SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter ended December 31, 1995.
Commission file Number 0-13627.
COMPUTER TELEPHONE CORP.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2731202
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
360 Second Avenue, Waltham, Massachusetts 02154
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(Address of principal executive offices) (Zip Code)
(617) 466-8080
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(Registrant's telephone number including area code)
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(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 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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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:
As of January 31, 1996 9,584,464 shares of Class I, $.01 par value, Common Stock
were outstanding.
<PAGE>
COMPUTER TELEPHONE CORP.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
<C> <C> <C> <C>
Part I FINANCIAL STATEMENTS PAGE NO.
Item 1. Financial Statements
Condensed Balance Sheets
As of December 31 and March 31, 1995 3
Condensed Statements of Income
Three Months Ended
December 31, 1995 and 1994 4
Condensed Statements of Income
Nine Months Ended
December 31, 1995 and 1994 5
Condensed Statements of Cash Flows
Nine Months Ended December 31, 1995 and 1994 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II OTHER INFORMATION
Item 1. Legal Proceedings Inapplicable
Item 2. Changes in Securities Inapplicable
Item 3. Default Upon Senior Securities Inapplicable
Item 4. Submission of Matters to a
Vote of Security Holders Inapplicable
Item 5. Other Information Inapplicable
Item 6. Exhibits and Reports on 8-K
The following exhibit is included herein:
(11) Statements Regarding Computation of
Per Share Earnings
Three and Nine Months Ended
December 31, 1995 and 1994 11
</TABLE>
The Company did not file any reports on Form 8-K during the nine months ended
December 31, 1995.
2
<PAGE>
COMPUTER TELEPHONE CORP.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 30, March 31,
1995 1995
------------- ---------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 3,717,906 $ 2,390,546
Accounts receivable, net 6,010,684 3,639,220
Inventories 26,190 36,512
Prepaid expenses and other current assets 514,426 353,381
----------- -----------
Total Current Assets 10,269,206 6,419,659
Furniture, Fixtures and Equipment 5,665,099 5,287,289
Less accumulated depreciation (4,601,417) (4,162,417)
----------- -----------
Total Equipment 1,063,682 1,124,872
Deferred tax asset 153,000 153,000
Other assets 24,685 28,285
----------- -----------
Total Assets $11,510,573 $ 7,725,816
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 891,074 $ 456,094
Accrued salaries and related taxes 2,289,289 1,445,937
Accrued income taxes (90,925) 281,569
Deferred revenue 0 4,209
Customer deposits 12,412 12,412
----------- -----------
Total Current Liabilities 3,101,850 2,200,221
Stockholders' Equity
Common stock 95,668 31,244
Additional paid in capital 4,854,095 4,871,302
Retained-earnings 3,608,645 796,734
8,558,408 5,699,280
Amounts due from stockholders (135,825) (159,825)
Less treasury stock, at cost (13,860) (13,860)
----------- -----------
Total Stockholders' Equity 8,408,723 5,525,595
----------- -----------
Total Liabilities and
Stockholders' Equity $11,510,573 $ 7,725,816
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
COMPUTER TELEPHONE CORP.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
December 31, December 31,
1995 1994
------------- --------------
<S> <C> <C>
Revenue
Network service commission income $ 6,826,572 $ 4,801,263
Long distance usage income 1,323,601 834,728
------------- --------------
8,150,173 5,635,991
Costs and expenses
Cost of long distance network 1,021,660 670,026
Selling, general & administrative expenses 5,186,249 4,258,190
------------- --------------
6,207,909 4,928,216
------------- --------------
Income from operations 1,942,264 707,775
Other
Interest income 49,727 10,019
Interest expense (34) (2,629)
Other 43 310
------------- --------------
49,736 7,700
------------- --------------
Income before income taxes 1,992,000 715,475
Provision for income taxes 817,000 248,900
------------- --------------
Net income $ 1,175,000 $ 466,575
============= ==============
Net income per common share
Primary $ 0.11 $ 0.05
============= ==============
Fully diluted $ 0.11 $ 0.05
============= ==============
Weighted average number of common shares
Primary 10,672,928 9,621,064
============= ==============
Fully diluted 10,672,928 9,950,708
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
COMPUTER TELEPHONE CORP.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended
December 31, December 31,
1995 1994
------------- --------------
<S> <C> <C>
Revenue
Network service ommission income $ 19,268,327 $ 13,323,429
Long distance usage income 3,668,316 2,128,744
------------- --------------
22,936,643 15,452,173
Costs and expenses
Cost of long distance network 2,837,851 1,691,874
Selling, general & administrative expenses 15,486,049 12,357,007
------------- --------------
18,323,900 14,048,881
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Income from operations 4,612,743 1,403,292
Other
Interest income 117,299 33,280
Interest expense (604) (6,046)
Other 9,162 6,017
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125,857 33,251
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Income before income taxes 4,738,600 1,436,543
Provision for income taxes 1,925,850 500,400
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Net income $ 2,812,750 $ 936,143
============= ==============
Net income per common share
Primary $ 0.27 $ 0.11
============= ==============
Fully diluted $ 0.27 $ 0.10
============= ==============
Weighted average number of common shares
Primary 10,487,978 8,776,429
============= ==============
Fully diluted 10,529,669 8,939,164
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
COMPUTER TELEPHONE CORP.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
December 31, December 31,
1995 1994
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 2,812,750 $ 936,142
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 439,000 486,000
Changes in noncash working capital items:
Accounts receivable (2,375,672) (1,133,269)
Inventories 10,322 (3,158)
Other current assets (161,045) 21,874
Income tax receivable 0 50,000
Other assets 3,600 3,210
Accounts payable 434,980 (230,089)
Accrued liabilities 843,352 517,858
Deferred revenue 0 190,251
Customer deposits 0 145,000
Accrued taxes (372,494) 99,140
------------- --------------
Net cash provided by operating activities 1,634,793 1,082,959
INVESTING ACTIVITIES
Additions to equipment (377,810) (496,715)
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Net cash used in investing activities (377,810) (496,715)
FINANCING ACTIVITIES
Proceeds from the issuance of common stock 71,217 13,992
Dividends Paid (840) 0
Repayment of capital lease obligations 0 (9,621)
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Net cash used by financing activities 70,377 4,371
Increase (decrease) in cash 1,327,360 590,615
Cash at beginning of year 2,390,546 1,238,811
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Cash and cash equivalents
at end of period $ 3,717,906 $ 1,829,426
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
COMPUTER TELEPHONE CORP.
NOTES TO FINANCIAL STATEMENTS
Note 1: BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared in accordance
with the instructions to Form 10-Q and do not include all the information and
footnote disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation have
been included. Operating results for the three and nine months ended December
31, 1995 are not necessarily indicative of the results that may be expected for
the year ending March 31, 1996. These statements should be read in conjunction
with the financial statements and related notes included in the Company's Annual
Report to Shareholders on Form 10-K for the year ended March 31, 1995.
NOTE 2: CASH DIVIDENDS
The Company has not paid cash dividends during the period presented.
NOTE 3: COMMITMENTS AND CONTINGENCIES
The Company is party to suits arising in the normal course of business which
either individually or in the aggregate are not material.
NOTE 4: COMMON STOCK TRANSACTIONS SUBSEQUENT TO
SEPTEMBER 30, 1995
On January 29, 1996, the Computer Telephone Corp. Employees Stock Purchase Plan
purchased 2,345 shares of Class 1 Common Stock from the Company at $11.05 per
share for the purchase period ended December 31, 1995.
On October 10, 1995, the Company declared a two for one stock split to all
shareholders of record at the close of business on October 23, 1995. The payable
date of this transaction was on November 6, 1995.
NOTE 5: NET INCOME PER SHARE
Net Income per share is computer based on the weighted average number of common
stock and, if dilutive, common stock equivalent shares outstanding during the
period. Common stock shares result from the assumed exercise of common stock
options using the treasury stock method.
7
<PAGE>
Part I
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the Financial
Statements and Notes set forth elsewhere in this Report.
Results of Operations - Three months and nine months ended December 31, 1995 as
compared to the three months and nine months ended December 31, 1994.
Total revenues for the third quarter of Fiscal 1996 increased 45% to
approximately $8,150,000 as compared to approximately $5,636,000 for the same
period of the preceding year (Fiscal 1995). Network service commission income,
which represents fees earned by the Company in it's capacity as an agent for
various telephone companies, increased 42% to approximately $6,827,000 for the
three months ended December 31, 1995, as compared to approximately $4,801,000
for the third quarter of Fiscal 1995. Long distance usage income, which
represents the gross billings to mid-sized commercial accounts on the Company's
long distance network, increased 59% to approximately $1,324,000 as compared to
approximately $835,000 for the same period of the preceding fiscal year.
Total revenues for the nine month period ended December 31, 1995 increased 48%
to approximately $22,937,000 as compared to approximately $15,452,000 for the
same period of Fiscal 1995. Network service commission income increased 45% to
approximately $19,268,000 as compared to $13,323,000 for the same period of the
preceding fiscal year. For the nine month period, the Company recognized long
distance usage income of $3,668,000 as compared to $2,129,000 for the same
period of Fiscal 1995, an increase of 72%.
These increases in revenue are primarily attributable to two factors. First, the
growing base of customers in the Northeast, where the Company is paid a residual
fee to actively manage a substantial group of accounts on behalf of NYNEX New
England, NYNEX- New York, and Southern New England Telephone, is a direct result
of additional account executives added during the first six months of calendar
1995. In addition, the Company has further developed its strategy of leveraging
these relationships with additional product offerings in order to influence a
great amount of each customers communication dollar expenditure. It is the
Company 's plan to continue both efforts throughout 1996.
8
<PAGE>
Selling, general and administrative expenses for the third quarter totaled
$5,186,000, an increase of approximately $928,000 over the same period one year
ago. For the nine month period ended December 31, 1995 selling, general and
administrative costs totaled $15,486,000, an increase of approximately
$3,129,000 over the same period of the preceding fiscal year.
These increases are directly attributable to the increases in the variable sales
commission and bonus expenses incurred in connection with the substantial
increases in revenues. As a percentage of revenues, these selling, general and
administrative expenses were approximately 64% and 68% respectively, for the
three and nine months periods of Fiscal 1996, as compared to 76% and 80%
respectively, for the corresponding periods of Fiscal 1995. These relative
reductions reflect the continuing efforts by the Company to control operating
expenses, as well as the financial impact of increasing sales opportunities to
the same customer base.
Operating income for the third quarter of Fiscal 1996 increased to approximately
$1,175,000, as compared to approximately $467,000 for the same period of Fiscal
1995. For the nine months ended December 31, 1995, operating income increased to
approximately $2,813,000, as compared to approximately $936,000 for the same
nine month period of Fiscal 1995. The Company estimates that it will utilize an
effective tax rate of approximately 40% for the balance of Fiscal 1996.
On October 10, 1995, the Company announced a 2-for-1 stock split, effective
October 23, 1995. On July 13, 1995, the Company announced a 3-for-2 stock split,
effective as of July 25, 1995. On January 18, 1995, the Company declared a
twenty five percent stock dividend, effective as of March 1, 1995. All income
per share and weighted average share information included in the accompanying
financial statements have been restated to reflect these changes.
The period ended December 31, 1995 marks the tenth consecutive quarter of
profits for the Company. Management believes that its strategy of building long
term relationships and offering additional products to these same customers,
when combined with continuing efforts to control costs, should results in a
continuation of this trend throughout the balance of Fiscal 1996.
9
<PAGE>
Liquidity and Capital Resources
Working capital at December 31, 1995 amounted to approximately $7,167,000 as
compared to $4,219,000 at March 31, 1995, an increase of 70%. Cash balances at
December 31, 1995 totaled approximately $3,718,000 an increase of approximately
$397,000 over the September 30, 1995 balance.
On April 28, 1995, the Company amended its revolving line of credit agreement
with Fleet Bank, which is available under certain conditions, to provide for an
increase in the credit line to $3,000,000 from $1,000,000 and to reduce the
interest rate to the prime rate from prime plus one-half percent.
In addition, the Company entered into an agreement with Fleet Bank which
provides up the $500,000 of term financing for capital expenditures at the prime
rate of interest plus one percent.
The Company presently has no bank debt and expects that the revolving credit
line, together with cash flows from operations, will be sufficient to meet the
cash requirements of the Company for the foreseeable future.
10
COMPUTER TELEPHONE CORP.
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
December 31, December 31, December 31, December 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
PRIMARY
<S> <C> <C> <C> <C>
Average shares outstanding 1,191 2,100 1,088 1,267
Net effect of stock options, if dilutive,
based on the treasury stock method
using the average market price 9,482 7,521 9,400 7,509
----------- ----------- ----------- -----------
Total 10,673 9,621 10,488 8,776
Net income $ 1,175 $ 467 $ 2,813 $ 936
----------- ----------- ----------- -----------
Net income per share $ 0.11 $ 0.05 $ 0.27 $ 0.11
----------- ----------- ----------- -----------
FULLY DILUTED
Average shares outstanding 1,187 2,430 1,130 1,430
Net effect of stock options, if dilutive
based on the treasury stock method
using the period-end market price 9,482 7,521 9,400 7,509
----------- ----------- ----------- -----------
Total 10,669 9,951 10,530 8,939
Net income $ 1,175 $ 467 $ 2,813 $ 936
----------- ----------- ----------- -----------
Net income per share $ 0.11 $ 0.05 $ 0.27 $ 0.10
----------- ----------- ----------- -----------
</TABLE>
11
<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 behalf by the undersigned
thereunto duly authorized.
COMPUTER TELEPHONE CORP.
DATE: February 7, 1996 /S/ Robert J. Fabbricatore
----------------- --------------------------
Robert J. Fabbricatore
Chairman and Chief
Executive Officer
DATE: February 7, 1996 /S/ John D. Pittenger
----------------- ---------------------------
John D. Pittenger
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5 Financial Data Schedule for 1st Quarter 10-Q
<CIK> 0000764841
<NAME> COMPUTER TELEPHONE CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-END> Jun-30-1995
<CASH> 2,336
<SECURITIES> 0
<RECEIVABLES> 4,739
<ALLOWANCES> 128
<INVENTORY> 32
<CURRENT-ASSETS> 7,390
<PP&E> 5,387
<DEPRECIATION> 4,300
<TOTAL-ASSETS> 8,657
<CURRENT-LIABILITIES> 2,442
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,184
<TOTAL-LIABILITY-AND-EQUITY> 8,657
<SALES> 6,716
<TOTAL-REVENUES> 6,748
<CGS> 828
<TOTAL-COSTS> 5,595
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,152
<INCOME-TAX> 463
<INCOME-CONTINUING> 689
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 689
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5 Financial Data Schedule for 2nd Quarter 10-Q
<CIK> 0000764841
<NAME> COMPUTER TELEPHONE CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-END> Sep-30-1995
<CASH> 3,321
<SECURITIES> 0
<RECEIVABLES> 5,168
<ALLOWANCES> 128
<INVENTORY> 26
<CURRENT-ASSETS> 8,933
<PP&E> 5,603
<DEPRECIATION> 4,448
<TOTAL-ASSETS> 10,267
<CURRENT-LIABILITIES> 3,048
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,171
<TOTAL-LIABILITY-AND-EQUITY> 10,267
<SALES> 8,070
<TOTAL-REVENUES> 8,114
<CGS> 994
<TOTAL-COSTS> 6,521
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,594
<INCOME-TAX> 645
<INCOME-CONTINUING> 949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 949
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5 Financial Data Schedule for 3rd Quarter 10-Q
<CIK> 0000764841
<NAME> COMPUTER TELEPHONE CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-END> Dec-31-1995
<CASH> 3,718
<SECURITIES> 0
<RECEIVABLES> 6,011
<ALLOWANCES> 128
<INVENTORY> 26
<CURRENT-ASSETS> 10,269
<PP&E> 5,665
<DEPRECIATION> 4,601
<TOTAL-ASSETS> 11,511
<CURRENT-LIABILITIES> 3,102
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,313
<TOTAL-LIABILITY-AND-EQUITY> 11,511
<SALES> 8,150
<TOTAL-REVENUES> 8,200
<CGS> 1,022
<TOTAL-COSTS> 6,208
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,992
<INCOME-TAX> 817
<INCOME-CONTINUING> 1,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,175
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
