FORM 10-Q QUARTERLY REPORT UNDER SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For quarter Ended June 30, 1995 Commission File Number 33-30715
CONESTOGA ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 23-2565087
(State of Incorporation) (IRS Employer Number)
202 East First Street, Birdsboro, Pennsylvania 19508
(Address of Principal executive offices)
Registrant's telephone number, including area code (610) 582-8711
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_______
As of June 30, 1995 the number of shares of Common Stock, par value $5.00
outstanding was 3,848,922
CONESTOGA ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS ( UNAUDITED )
June 30, 1995, June 30, 1994 and December 31, 1994
ASSETS
6/30 6/30 12/31
1995 1994 1994
Current Assets
Cash and Cash Equivalents $1,609,586 $705,671 $907,050
Accounts receivable, including unbilled
revenue 3,730,368 3,443,790 3,602,102
*Material and Supplies, at average cost 733,943 379,985 596,716
Prepaid expenses 130,365 119,535 361,535
Total Current Assets 6,204,262 4,648,981 5,467,403
Investments and Other Assets
Investments in equity securities 2,058,990 1,776,000 1,913,165
Investments in partnerships 1,954,375 1,483,330 1,664,744
Nonregulated property and equipment, 881,280 908,880 945,387
Prepaid Pension Costs 1,296,129 970,503 1,096,731
Other 70,963 97,279 57,812
6,261,737 5,235,992 5,677,839
Plant, at Cost
In Service 80,510,664 76,166,298 79,340,171
Under Construction 927,863 1,575,713 502,215
81,438,527 77,742,011 79,842,386
Less accumulated depreciation 37,388,906 33,175,740 35,188,512
Net plant in service 44,049,621 44,566,271 44,653,874
$56,515,620 $54,451,244 $55,799,116
*Material and supplies are used to provide service
CONESTOGA ENTERPRISES, INC.
LIABILITIES AND STOCKHOLDERS' EQUITY
6/30 6/30 12/31
1995 1994 1994
Current Liabilities
Current maturities of long term debt $390,000 $390,000 $390,000
Accounts payable 1,456,060 1,778,013 1,868,367
Notes payable 500,000
Accrued:
Taxes (106,741) (396,263) 2,768
Payroll & Vacation Pay 488,422 439,619 392,745
Advance billings / Customer Deposits 954,591 428,220 910,893
Total Current Liabilities 3,182,332 3,139,589 3,564,773
Long Term Liabilities
Long Term Debt, less Current Maturities 4,840,000 5,230,000 5,035,000
Accumulated Post Retirement Cost 374,579 226,493 302,247
Other 177,302 153,431 165,258
5,391,881 5,609,924 5,502,505
Deferred Income Taxes 6,899,387 6,737,967 6,823,482
Stockholders' Equity:
Common stock, par value $5 per
share; authorized 10,000,000 shares;
issued and outstanding;
6/30/95 6/30/94 12/31/94
3,848,922 3,660,494 3,665,967 19,244,610 18,302,470 18,329,835
Additional Paid-In Capital 4,769,183 837,032 950,049
Common stock dividend payable 0 0 4,733,909
Retained earnings 16,859,641 19,824,262 15,814,593
Net unrealized appreciation on marketable
equity securities, net of tax 168,586 0 79,970
Total Capital 41,042,020 38,963,764 39,908,356
$56,515,620 $54,451,244 $55,799,116
Note - Long-term debt consisted of the
following at June 30, 1995, June 30, 1994 and December 31, 1994
10 year term note at prime rate due 1997 2,500,000 2,500,000 2,500,000
10 year term note at prime rate due 2002 2,730,000 3,120,000 2,925,000
$5,230,000 $5,620,000 $5,425,000
Less current Maturities 390,000 390,000 390,000
$4,840,000 $5,230,000 $5,035,000
CONESTOGA ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
June 30, 1995 June 30, 1994
QUARTER YEAR QUARTER YEAR
Operating Revenues: ENDED TO DATE ENDED TO DATE
Local Network Service $1,501,436 $2,874,753 $1,480,012 $2,976,378
Network Access 2,590,460 4,948,435 2,248,830 4,640,036
Long Dist. Network Svc. 2,559,146 5,091,695 2,588,058 5,449,208
Nonreg. Sales & Lease 1,314,392 2,124,293 1,115,097 1,941,807
Miscellaneous 250,968 499,556 231,971 468,856
8,216,402 15,538,732 7,663,968 15,476,285
less uncollectible
operating revenues 56,507 41,871 46,435 40,680
8,159,895 15,496,861 7,617,533 15,435,605
Operating Expenses:
Plant Specific 879,703 1,600,585 850,383 1,516,381
Plant Non-Specific:
Network & Other 347,824 668,787 346,678 659,743
Depreciation 1,258,421 2,507,997 1,197,340 2,374,525
Customer Operations 1,185,927 2,272,505 1,097,971 2,232,929
Corporate Operations 472,922 1,001,789 426,643 882,889
Nonreg. Sales & Lease 699,138 1,294,589 694,210 1,357,646
Operating taxes, other 332,645 652,439 322,617 648,325
5,176,580 9,998,691 4,935,842 9,672,438
Operating Income 2,983,315 5,498,170 2,681,691 5,763,167
Other (Income)Deductions, Net:
Interest Expense 112,910 $228,574 101,808 $188,391
Income from Partnerships (253,245) (283,583) (186,274) (186,274)
Other, Net (67,974) (60,783) 23,874 (13,797)
(208,309) (115,792) (60,592) (11,680)
Income Before Income Taxes 3,191,624 5,613,962 2,742,283 5,774,847
Income Taxes 1,277,321 2,260,087 1,113,997 2,410,323
Net Income $1,914,303 $3,353,875 $1,628,286 $3,364,524
*Earnings per common share $0.50 $0.87 $0.42 $0.87
*Dividends per common share $0.30 $0.60 $0.26 $0.53
* Adjusted to reflect 5% stock dividend Paid February 28, 1995
CONESTOGA ENTERPRISES, INC.
Consolidated Statement of Cash Flow (Unaudited)
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
1995 1994
Cash Flows from Operating Activities:
Net Income $3,353,876 $3,364,524
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & Amortization $2,505,590 $2,372,197
Changes in assets and liabilities:
Accounts Receivable ($128,265) $75,738
Inventories ($137,227) $16,454
Other Current Assets and Prepaid Expenses ($74,969) ($35,215)
Accounts Payable ($412,307) $214,171
Other accrued Expenses $139,375 ($64,317)
Income Taxes Payable ($2,768) ($647,318)
Deferred Taxes $75,905 $4,633
Net Deferred Charges/Credits $71,224 $48,021
$2,036,558 $1,984,364
Net Cash Provided by
Operating Activities $5,390,434 $5,348,888
Cash Flows From Investing Activities:
Capital Expenditures ($1,901,337) ($2,790,889)
Increase in Investments ($282,734) ($1,036,142)
Net Cash Used in
Investing Activities ($2,184,071) ($3,827,031)
Cash Flows From Financing Activities:
Proceeds From Issuance of Common Stock:
Dividend Reinvestment $0 $0
Employee Stk Purch. Prog. $0 $0
Proceeds from Notes Payable (credit line) $0 $500,000
Proceeds from Long Term Debt $0 $0
Refinancing of Long Term Debt $0 $0
Principal Payments of Long Term Debt ($195,000) ($195,000)
Dividends Paid ($2,308,828) ($2,049,877)
Net Cash Provided
By Financing Activities ($2,503,828) ($1,744,877)
Net Increase in Cash & Cash Equivalents $702,535 ($223,020)
Cash & Cash Equivalents at Beginning Of Year $907,051 $928,691
Cash & Cash Equivalents at JUNE 30 $1,609,586 $705,671
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Payments for:
Interest $226,641 $239,798
Income Taxes $1,609,680 $2,655,093
CONESTOGA ENTERPRISES, INC.
The information shown in this interim report is unaudited for June 30, 1995 and
June 30, 1994. However,the information reflects all normal recurring
adjustments which are, in the opinion of management, necessary to a fair
statement of results for the interim periods.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE QUARTERLY INCOME STATEMENTS
On December 31, 1989, a Plan of Merger became effective, resulting in Conestoga
Enterprises, Inc.(CEI) becoming the parent company of The Conestoga Telephone
and Telegraph Company(CTT). The merger was accounted for as a pooling of
interests.
During 1991, CEI accepted assignment of CTT interests in its joint ventures
to offer cellular telephone service ( Berks Reading Area CellularEnterprises
(BRACE) and Lancaster Area Cellular Enterprises (LACE)) and 100 % ownership
of CTT's subsidiary Northern Communications, Inc (NCI). Both were handled as
non cash dividends.
Conestoga Mobile Systems, Inc.(CMS) was formed in 1991 as a new subsidiary to
provide pager services. CTT transferred its investment in deregulated pager
equipment and associated depreciation reserve to CEI as a non cash dividend,
who in turn transferred the pager equipment and associated reserve to CMS as
additional paid in capital to the subsidiary. There was no effect on the
consolidated financial statements.
During the second quarter of 1995, CEI and Infocore, Inc. (a King of Prussia Pa.
firm) formed Conestoga Wireless Company (CWC). CWC is a limited liability
company which is owned 60% by CEI and 40% by Infocore, Inc. CWC will provide
broadband personal communication services if it is successful in acquiring
licenses in the Federal Communications Commission's PCS Spectrum Auction.
FINANCIAL CONDITIONS
The cash and cash equivalents for the first six months of the current year
increased $702,535, which is an increase over the previous year's first six
months primarily due to no additional investments in marketable equity
securities of other telecommunications companies and decreased capital
expenditures.
Capital expenditures are primarily provided by internally generated funds.
There was no outside short term borrowing outstanding on June 30, 1995.
RESULTS OF OPERATIONS
Net income for the first six months is even with the first six months of the
previous year. The consolidated financial statements (unaudited) for the
period include profits (losses) from the company's subsidiaries and joint
ventures as follows:
CT&T Local Exchange Carrier $2,950,969
NCI Reseller of Long Dist. $265,881
CMS Paging Services ($3,451)
BRACE/LACE Cellular Svc. Partners $253,245
OPERATING REVENUES
Operating Revenues for the second quarter of 1995 were $8,159,895, an
increase of 11.2% when compared with the first quarter of 1995. Operating
Revenues for the current quarter, when compared with the second quarter of
1994 increased 7.1%.
Operating Revenues for the first six months of 1995 were $15,496,861, an
increase of .4% when compared with the first six months of 1994. The
increase in operating revenues is comprised of the following:
Increase/
(Decrease) %
Local Network Ser ($101,625) -3.4%
Network Access $308,399 6.7%
Long Distance Net ($357,513) -6.6%
Nonregulated $182,486 9.4%
Miscellaneous (ne $29,509 6.9%
Local Network Servic The decrease in local service revenues is a direct
result of the elimination of the touch tone line charge during the second
half of 1994, which was agreed to in the settlement of the show cause order
with the Pa. Public Utility Commission. Total telephone and pager access line
increased 2.1% during this current period.
Network Access The increase in access revenues is a result of increased
minutes of use, on the interlata long distance network , of about 16% during
the first six months of 1995.
Long Distance Networ The decrease in long distance revenues during the current
period when compared with the same period of 1994 can be attributed to
exceptional high volume of traffic during the first quarter of 1994 on the
intralata network as well as the optional EAS plan implemented during the
second half of 1994.
Nonregulated Increases in nonregulated revenues were recorded on both
Conestoga Telephone and Conestoga Mobile Systems during the first six months
of 1995.
OPERATING EXPENSES
Operating Expenses for the second quarter of 1995 were $5,176,580, an
increase of 7.4% when compared with the first quarter of 1995. Operating
Expenses for the current quarter. when compared with the second quarter of
1994 increased 4.9%.
Operating Expenses for the first six months of 1995 were $9,998,691, an
increase of 3.4% when compared with the first six months of 1994. The
increase in operating expenses is comprised of the following:
Increase/
(Decrease) %
Plant Specific $84,204 5.6%
Plant Non-Specifi $142,516 4.7%
Customer Operatio $39,576 1.8%
Corporate Operati $118,900 13.5%
Nonregulated ($63,057) -4.6%
Operating Taxes $4,114 0.6%
Plant Specific, The increase in plant specific operating expenses is due in part
to one time charges for renovations during the first quarter of 1995.
Plant Non-Specific Depreciation expense accounted for the increase in plant
non-specific operating expenses for the current period. Depreciation expense
increased $133,472 or 5.6% when compared with the same period of 1994.
Corporate OperationsThe increase in corporate operating expenses during the
first six months of 1995 can be attributed to several one time charges for
legal fees and consulting services.
OTHER (INCOME) DEDUCTIONS, NET
Interest on Funded Debt for the first six months of the current year
increased 21.3% This reflects the increase in the prime interest rate
during 1995 when compared with 1994. The interest rate with the local bank
is currently at prime rate. As of June 30, 1995 there were no short term
obligations outstanding. The income from the partnerships providing cellular
services recorded an increase of 52.2% for the first
six months of 1995 when compared with the same period of the previous year.
INCOME TAXES
Income taxes for the first two quarters of 1995 are $2,260,087, a decrease
of 6.2% when compared with the first two quarters of 1994. This is due to the
decrease in the Pa. corporate tax rate from 11.99% in 1994 to 9.99% this
current year.
CONESTOGA ENTERPRISES, INC.
PART II. OTHER INFORMATION
Item 6 (b) EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
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.
CONESTOGA ENTERPRISES, INC.
Date ____8/8/95_____ By_____/s/ John R. Bentz___________
John R. Bentz
Executive Vice President
Date____8/8/95 _____ By__/s/ Donald R. Breitenstein________
Donald R. Breitenstein
Controller
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