SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996 Commission File No. 0-16751
CFW COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1443350
(State or other jurisdiction of (I R S employer
incorporation or organization) identification no.)
P. O. Box 1990, Waynesboro, Virginia 22980
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 540-946-3500
None
(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
(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.
Class COMMON STOCK, NO PAR VALUE Outstanding 09/30/96 12,976,853
<PAGE>
CFW COMMUNICATIONS COMPANY
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets,
September 30, 1996 and December 31, 1995 3- 4
Condensed Consolidated Statements of
Income, Three and Nine Months Ended
September 30, 1996 and 1995 5
Condensed Consolidated Statements of
Cash Flows, Nine Months Ended
September 30, 1996 and 1995 6
Notes to Condensed Consolidated
Financial Statements 7- 8
Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9-13
PART II. OTHER INFORMATION 14
SIGNATURES 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CFW COMMUNICATIONS COMPANY
Condensed Consolidated Balance Sheets
ASSETS
September 30, 1996 December 31,
(unaudited) 1995
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 3,613,777 $ 5,264,986
Accounts receivable, including
interest receivable 8,680,737 8,677,086
Note receivable 129,703 140,231
Materials and supplies 2,024,049 1,980,837
Prepaid expenses 1,703,036 207,319
Income taxes receivable - 3,356
------------ ------------
16,151,302 16,273,815
------------ ------------
SECURITIES AND INVESTMENTS 27,994,178 29,471,626
------------ ------------
PROPERTY AND EQUIPMENT
In service 117,689,733 107,420,864
Under construction 4,397,371 4,385,440
------------ ------------
122,087,104 111,806,304
Less: accumulated depreciation 35,683,756 30,713,237
------------ ------------
86,403,348 81,093,067
------------ ------------
OTHER ASSETS
Cost in excess of net assets
of business acquired, less
accumulated amortization 12,778,811 13,268,224
Deferred charges 3,776,130 3,144,581
------------ ------------
16,554,941 16,412,805
------------ ------------
TOTAL ASSETS $147,103,769 $143,251,313
============ ============
3
<PAGE>
CFW COMMUNICATIONS COMPANY
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 1996 December 31,
(unaudited) 1995
------------ ------------
CURRENT LIABILITIES
Accounts payable $ 2,269,118 $ 3,674,310
Customers' deposits 472,878 477,393
Advance billings 1,825,714 1,506,777
Accrued payroll 652,002 833,232
Accrued interest 363,000 726,000
Note payable 1,500,000 -
Other accrued liabilities 3,784,942 2,384,774
Deferred revenue 1,462,251 972,593
Income taxes payable 636,705 -
------------ ------------
12,966,610 10,575,079
------------ ------------
LONG-TERM DEBT 22,500,000 20,000,000
------------ ------------
LONG-TERM LIABILITIES
Deferred income taxes 12,447,716 13,866,047
Retirement benefits other than
pensions 7,584,569 7,149,957
Other 1,324,414 1,543,863
------------ ------------
21,356,699 22,559,867
------------ ------------
MINORITY INTERESTS 1,098,959 874,664
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, no par - -
Common stock, no par 43,355,988 43,531,164
Retained earnings 38,815,723 35,700,859
Unrealized gain on securities
available for sale, net 7,009,790 10,009,680
------------ ------------
89,181,501 89,241,703
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $147,103,769 $143,251,313
============ ============
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
CFW COMMUNICATIONS COMPANY
Condensed Consolidated Statements of Income
<CAPTION>
(Unaudited)
Three Months Ended Nine Months Ended
----------------------------------- -----------------------------------
<S> <C>
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
------------- ------------- ------------- ------------
Operating revenues
Local service $ 2,367,737 $ 1,868,162 $ 6,864,972 $ 5,567,888
Access and toll service 3,461,486 3,887,959 10,835,924 10,756,056
Wireless communications and
other 6,819,249 6,175,204 19,701,026 14,941,834
------------- ------------- ------------- ------------
12,648,472 11,931,325 37,401,922 31,265,778
------------- ------------- ------------- ------------
Operating expenses
Maintenance and support 2,383,022 2,216,823 6,970,219 6,039,228
Depreciation 1,760,557 1,553,115 4,990,287 4,377,014
Amortization 247,150 122,272 731,582 359,883
Customer operations 2,722,200 2,563,691 8,230,484 6,742,900
Corporate operations 1,178,274 1,150,517 3,567,112 3,568,672
Taxes other than income 198,343 219,856 610,360 582,903
------------- ------------- ------------- ------------
8,489,546 7,826,274 25,100,044 21,670,600
------------- ------------- ------------- ------------
Operating income 4,158,926 4,105,051 12,301,878 9,595,178
Other expenses,
principally interest 336,133 423,985 1,084,008 1,103,290
Interest and dividend income 106,496 131,434 409,384 468,053
Gain on sale of investment - - - 926,702
------------- ------------- ------------- ------------
Income before income taxes
and minority interests 3,929,289 3,812,500 11,627,254 9,886,643
Income taxes 1,451,581 1,398,765 4,327,150 3,559,207
------------- ------------- ------------- ------------
Income before minority interests 2,477,708 2,413,735 7,300,104 6,327,436
Minority interests ( 185,786) ( 107,144) ( 370,049) ( 335,888)
------------- ------------- ------------- -------------
Net income $ 2,291,922 $ 2,306,591 $ 6,930,055 $ 5,991,548
============= ============= ============= ============
Net income per common share:
Income before minority
interests $ 0.189 $ 0.185 $ 0.559 $ 0.492
Minority interests ( 0.014) ( 0.008) ( 0.028) ( 0.026)
------------- ------------- ------------- -------------
Net income per common share $ 0.175 $ 0.177 $ 0.531 $ 0.466
============= ============= ============= ============
Weighted average shares
outstanding 13,071,149 13,046,951 13,052,528 12,851,719
============= ============= ============= ============
Cash dividends per share $ 0.098 $ 0.09475 $ 0.294 $ 0.28425
============= ============= ============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
CFW COMMUNICATIONS COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
<S> <C>
Nine Months Ended
----------------------------------
Sept. 30, Sept. 30,
1996 1995
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,930,055 $ 5,991,548
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,721,869 4,736,897
Deferred taxes and tax credit
amortization 524,171 ( 92,196)
Retirement benefits other than
pensions 434,612 476,179
Other ( 418,391) ( 244,894)
Distributions received from
investments 155,141 -
Share of equity investees income ( 440,552) -
Minority interests 224,295 16,075
Gain on sale of investment - ( 926,702)
Changes in assets and liabilities from operations:
Increase in accounts receivable ( 26,913) ( 2,641,567)
(Increase) decrease in materials
and supplies ( 43,212) 154,344
(Increase) decrease in other
current assets ( 1,481,833) 1,057,322
Decrease in accounts payable ( 1,405,192) ( 2,235,032)
Increase in other accrued liabilities 855,938 814,158
Increase in other current liabilities 951,127 811,762
------------- ------------
Net cash provided by operating activities 11,981,115 7,917,894
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ( 10,485,686) ( 7,283,759)
Cash flows from securities and
investments ( 3,156,270) 2,183,255
------------- ------------
Net cash used in investing activities ( 13,641,956) ( 5,100,504)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock redeemed ( 175,313) ( 2,509,625)
Cash dividends ( 3,815,191) ( 3,622,156)
Proceeds from borrowings 4,000,000 -
Other, net 136 193,511
------------- ------------
Net cash provided by (used in)
financing activities 9,632 ( 5,938,270)
------------- -------------
Decrease in cash and cash equivalents ( 1,651,209) ( 3,120,880)
Cash and cash equivalents:
Beginning 5,264,986 8,558,886
------------- ------------
Ending $ 3,613,777 $ 5,438,006
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
CFW COMMUNICATIONS COMPANY
Notes To Condensed Consolidated Financial Statements
(1) In the opinion of the Company, the accompanying condensed consolidated
financial statements which are unaudited, except for the condensed
consolidated balance sheet dated December 31, 1995, contain all
adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position as of September 30, 1996 and
December 31, 1995 and the results of operations for the three and nine
month periods ended September 30, 1996 and September 30, 1995, and cash
flows for the nine months ended September 30, 1996 and 1995.
(2) The results of operations for the three and nine months ended September
30, 1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
(3) The Company has currently outstanding 329,096 options to acquire shares
of common stock, of which 178,172 are currently exercisable.
The earnings per common share were computed on the weighted average
number of shares outstanding. The common stock equivalents resulting
from the options mentioned in the preceding paragraph have been
included in the computation as outstanding shares.
(4) Decrease in common shares is due to shares purchased by the Company
under a plan approved by the Board of Directors authorizing up to
230,000 shares to be purchased. The decrease is partially offset by
issuances of common stock pursuant to the Company's stock option plan.
(5) In April, 1996 the Company announced that the Virginia PCS Alliance,
L.C. (Alliance), a consortium of ten independent telephone companies,
had signed an agreement to acquire from PCS PrimeCo, L.P. a portion of
its 30 MHz personal communication services (PCS) radio spectrum license
covering the central and western portions of Virginia. In July, 1996
the Federal Communications Commission (FCC) approved the transfer of
the partitioned license to the Alliance. The acquisition price for the
partitioned license is approximately $16 million.
In May, 1996 the FCC announced the conclusion of the Block "C" auction
of the 30 MHz PCS radio spectrum licenses. The Alliance was the high
bidder for 30 MHz PCS radio spectrum license for the Charlottesville
and Winchester Basic Trading Areas (BTAs) for a net purchase price of
approximately $12 million. In August, 1996 the FCC approved the
transfer of these licenses to the Alliance.
At September 30, 1996, the Company had made an investment of
approximately $5 million in the Alliance in exchange for common and
convertible preferred ownership interests. The Company will account for
its investment in the Alliance under the equity method of accounting
and anticipates holding a 20% common ownership interest in the Alliance
by year end. The Company will manage the build-out of the PCS system in
accordance with a services agreement with the Alliance. The Company has
guaranteed a short-term loan on behalf of the Alliance and also
anticipates providing additional support to the Alliance in the form of
guarantees and commitments to contribute additional capital pursuant to
capital calls to the Alliance partners.
7
<PAGE>
CFW COMMUNICATIONS COMPANY
Notes To Condensed Consolidated Financial Statements
Continued
(6) On October 25, 1996, the Company and R&B Communications, Inc.
(R&B)signed agreements to acquire from GTE Wireless (GTE) part of its
30 MHz PCS radio spectrum license within the Cincinnati Metropolitan
Trading Area, including most of West Virginia and parts of eastern
Kentucky, southwestern Virginia and eastern Ohio. The Company's share
of the acquisition price for the partitioned license is approximately
$4.25 million. In addition, GTE would purchase the Company's 30%
limited interest in the Roanoke MSA Cellular Partnership for
approximately $6.6 million. The Company also entered into an agreement
to acquire from GTE its 10% limited interest in the Virginia RSA6
Cellular Partnership for approximately $1.3 million. The Company
currently has a 75.7% ownership interest in the Virginia RSA6 Cellular
Partnership. These transactions are all subject to approval by the
Federal Communications Commission (FCC).
For the three and nine month periods ended September 30, 1996, the
Company recognized earnings under the equity method of accounting from
the Roanoke MSA Cellular Partnership of approximately $83,000 and
$453,000, respectively ($209,000 and $529,000, respectively, for the
three and nine month periods ended September 30,1995).
8
<PAGE>
CFW COMMUNICATIONS COMPANY
Item 2. Management's Discussion And Analysis
Of Financial Conditions And Results Of Operations
Three and Nine Months Ended September 30, 1996 and 1995
OVERVIEW
The Company provides wireline services, such as local telephone
exchange, long distance and cable television services; wireless services, such
as cellular telephone, cable television and paging services; and directory
assistance services. The Company also provides other telecommunications related
services, such as directory advertising, security alarm monitoring and billing
and collection services.
The Company derives the majority of its revenues from charges to
customers for use of the Company's wireline and wireless network, including:
telephone revenues derived from local service and toll access charges; network
service revenues from charges to long distance and other carriers for use of the
Company's fiber optic network; cellular monthly service charges, including
roaming and long distance charges and equipment sales; cable television revenues
from installation charges and monthly subscription fees, including basic service
charges and charges for premium channels; directory assistance revenues from
providing long distance directory listings for a four state region; and various
other revenues from services such as directory advertising sales, paging and
enhanced services such as call waiting and caller identification. The Company's
expenses come primarily from the maintenance and support of its local exchange
and interexchange network and its cellular and cable television facilities, its
directory assistance support, and general and administrative expenses.
Historically, the Company has derived most of its revenues from its
base local exchange telephone business. However, as a result of the Company's
increasing focus on wireless telecommunications and other competitive
communications related businesses, more than 50% of the Company's revenues and a
larger percentage of operating cash flow is being generated by businesses other
than local exchange. (Operating cash flow is defined as operating income before
depreciation and amortization.) Accordingly, management believes operating cash
flow is a meaningful indicator of the Company's performance. Operating cash flow
is commonly used in the wireless telecommunications industry and by financial
analysts and others who follow the industry to measure operating performance.
Operating cash flow for third quarter 1996 was $6.2 million, a 6.7%
increase over third quarter 1995 operating cash flow of $5.8 million. Operating
cash flow for the nine months ended September 30, 1996 was $18.0 million, a
25.8% increase over the $14.3 million for the prior year's comparable period.
These results reflect continued growth in access and toll minutes and cellular
and wireless cable customer growth of 42% and 29%, respectively, over the same
period last year, coupled with the non-recurrence of heavy start-up costs
incurred in 1995 related to launching directory assistance. Offsetting these
increases were start-up losses associated with Richmond cable and expanded cable
channel lineups in the Shenandoah Valley and Alleghany County. In addition,
repairs and clean-up costs associated with Hurricane Fran led to higher costs
during third quarter 1996.
9
<PAGE>
CFW COMMUNICATIONS COMPANY
Item 2. Management's Discussion And Analysis
Of Financial Conditions And Results Of Operations
Continued
OPERATING REVENUES
Total operating revenues increased $0.7 million or 6.0% for the three
months ended September 30, 1996 and $6.1 million or 19.6% for the nine months
then ended as compared to the same periods in 1995. Revenues from the Company's
telephone operations, which include local and access and toll service revenues,
increased $73,100 or 1.3% for the three months ended September 30, 1996 and $1.4
million or 8.4% for the nine month period then ended as compared to the same
time periods for 1995. Revenues from the Company's wireless communications and
other operations, which include cellular, directory advertising, billing and
collection, wireless cable, fiber optic leases, directory assistance, sales and
lease of equipment and other miscellaneous revenues, increased $0.6 million or
10.4% for the three months and $4.8 million or 31.9% for the nine months ended
September 30, 1996.
TELEPHONE REVENUES
Local service revenues increased $499,600 or 26.7% and $1.3 million or
23.3% for the three and nine months ended September 30, 1996. The January, 1996
implementation of an extended area calling plan for Waynesboro customers, which
enables local calling or reduced per-call charges to an extended area, accounted
for $349,300 of the three month increase and $918,300 of the nine month increase
in local service revenues. Revenues from toll minutes for calling to the
extended area were classified as access and toll revenues in 1995. Other factors
contributing to the increase were increased access lines, service connection
charges, and demand for custom calling features, such as call waiting, call
forwarding and caller identification. The Company has not had a general
telephone rate increase since November 1, 1981.
Access and toll service revenues decreased $426,500 or 11% for the
three months ended September 30, 1996 and remained constant for the nine month
period as compared to 1995. The decrease in the three month revenues were due
primarily to classification of revenues from the extended area calling plan as
local services revenues in 1996. The nine month period was offset by additional
access revenues realized due to the Company's exit in July, 1995 from the
National Exchange Carrier Association's (NECA's) average schedule interstate
access revenue pool in favor of billing its own interstate access rates to
interexchange carriers and retaining the revenues.
WIRELESS COMMUNICATIONS AND OTHER REVENUES
Directory assistance service, which became operational late in the
first quarter of 1995, remained constant for the three month period and
generated an additional $2.0 or 41.2% in revenues for the nine month period of
1996 as compared to the same periods for 1995. Cellular revenues, including
access, airtime and roaming charges, increased by $397,800 or 24.3% and $1.0
million or 22.9% for the three and nine month periods ended September 30, 1996.
These increases are primarily due to a 42% growth in the RSA6 cellular customer
base over the first nine months of 1995. Wireless cable customer growth of 29%
is responsible for $90,900 or 15.6% of the three month revenue increase and
$276,600 or 16.3% of the nine month increase in wireless communications and
other operations for the periods ended September 30, 1996. The cable customer
growth reflects continued penetration in the Charlottesville and Shenandoah
Valley markets and commencement of wireless cable services in the Richmond
market in December, 1995. Revenues from wireline cable, which was acquired
during June,
10
<PAGE>
CFW COMMUNICATIONS COMPANY
Item 2. Management's Discussion And Analysis
Of Financial Conditions And Results Of Operations
Continued
1995, remained constant for the third quarter 1996 and increased $704,400 for
the nine months ended September 30, 1996. Revenues from leased fiber optic
capacity increased $116,900 or 13.8% and $449,700 or 21.6% for the three and
nine months ended September 30, 1996 primarily due to a 27% increase in DS-3's
leased.
OPERATING EXPENSES
Operating expenses increased $663,300 or 8.5% for the three month
period ended September 30, 1996 and $3.4 million or 15.8% for the nine months
then ended as compared to the same time periods in 1995. Depreciation and
amortization expense increased $332,300 and $985,000 for the three and nine
months ended September 30, 1996 as a result of capital additions and the June,
1995 wireline cable acquisition. Cellular operating expenses increased $131,800
or 19% and $775,600 or 42% for the three and nine months ended September 30,
1996, primarily due to a 42% year over year customer growth. During the nine
month period ended September 30, 1996, commissions paid for the sale of cellular
phones increased $253,500 or 58% due to a 75% increase in phones sold compared
to 1995. Wireline cable operating expenses, excluding depreciation and
amortization, increased $346,200 for the nine months ended September 30, 1996 as
compared to the same period for 1995, reflecting the Company ownership since
June, 1995.
As a percentage of total operating revenues, total operating expenses
increased slightly from 65.6% to 67.1% for the three months and decreased from
69.3% to 67.1% for the nine months ended September 30, 1996. Continued operating
efficiencies in directory assistance operations, since its start-up in early
1995, have contributed to reduced staffing levels and improved operating margins
for the nine months ended September 30, 1996.
MAINTENANCE AND SUPPORT EXPENSE
Maintenance and support expense, which includes property and equipment
maintenance, general engineering and general administration of plant operations,
increased $166,200 or 7.5% for the three months ended September 30, 1996 and
$931,000 or 15.4% for the nine months then ended. These increases are primarily
attributable to Company growth and property and equipment expansion offset by a
reduction in leased facility access charges.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense increased $332,300 or 19.8% and
$985,900 or 21% for the three and nine month periods ended September 30, 1996.
This increase was due to commencement of wireless cable services in Richmond in
December, 1995 and the June, 1995 acquisition of a wireline cable operation.
Property and equipment additions to meet continuing customer growth have also
contributed to this increase.
CUSTOMER OPERATIONS EXPENSE
Customer operations expense, which includes marketing, product
management, product advertising, sales, publication of a regional telephone
directory, customer services, directory assistance services and local directory
services increased $158,500 or 6.2% and $1.5 million or 22.1% for the three and
nine month periods, reflecting an increase in staffing for cellular and cable
and additional sales commissions, primarily related to sales of cellular phones
and service. In addition, the new directory assistance service, which became
fully operational in June, 1995, added $297,900 during the nine months ended
September 30, 1996 as compared to 1995.
11
<PAGE>
CFW COMMUNICATIONS COMPANY
Item 2. Management's Discussion And Analysis
Of Financial Conditions And Results Of Operations
Continued
CORPORATE OPERATIONS EXPENSE
Corporate operations expense, such as executive, planning, accounting,
external relations, legal, purchasing, information management, human resources
and other general and administrative expenses increased $27,800 or 2.4% for the
three month period and remained flat for the nine months ended September 30,
1996.
TAXES, OTHER THAN INCOME
Taxes, other than income, which include property and special assessment
taxes, decreased $21,500 or 9.8% for the three month period ended September 30,
1996, and increased $27,500 or 4.7% for the nine month period as a result of
taxes on additional property and equipment.
OTHER EXPENSES, PRINCIPALLY INTEREST
Other expenses, principally interest, decreased $87,900 or 20.7% and
$19,300 or 1.7% for the three and nine months ended September 30, 1996. These
decreases are primarily attributable to an increase in capitalized interest due
to additional construction activity during 1996 offset by a loss on sale of a
security and investment.
INTEREST AND DIVIDEND INCOME
Interest and dividend income decreased $24,900 or 19% for the three
months ended September 30, 1996 and $58,700 or 12.5% for the nine month period.
These decreases are a result of cash expenditures for capital expansion.
GAIN ON SALE OF INVESTMENT
In the first quarter of 1995 the Company sold its Virginia MetroTel,
Inc. investment in exchange for $65,600 and stock of the acquiring company which
is publicly traded on a national exchange. A gain of $787,600 resulted from the
sale. Stock of the acquiring company was sold for an additional gain of
$128,300.
INCOME TAXES
Income taxes increased $52,800 for the third quarter of 1996 as
compared to the same period in 1995. Income taxes for the nine month period
ended September 30, 1996 increased $767,900 or 21.6%. These increases are due to
an increase in taxable income from operations. The effective rate for 1996 is
38.4% as compared to 37.3% for 1995. Additional non-deductible goodwill
amortization related to business acquisitions is the primary reason for the
increased effective tax rate.
MINORITY INTERESTS
Minority interests increased $78,600 or 73.4% for the three month
period and $34,200 or 10.2% for the nine month period, reflecting continued
growth of cellular customers.
12
<PAGE>
CFW COMMUNICATIONS COMPANY
Item 2. Management's Discussion And Analysis
Of Financial Conditions And Results Of Operations
Continued
NET INCOME
Net income increased $938,500 or 15.7% for the nine months ended
September 30, 1996 and was comparable to the third quarter of 1995. Results for
1995 included a gain of $568,300 ($915,600 pre-tax) from the first quarter sale
of an investment. Excluding this gain, net income for the nine months from
operations increased $1.5 million or 27.8%, reflecting strong growth in access
and toll minutes coupled with the non-recurrence of heavy start-up costs
incurred in 1995 related to launching directory assistance and expansion of
wireless cable.
LIQUIDITY AND CAPITAL RESOURCES
In the nine months ended September 30, 1996, net cash provided by
operating activities was $11.9 million. Principal changes in operating assets
and liabilities included a $1.6 million increase in current assets and a
$401,900 increase in current liabilities. The increase in current assets
resulted from an increase in prepaid expenses for a deposit made to allow the
Company to participate in the bidding for additional wireless channels being
auctioned by the Federal Communications Company. Operating liabilities decreased
due to a decrease in accounts payable, primarily related to payments on capital
projects. The Company's investing activities included $10.5 million for the
purchase of property and equipment, including $762,200 for fiber expansion
related to competitive access services, $1.3 million for improvements to the
wireline cable service, $2.3 million for expenditures related to equipment for
additional wireless cable subscribers, $434,100 for a computer systems upgrade
to the AS400, and $533,400 for additional AT&T 5ESS switching capabilities. Net
cash provided by financing activities included $4.0 million received from
available credit lines, $3.8 million used to pay dividends on outstanding
capital stock, and $175,300 used to retire common shares.
For the first nine months of 1996, working capital decreased $2.5
million. Capital expenditures for the remainder of the year are anticipated to
be approximately $4 million for market expansion of the wireless cable and fiber
optics systems and improvements to the wireline cable system. The Company has
guaranteed a short-term loan on behalf of the Alliance and also anticipates
providing additional support to the Alliance in the form of guarantees and
commitments to contribute additional capital pursuant to capital calls to the
partners. During the fourth quarter of 1996, the Company anticipates finalizing
the terms and conditions of such support concurrent with the Alliance's
finalizing its debt and equity instruments associated with its purchasing
network equipment and licenses. During the fourth quarter 1996, the Company will
be seeking FCC approval of the purchase of the PCS partitioned license, sale of
its 30% limited interest in the Roanoke MSA Cellular Partnership and purchase of
an additional 10% interest in its majority owned Virginia RSA6 Cellular
Partnership. (See Note 6.) The Company anticipates the FCC would act on these
transactions in 1997. Funds required for the investment in and support of the
Alliance, dividends, investment in aforementioned PCS license and cellular
partnership interest, capital expenditures, partnership contributions and annual
interest payments on long-term debt are expected to be provided from available
cash, cash generated from operations and borrowings available under the
Company's lines of credit.
13
<PAGE>
CFW COMMUNICATIONS COMPANY
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes In Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission Of Matters To A Vote Of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K - None
14
<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.
CFW COMMUNICATIONS COMPANY
s/J. S. Quarforth
----------------------------------
J. S. Quarforth, President
November 13, 1996 and Chief Executive Officer
s/C. S. Smith
----------------------------------
C. S. Smith, V P - Administration,
November 13, 1996 Treasurer and Secretary
s/M. B. Moneymaker
----------------------------------
M. B. Moneymaker
November 13, 1996 Vice President - Finance
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,613,777
<SECURITIES> 0
<RECEIVABLES> 8,810,440
<ALLOWANCES> 0
<INVENTORY> 2,024,049
<CURRENT-ASSETS> 16,151,302
<PP&E> 117,689,733
<DEPRECIATION> 35,683,756
<TOTAL-ASSETS> 147,103,769
<CURRENT-LIABILITIES> 12,966,610
<BONDS> 20,000,000
0
0
<COMMON> 43,355,988
<OTHER-SE> 45,825,513
<TOTAL-LIABILITY-AND-EQUITY> 147,103,769
<SALES> 0
<TOTAL-REVENUES> 37,401,922
<CGS> 0
<TOTAL-COSTS> 25,100,044
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,746,240
<INCOME-PRETAX> 11,627,254
<INCOME-TAX> 4,327,150
<INCOME-CONTINUING> 6,930,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,930,055
<EPS-PRIMARY> 0.531
<EPS-DILUTED> 0
</TABLE>
