<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
--------------------------------
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _________________________
Commission File Number 0-13716
---------------------------------------------------------
NORTH PITTSBURGH SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1485389
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4008 Gibsonia Road, Gibsonia, Pennsylvania 15044-9311
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
724-443-9600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Change
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 and 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_____
---
APPLICABLE ONLY TO CORPORATE USERS:
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
------------------------
At July 23, 1999, the Registrant had 15,005,000 shares of common stock
outstanding, par value $.15625 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 For the Six Months
Ended June 30 Ended June 30
--------------------- -------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenues:
Local network services $ 3,264 $ 2,983 $ 6,455 $ 5,808
Long distance and access services 11,581 11,801 23,327 22,797
Directory advertising, billing & other services 768 569 1,376 1,191
Telecommunication equipment sales 678 866 1,373 1,426
Other operating revenues 1,138 1,020 2,437 2,113
------- ------- ------- -------
Total Operating Revenues 17,429 17,239 34,968 33,335
Operating expenses:
Network and other operating expenses 7,997 6,136 15,144 12,352
Depreciation and amortization 3,313 2,922 6,530 5,820
State and local taxes 768 702 1,570 1,457
Telecommunication equipment expenses 669 807 1,259 1,343
------- ------- ------- -------
Total Operating Expenses 12,747 10,567 24,503 20,972
------- ------- ------- -------
Net Operating Revenues 4,682 6,672 10,465 12,363
Other expense (income), net:
Interest expense 499 456 1,010 919
Interest income (211) (387) (456) (769)
Sundry expense (income), net (316) (195) (494) (1,099)
------- ------- ------- -------
(28) (126) 60 (949)
------- ------- ------- -------
Earnings before income taxes 4,710 6,798 10,405 13,312
Income taxes 1,931 2,732 4,210 4,995
------- ------- ------- -------
Net earnings $ 2,779 $ 4,066 $ 6,195 $ 8,317
======= ======= ======= =======
Weighted average common shares outstanding 15,005 15,005 15,005 15,005
======= ======= ======= =======
Basic and diluted earnings per share of
common stock $ .18 $ .27 $ .41 $ .55
======= ======= ======= =======
Dividends per share of common stock $ .16 $ .15 $ .32 $ .35
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
(Unaudited)
June 30 Dec. 31
ASSETS 1999 1998
------ -------- --------
<S> <C> <C>
Current Assets:
Cash and temporary investments $ 8,259 $ 16,786
Marketable securities available for sale 16,088 14,670
Accounts receivable:
Customers 4,297 3,599
Access service settlements and other 7,530 7,310
Prepaid expenses 198 204
Inventories of construction and operating materials and
supplies 5,390 4,019
Prepaid taxes 533 -
Prepaid federal and state income taxes 315 -
-------- --------
Total current assets 42,610 46,588
-------- --------
Property, plant and equipment:
Land 475 475
Buildings 11,283 11,067
Equipment 140,195 136,779
-------- --------
151,953 148,321
Less accumulated depreciation and amortization 80,866 78,854
-------- --------
71,087 69,467
Construction in progress 12,547 6,863
-------- --------
Total property, plant and equipment, net 83,634 76,330
Investments 7,824 9,637
Deferred financing costs 811 857
Prepaid pension cost 873 598
Other assets 801 1,305
-------- --------
$136,553 $135,315
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,878 $ 1,850
Accounts payable 8,316 6,756
Dividend payable 2,401 2,251
Other accrued liabilities 1,788 2,616
Federal and state income taxes - 920
-------- --------
Total current liabilities 14,383 14,393
-------- --------
Long-term debt 31,248 32,196
Deferred income taxes 8,692 8,060
Accrued postretirement benefits 5,067 5,002
Other liabilities 1,771 1,858
Shareholders' equity:
Capital stock/Common stock 2,350 2,350
Capital in excess of par value 2,215 2,215
Retained earnings 70,658 69,265
Less cost of treasury stock (1999 and 1998-35,000 shares) (508) (508)
Accumulated other comprehensive income-unrealized gain
on available for sale securities, net 677 484
-------- --------
Total shareholders' equity 75,392 73,806
-------- --------
$136,553 $135,315
======== ========
</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 Six Months
Ended June 30
----------------------
1999 1998
-------- -------
<S> <C> <C>
Cash from operating activities:
Net earnings $ 6,195 $ 8,317
Adjustments to reconcile net earnings to net cash from
operating activities:
Depreciation and amortization 6,530 5,820
Gain on sale of marketable securities (186) (1)
Equity (income) losses of affiliated companies (289) (751)
Changes in assets and liabilities:
Accounts receivable (918) (1,169)
Inventories of construction and operating materials
& supplies (1,371) (353)
Deferred financing costs, prepaid pension cost
and other assets 275 364
Prepaid federal and state taxes (848) (510)
Accounts payable 1,560 1,596
Other accrued liabilities (915) (651)
Accrued postretirement benefits 65 121
Federal and state income taxes (420) (2,307)
Other, net (47) 62
-------- -------
Total adjustments 3,436 2,221
-------- -------
Net cash from operating activities 9,631 10,538
-------- -------
Cash used for investing activities:
Expenditures for property and equipment (13,845) (9,457)
Net salvage on retirements 64 389
-------- -------
Net capital additions (13,781) (9,068)
-------- -------
Purchase of marketable securities available for sale (5,777) -
Proceeds from sale of marketable securities available for sale 4,870 105
Proceeds from sale of investment - 13,561
Investments in affiliated entities - (630)
Distributions from affiliated entities 2,102 43
-------- -------
Net cash used for investing activities (12,586) 4,011
-------- -------
Cash used for financing activities:
Cash dividends (4,652) (5,103)
Retirement of debt (920) (398)
-------- -------
Net cash used for financing activities (5,572) (5,501)
-------- -------
Net (decrease) increase in cash and temporary investments (8,527) 9,048
Cash and temporary investments at beginning of period 16,786 15,938
-------- -------
Cash and temporary investments at end of period $ 8,259 $24,986
======== =======
Interest paid $ 969 $ 876
======== =======
Income taxes paid $ 4,813 $ 7,302
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
-------
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 (North Pittsburgh), Penn Telecom, Inc.
(Penn Telecom) and Pinnatech, Inc. (Pinnatech). 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. These condensed consolidated financial
statements should 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.
(2) COMPREHENSIVE INCOME
--------------------
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130) establishes requirements for disclosure
of comprehensive income. The objective of SFAS 130 is to report all
changes in equity that result from transactions and economic events other
than transactions with owners. Comprehensive income is the total of net
income and all other non-owner changes in equity. The reconciliation of
net income to comprehensive income (loss) is as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------- -------------------
1999 1998 1999 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net income $2,779 $4,066 $6,195 $8,317
Unrealized gain (loss) on
marketable securities 4 -- 193 (2)
------ ------ ------ ------
Comprehensive income $2,783 $4,066 $6,388 $8,315
====== ====== ====== ======
</TABLE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. Financial Condition
-------------------
(a) General
-------
There were no material changes in the Registrant's consolidated general
financial condition from the end of its preceding fiscal year on December
31, 1998 to June 30, 1999, the end of the six-month period reported herein.
(b) Liquidity and Capital Resources
-------------------------------
Consolidated capital expenditure commitments for the purchase and
installation of communications and other equipment at June 30, 1999
amounted to approximately $6,087,715, with such amount being part of the
1999 construction program, which is expected
4
<PAGE>
to be in excess of $20 million. Funds for financing construction
expenditures in the six-month period ended June 30, 1999 were generated
from internal sources. Based on its 1999 construction budget and projected
cash flows, the Registrant anticipates cash flows provided by operating
activities and cash reserves in 1999 to be sufficient to service long-term
debt, to pay dividends and to finance approximately 25% to 50% of capital
additions. The balance of capital additions will be financed from debt
financing available from the Rural Utilities Service. At June 30, 1999,
construction work in progress was $12,547,000.
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 a significant portion of the capital requirements of the Registrant
as discussed above 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.
(c) Regulatory/Competition
----------------------
North Pittsburgh, under Chapter 30 of the Pennsylvania Public Utility Code,
filed a petition with the Pennsylvania Public Utility Commission (PA PUC),
on July 31, 1998, seeking approval of an alternative form of regulation to
replace traditional rate base/rate of return regulation or be subject to a
show cause proceeding. The petition also included a proposed network
modernization plan. In the filing, North Pittsburgh proposed a price cap
plan whereby rates for noncompetitive services are allowed to be increased
based on an index that measures general economy wide price increases. This
petition is still pending before the PA PUC and may be modified in the
final order. However, it is not possible at this time to determine the PA
PUC's disposition of this petition or the effect on North Pittsburgh's
financial position or results of operations.
The Federal Communications Commission (FCC) continues to work on
Rulemakings that will further spell out the specifics of the
Telecommunications Act of 1996 (the 1996 Act). The PA PUC must then
finalize its course of action to fully implement the 1996 Act, or to the
extent possible and permissible, change the manner in which such
regulations are implemented in Pennsylvania before the impact on North
Pittsburgh, a Rural Telephone Company under the 1996 Act, can be fully
understood and measured. However, the clear intent of the 1996 Act is to
open up the local exchange market to competition. The 1996 Act appears to
mandate, among other items, that North Pittsburgh, at some point in time,
permit the resale of its services at wholesale rates, provide number
portability, if feasible, provide dialing parity, provide interconnection
to any requesting carrier for the transmission and routing of telephone
exchange service and exchange access and provide access to network
elements. North Pittsburgh was granted a two-year suspension of the
interconnection requirements of Section 251 of the 1996 Act that expired
July 10, 1999. In January, 1999, North Pittsburgh filed for an additional
one-year extension of the suspension until July 10, 2000. In an order
entered June 25, 1999, the one-year extension of the suspension was
approved.
The 1996 Act, FCC and PA PUC regulatory proceedings and the thrust towards
a fully competitive marketplace have created some uncertainty in respect to
the levels of the Registrant's revenue growth in the future. However, the
Registrant, through its subsidiaries, has positioned itself to take
advantage of the opportunities the 1996 Act presents. The Registrant's
business plan focuses on expanding its telecommunication services outside
its traditional service area. Also, its unique location in a growing
commercial/residential suburban traffic corridor to the north of the City
of Pittsburgh, its state-of-the-art switching transmission and transport
facilities and its extensive fiber network place the Registrant in a solid
position to meet competition and minimize any loss of revenues. In
addition, the Registrant continues to make its network flexible and
responsive to the needs of its customers to meet competitive threats.
Expansion of services outside the traditional territory, new services,
access line growth and anticipated usage growth are expected to lessen or
offset any reductions in the Registrant's revenue sources.
2. Results of Operations
---------------------
Total operating revenues increased $1,633,000 (4.9%) in the six-month
period ended June 30, 1999 over the comparable period in 1998. This change
was due to an increase in local network services of $647,000 (11.1%), an
increase in long distance and access services of $530,000 (2.3%) and an
increase in other operating revenues of $324,000 (15.3%). Increased local
network service revenues were attributable to customer growth, growth in
second lines
5
<PAGE>
and expanded penetration of enhanced services. Higher long distance and
access services were generally the result of an increase in the number of
customers and minutes of use. The increase in other operating revenues is
primarily due to an increase in Internet-related revenues.
Total operating expenses for the six-month period ended June 30, 1999
increased $3,531,000 (16.8%) over the preceding year. That change is
principally the result of an increase in network and other operating
expenses of $2,792,000 (22.6%), and an increase in depreciation and
amortization of $710,000 (12.2%). The increase in network and other
operating expenses consists of an increase in personnel costs due to an
expansion of existing business and an increase in personnel and other
expenses due to start-up activities of competitive local exchange carrier
and Internet-related services. Temporary increases in data processing
expenses currently being experienced are necessary to maintain both
existing and new systems during conversion activities and will cease
beginning in the third quarter. The increase in depreciation and
amortization is the direct result of the growth in fixed assets to serve
current and future customer needs. The increase in total operating revenues
discussed above coupled with the increase in total operating expenses
resulted in net operating revenues decreasing $1,898,000 (15.4%) between
1999 and 1998.
Interest income decreased $313,000 primarily due to a shift in temporary
investments to available for sale securities. The net decrease in Sundry
income (non-operating) of $605,000 is primarily due to receipts from a one-
time insurance settlement in 1998, offset by an increase in cellular
partnership income in 1999 over 1998.
The decrease in net operating revenues for the six-month period ended June
30, 1999, in conjunction with the decrease in Sundry income, net, resulted
in a decrease of $2,907,000 (21.8%) in earnings before income taxes.
The Registrant's effective tax rate was 40% and 38% for the six-month
period ending June 30, 1999 and 1998 respectively. The increase in the
effective tax rate results from receipt of a non-taxable life insurance
settlement in the quarter ended March 31, 1998.
Fluctuations in the revenues and expenses for the three-month period ended
June 30, 1999, as compared to the same quarterly period in 1998 are
generally attributable to the same reasons above in the year-to-date
comparisons.
3. Adoption of New Accounting Pronouncements
-----------------------------------------
In June, 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". The
Registrant does not expect this pronouncement to impact the consolidated
financial statements because the Registrant has not entered into derivative
or hedging transactions.
Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", has been adopted
by the Registrant effective January 1, 1999. SOP 98-1 provides guidance on
capitalizing costs of computer software developed or obtained for internal
use. SOP 98-1 did not have a material effect on its financial statements.
4. Year 2000
---------
(a) State of Readiness
------------------
The Registrant has taken actions to understand the nature and extent of the
work required in order to make its systems and infrastructure Year 2000
compliant. The Registrant began work last year to prepare its information
technology (IT) and non-information technology (non-IT) systems, including
updating and/or replacing existing legacy systems. The Registrant has
formed a Corporate Year 2000 Task Force, which is responsible for all Year
2000 activities and is being monitored by senior management and the Board
of Directors.
There are six phases of the Registrant's Year 2000 program: Awareness,
Inventory, Assessment, Renovation, Validation and Implementation. The
Registrant has defined the six phases as follows:
Awareness - Gain the commitment of management and staff to solving the
problem. This phase has been completed.
6
<PAGE>
Inventory - Conduct a thorough inventory of all hardware and software
systems. This phase will run until December, 1999 in order to maintain the
inventory throughout the life of the project.
Assessment and Planning - Decide which systems to retire, repair or
replace. Prepare contingency plans. This phase has been completed.
Renovation - Perform upgrades to hardware and software. The Registrant has
contracted to outsource certain operational support, billing and accounting
systems to a third party vendor. The software and hardware components of
the systems selected have been certified by the vendor as Year 2000
compliant. The Registrant has completed the remediation of all mission
critical systems at this time. The Renovation is now 95% complete. The
remaining 5% of non-mission critical systems are scheduled to be remediated
well in advance of December, 1999.
Validation - Test and certify new and renovated systems. This phase is
underway; however, due to the introduction of several new product
technologies, will not be completed until the end of September, 1999. This
phase is currently 80% complete.
Implementation and Follow-up - New or renovated systems go into service.
This phase is scheduled to be completed in December, 1999, and will include
the resolution of any outstanding problems. The Year 2000 Project will
extend until March, 2000 in order to address the leap day of February 29,
2000 and to address any outstanding issues.
The Registrant's Year 2000 issues related to third parties can be broken
into two categories: third party vendors who supply products to the
Registrant, and other telecommunications companies who provide joint
service to our customers. The third party vendors have been providing the
Registrant with Year 2000 solutions on an on-going basis. Year 2000
upgrades, repairs and testing are being performed as per vendor
specifications. Other telecommunications service providers are
implementing Year 2000 programs in much the same fashion as the Registrant
and industry testing is being performed on an on-going basis.
(b) Cost to Address Year 2000 Issues
--------------------------------
Expenditures related to Year 2000 remediation, the data processing
transition plan, license fees for purchase of software and training and
implementation costs are not expected to exceed $3.5 million, $2.4 million
of which has been incurred through June 30, 1999. Costs related to
implementation of new systems are being capitalized, in accordance with SOP
98-1, and will be amortized over the estimated useful life of the asset
beginning in the second quarter of 1999. The remainder of these costs,
including Year 2000 remediation costs, will be expensed as incurred.
(c) Risks of Year 2000 Issues
-------------------------
The most reasonably likely worst case scenario is loss of services to other
interconnecting companies who have not attained Year 2000 compliance. This
is unlikely to occur since the interconnecting companies realize their
responsibility to comply. However, should this worst case scenario occur,
the Registrant will give customers the option of rerouting service to a
working carrier.
(d) Contingency Plan
----------------
The Registrant has developed a Corporate Year 2000 Contingency Plan to
cover its primary business activities. This plan outlines the key areas of
business, and the manner in which they will be supported in the event of a
Year 2000 failure. This plan has been developed as a result of research
into United States Telephone Association member telephone company responses
to hurricanes, tornadoes, ice storms and other disasters. The Registrant
has studied and modified these plans to cover operations during potential
Year 2000 related failures. Testing and refinement of the Registrant's
Contingency Plan is now underway. The Registrant has also updated and
revised the existing Emergency Response Plan. The Registrant's Emergency
Response Plan will form the core of the Registrant's Contingency Plan if a
major service outage should occur.
Key components of the Contingency Plan are the preparations to revert to a
manual operation, stockpiling and conservation of materials, increased
staffing levels, data storage for processing at a later date, isolation of
harmful network elements and positioning key personnel in areas where they
will be most effective. Should there be a serious service affecting
problem, the
7
<PAGE>
Emergency Response Plan will be activated until all services are restored.
Events, which could trigger activation of the Emergency Response Plan,
include widespread loss of gas or electric service, failures at various
interconnecting companies or failure of internal switching or transmission
systems.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
1. There have been no material changes in reported market risks faced by the
Registrant since December 31, 1998.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and 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.
------------------------------
(Registrant)
Date August 2, 1999 /s/ H. R. Brown
____________________ ----------------------------------------
H. R. Brown, President
Date August 2, 1999 /s/ A. P. Kimble
____________________ ----------------------------------------
A. P. Kimble, Vice President & Treasurer
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The 1999 Annual Meeting of Shareholders was held on May 21, 1999.
(b) The only matter voted upon at the Annual Meeting was the election
of Directors. The vote tabulation in respect to the Directors
elected at such meeting to serve until the 2000 Annual Meeting of
Shareholders and until their successors are elected is shown in
the following table:
Number of Number of
Shares Shares
Name Voted in Favor Withheld
---- -------------- ---------
Harry R. Brown 12,057,625 335,834
Dr. Charles E. Cole 12,132,801 260,658
Allen P. Kimble 12,177,923 215,536
Stephen G. Kraskin 12,160,537 232,922
David E. Nelsen 12,149,257 244,202
Jay L. Sedwick 12,115,829 277,630
Charles E. Thomas, Jr. 12,131,215 262,244
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - Exhibit Index for Quarterly Reports on Form 10-Q.
--------
Exhibit
Number Subject Applicability
- ------- ------- -------------
(2) Plan of acquisition, reorganization, Not Applicable
arrangement, liquidation or
succession
(3) (i) Articles of Incorporation Provided in Quarterly Report
on Form 10-Q for the quarter
ended June 30, 1996 and
Incorporated Herein by
Reference.
(3) (ii) By-Laws Provided in Annual Report
on Form 10-K for the year
ended December 31, 1998
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 Attached Hereto
share earnings
<PAGE>
Exhibit
Number Subject Applicability
- ------ ------- -------------
(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
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
-------------------
quarter ended June 30, 1999.
<PAGE>
EXHIBIT 11
NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
Statement - computation of per share earnings
Statement of Computations of Earnings per Share
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended Mar. 31 Ended June 30
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Earnings $ 2,779,000 $ 4,066,000 $ 6,195,000 $ 8,317,000
=========== =========== =========== ===========
Weighted average common shares
outstanding 15,005,000 15,005,000 15,005,000 15,005,000
=========== =========== =========== ===========
Basic and diluted earnings per share
of common stock $ .18 $ .27 $ .41 $ .55
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1999 QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,259
<SECURITIES> 16,088
<RECEIVABLES> 11,827
<ALLOWANCES> 0
<INVENTORY> 5,390
<CURRENT-ASSETS> 42,610
<PP&E> 164,500
<DEPRECIATION> 80,866
<TOTAL-ASSETS> 136,553
<CURRENT-LIABILITIES> 14,383
<BONDS> 31,248
0
0
<COMMON> 2,350
<OTHER-SE> 73,042
<TOTAL-LIABILITY-AND-EQUITY> 136,553
<SALES> 1,373
<TOTAL-REVENUES> 34,968
<CGS> 1,259
<TOTAL-COSTS> 24,503
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,010
<INCOME-PRETAX> 10,405
<INCOME-TAX> 4,210
<INCOME-CONTINUING> 6,195
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,195
<EPS-BASIC> .41
<EPS-DILUTED> .41
</TABLE>
