,015 4,589
State and local taxes 592 554
Telecommunication equipment expenses 442 775
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Total Operating Expenses 7,902 7,872
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Net Operating revenues 4,572 4,396
Other expense (income), net:
Interest expense 403 392
Interest income (365) (178)
Sundry expense (income), net 64 49
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102 263
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Earnings before income taxes 4,470 4,133
Income taxes:
Current 1,785 1,680
Deferred - -
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1,785 1,680
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Net earnings $ 2,685 $ 2,453
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Average common shares outstanding 7,520 7,520
========= =========
Earnings per share of common stock $ .36 $ .33
========= =========
Dividends per share of common stock $ .24 $ .22
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
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NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Thousands of Dollars)
<TABLE>
<CAPTION>
ASSETS
- ------ March 31 Dec. 31
1995 1994
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<S> <C> <C>
Current assets:
Cash and temporary investments $14,294 $14,779
Marketable securities available for sale 1,146 2,063
Marketable securities held to maturity 5,874 5,640
Accounts receivable:
Customers 3,025 3,169
Access service settlements and other 4,884 4,295
Inventories of construction and operating materials and
supplies 1,951 2,110
Prepaid taxes 632 -
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Total current assets 31,806 32,056
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Property, plant and equipment:
Telephone plant in service:
Land 188 188
Buildings 8,321 8,281
Equipment 88,409 87,711
Miscellaneous physical property 36 36
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96,954 96,216
Less accumulated depreciation and amortization 49,131 47,596
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47,823 48,620
Construction in progress 5,216 2,374
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Total property, plant and equipment, net 53,039 50,994
Investments 3,507 3,480
Prepaid Pension Cost 1,401 827
Other assets 4,190 4,221
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$93,943 $91,578
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LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current portion of long-term debt $ 668 $ 662
Accounts payable 5,530 5,174
Accrued interest 126 127
Dividend payable 1,805 1,654
Taxes other than income taxes 442 620
Accrued vacation 621 621
Other liabilities 299 283
Federal and state income taxes 1,598 247
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Total current liabilities 11,089 9,388
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Long term debt 22,223 22,396
Unamortized investment tax credits 583 621
Deferred income taxes 5,653 5,653
Postretirement benefits 4,129 4,065
Other liabilities 1,474 1,544
Shareholders' equity:
Capital stock/Common stock 2,350 2,350
Capital in excess of par value 2,215 2,215
Retained earnings 44,227 43,346
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Total shareholders' equity 48,792 47,911
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$93,943 $91,578
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31
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1995 1994
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<S> <C> <C>
Cash from operating activities:
Net earnings $ 2,685 $ 2,453
Adjustments to reconcile net earnings to net cash from
operating activities:
Depreciation and amortization 1,853 1,954
Equity loss of affiliated companies 13 -
Provision for postretirement benefits other than pensions 64 100
Investment tax credit amortization (38) (43)
Deferred income taxes - (24)
Changes in assets and liabilities:
Accounts receivable (446) (317)
Inventories of construction and operating materials &
supplies 159 (115)
Prepaid federal and state taxes (632) (576)
Accounts payable 356 629
Taxes other than income taxes (179) (150)
Other liabilities (97) 141
Federal and state income taxes 1,351 762
Prepaid Pension Cost (574) (518)
Other, net 30 145
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Total adjustments 1,860 2,218
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Net cash from operating activities 4,545 4,671
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Cash used for investing activities:
Expenditures for property and equipment (3,875) (1,943)
Net salvage on retirements 23 (11)
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Net capital additions (3,852) (1,954)
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Purchase of marketable securities held to maturity (1,275) (3,153)
Proceeds from redemption of marketable securities held to maturity 1,021 1,297
Purchase of marketable securities available for sale (158) (806)
Proceeds from sale of marketable securities available for sale 1,095 500
Investments in affiliated entities (40) -
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Net cash used for investing activities (3,209) (4,115)
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Cash used for financing activities:
Cash dividends (1,654) (1,504)
Retirement of debt (167) (156)
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Net cash used for financing activities (1,821) (1,660)
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Net (decrease) increase in cash and temporary investments (485) (1,104)
Cash and temporary investments at beginning of period 14,779 19,045
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Cash and temporary investments at end of period $14,294 $17,941
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Interest paid $ 378 $ 392
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Income taxes paid $ 472 $ 986
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
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The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Consolidated herein are the
financial results of the Registrant's wholly-owned subsidiaries, North
Pittsburgh Telephone Company, Penn Telecom, Inc., and Pinnatech, Inc. Certain
information and 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. Nevertheless, the
Registrant believes that its disclosures herein are adequate to make the
information presented not misleading and, in the opinion of management, all
adjustments (which consisted only of normal recurring accruals) necessary to
present fairly the results of operations for the interim periods have been
reflected. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Registrant's latest annual report to the Securities and
Exchange Commission on Form 10-K.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. Financial Condition
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(a) General
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There were no material changes in the Registrant's consolidated general
financial condition from the end of its preceding fiscal year on December 31,
1994 to March 31, 1995, the end of the three-month period reported herein.
(b) Liquidity and Capital Resources
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Consolidated capital expenditure commitments for the purchase and installation
of communications and other equipment at March 31, 1995 amounted to
approximately $3,127,000 with such amount being part of the 1995 Construction
Program. Funds for financing construction expenditures in the three-month
period ended March 31, 1995 were generated from internal sources. In the
foreseeable future, based on projected construction budgets and cash flows,
North Pittsburgh Telephone Company anticipates financing all telephone plant
construction from cash reserves and internally generated funds. At March 31,
1995, construction work in progress is $5,216,000. An additional $8,281,000
will be expended to complete these projects.
The Registrant and its subsidiaries have not experienced any difficulty in the
past meeting either long-term or short-term cash commitments. Cash flow
generated through regular operations has been adequate to not only finance the
capital requirements of the Registrant as discussed in the previous paragraph
but also to meet principal and interest payments on long-term debt and all
working capital requirements. It is anticipated that future long-term interest
and principal payments will be made from the same source of internally generated
funds.
4
<PAGE>
2. Results of Operations
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Total operating revenues increased $206,000 (1.7%) in the three-month period
ended March 31, 1995, over the comparable period in 1994. This change was due
to increases in long distance and access services of $360,000 (4.0%), local
network services of $92,000 (5.4%) offset by a decrease in telecommunications
equipment sales of $319,000 (39.4%). Higher long distance and access service
revenues were generally the result of an increase in the number of customers and
in minutes of use. However, the rate of growth of revenues slowed in 1995 as
compared to 1994 due to the expansion in the first quarter of 1995 of an
optional flat rated calling plan to meet customer calling needs. Increased
local network service revenues were attributable to customer growth. The
decrease in telecommunications equipment sales reflects a decrease in the number
of systems sold in 1995 as compared to 1994.
Total operating expenses for the three-month period ended March 31, 1995,
increased $30,000 (.38%) over the preceding year. That change is principally
the result of an increase in network and other operating expenses of $426,000
(9.3%) offset by a decrease in telecommunication equipment expenses of $333,000
(43.0%). The increase in network and other operating expenses is the result of
expanded operations to serve customer growth as noted above. In addition,
increased computer software expenditures related to call processing and
increased marketing expenses associated with the expansion of the optional
calling plan discussed above, along with increased community awareness
advertising campaigns account for the overall increases. The decrease in
telecommunication equipment expenses is related to the decrease in equipment
sales discussed above. The increase in total operating revenues discussed above
coupled with a smaller increase in total operating expenses resulted in a 4%
increase in net operating revenues in 1995 as compared to the same period in
1994.
Other expense (income), net, for the three-month period declined $161,000
(61.2%) compared to the preceding year. Interest income increased $187,000
(105.1%) due to the recognition of unrealized losses on marketable securities in
1994.
The increase in net operating revenues for the three-month period ended March
31, 1995, in conjunction with the decline in other expense (income), net,
resulted in an increase of $337,000 (8.2%) in earnings before income taxes.
5
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits - Exhibit Index for Quarterly Reports on Form 10-Q.
--------
<TABLE>
<CAPTION>
Exhibit
Number Subject Applicability
- ------- ---------------------------------------- --------------------------------------
<C> <S> <C>
(2) Plan of acquisition, reorganization, Not Applicable
arrangement, liquidation or succession
(3) Articles of Incorporation Provided in Annual Report on Form
10-K for the year ended December
31, 1993 and Incorporated Herein by
Reference.
(3) By-Laws Provided in Annual Report on Form
10-K for the year ended December
31, 1993 and Incorporated Herein by
Reference.
(4) Instruments defining the rights of Provided in Registration of
security holders including indentures Securities of Certain Successor
Issuers on Form 8-B filed on
June 25, 1985 and Incorporated
Herein by Reference.
(10) Material Contracts Not Applicable
(11) Statement re computation of per share Attached Hereto
earnings
(15) Letter re unaudited interim financial Not Applicable
information
(18) Letter re change in accounting Not Applicable
principles
(19) Report furnished to security holders Not Applicable
(22) Published report regarding matters Not Applicable
submitted to a vote of security holders
(23) Consents of experts and counsel Not Applicable
(24) Power of attorney Not Applicable
(27) Financial Data Schedule Attached Hereto
(99) Additional exhibits Not Applicable
</TABLE>
(b) Reports on Form 8-K -No reports on Form 8-K were filed during the
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quarter ended March 31, 1995.
6
<PAGE>
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.
NORTH PITTSBURGH SYSTEMS, INC.
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(Registrant)
Date MAY 08 1995 /s/ G. A. Gorman
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G. A. Gorman, President
Date MAY 08 1995 /s/ A. P. Kimble
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A. P. Kimble, Vice President,
Secretary & Treasurer
7
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
Exhibit No. (11) - Statement - computation of per share earnings
Statement of Computations of Earnings per Share
<TABLE>
<CAPTION>
For the Three Months
Ended March 31
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1995 1994
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<S> <C> <C>
Net earnings $2,685,000 $2,453,000
========== ==========
Average common shares outstanding 7,520,000 7,520,000
========== ==========
Earnings per share of common stock $ .36 $ .33
========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1995 QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 14,294
<SECURITIES> 7,020
<RECEIVABLES> 7,909
<ALLOWANCES> 0
<INVENTORY> 1,951
<CURRENT-ASSETS> 31,806
<PP&E> 102,170
<DEPRECIATION> 49,131
<TOTAL-ASSETS> 93,943
<CURRENT-LIABILITIES> 11,089
<BONDS> 22,223
<COMMON> 2,350
0
0
<OTHER-SE> 46,442
<TOTAL-LIABILITY-AND-EQUITY> 93,943
<SALES> 490
<TOTAL-REVENUES> 12,474
<CGS> 442
<TOTAL-COSTS> 7,902
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 403
<INCOME-PRETAX> 4,470
<INCOME-TAX> 1,785
<INCOME-CONTINUING> 2,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,685
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
