SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
We are submitting this amended 10Q for Sept. 30, 1995 due to an error in the
Management Discussion and Analysis section(Income Taxes). The income taxes
for the current year decreased rather than increased as the original filing
indicated.
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 September 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 September 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 )
September 30, 1995, September 30, 1994 and December 31, 1994
ASSETS
9/30 ** 9/30 12/31
1995 1994 1994
Current Assets
Cash and Cash Equivalents $1,501,331 $843,883 $907,050
Accounts receivable, including unbilled
revenue 3,978,771 3,686,628 3,602,102
*Material and Supplies, at average cost 518,204 475,243 596,716
Prepaid expenses 339,774 397,279 361,535
Total Current Assets 6,338,080 5,403,033 5,467,403
Investments and Other Assets
Investments in equity securities 2,604,306 1,775,490 1,913,165
Investments in partnerships 2,126,937 1,511,839 1,664,744
Nonregulated property and equipment, 893,826 924,856 945,387
Prepaid Pension Costs 1,395,828 1,000,884 1,096,731
Other 67,313 98,747 57,812
7,088,210 5,311,816 5,677,839
Plant, at Cost
In Service 82,561,628 77,334,380 79,340,171
Under Construction 1,299,889 1,292,468 502,215
83,861,517 78,626,848 79,842,386
Less accumulated depreciation 38,579,092 34,233,363 35,188,512
Net plant in service 45,282,425 44,393,485 44,653,874
Total Assets 58,708,715 55,108,334 55,799,116
*Material and supplies are used to provide service
**Certain items have been restated for comparative purposes
LIABILITIES AND STOCKHOLDERS' EQUITY
9/30 ** 9/30 12/31
1995 1994 1994
Current Liabilities
Current maturities of long term debt $390,000 $390,000 $390,000
Accounts payable 1,723,314 1,326,335 1,868,367
Notes payable 1,000,000 500,000
Accrued:
Taxes 0 0 2,768
Payroll & Vacation Pay 476,617 422,583 392,745
Advance billings / Customer Deposits 945,983 710,203 910,893
Total Current Liabilities 4,535,914 3,349,121 3,564,773
Long Term Liabilities
Long Term Debt, less Current Maturities 4,742,500 5,132,500 5,035,000
Accumulated Post Retirement Cost 411,135 264,815 302,247
Other 183,428 159,399 165,258
5,337,063 5,556,714 5,502,505
Deferred Income Taxes 7,043,046 6,757,558 6,823,482
Minority Interest (cwc) $98,937
Stockholders' Equity:
Common stock, par value $5 per
share; authorized 10,000,000 shares;
issued and outstanding;
9/30/95 9/30/94 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 17,358,256 20,305,439 15,814,593
Net unrealized appreciation on marketable
equity securities, net of tax 321,706 0 79,970
Total Capital 41,792,692 39,444,941 39,908,356
Total Liabilities and
Stockholders' Equity 58,708,715 55,108,334 55,799,116
Note - Long-term debt consisted of the
following at September 30, 1995, September 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 2,632,500 3,022,500 2,925,000
$5,132,500 $5,522,500 $5,425,000
Less current Maturities 390,000 390,000 390,000
$4,742,500 $5,132,500 $5,035,000
**Certain items have been restated for comparative purposes
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Septemb ** September 30, 1994
QUARTER YEAR QUARTER YEAR
ENDED TO DATE ENDED TO DATE
Operating Revenues:
Local Network Service 1,503,306 $4,378,059 $1,441,723 $4,418,101
Network Access 2,290,611 7,239,046 2,242,340 6,882,376
Long Dist. Network Svc. 2,549,789 7,641,484 2,624,032 8,073,240
Nonreg. Sales & Lease 1,095,379 3,219,672 890,080 2,831,887
Miscellaneous 198,171 697,727 242,771 711,627
7,637,256 23,175,988 $7,440,946 $22,917,231
less uncollectible
operating revenues 58,940 100,811 36,119 76,799
7,578,316 23,075,177 7,404,827 22,840,432
Operating Expenses:
Plant Specific $702,328 $2,302,913 $742,023 $2,258,404
Plant Non-Specific:
Network & Other 316,058 984,845 308,566 968,309
Depreciation 1,305,010 3,813,007 1,215,352 3,589,877
Customer Operations 1,143,712 3,416,217 1,071,946 3,304,875
Corporate Operations 527,182 1,528,971 411,925 1,294,814
Nonreg. Sales & Lease 683,040 1,977,629 651,080 2,008,726
Operating taxes, other 323,064 975,503 269,651 917,976
5,000,394 14,999,085 4,670,543 14,342,981
Operating Income 2,577,922 8,076,092 2,734,284 8,497,451
Other (Income)Deductions, Net:
Interest Expense 116,213 344,787 117,433 305,824
Income from Partnerships (270,611) ($554,194) (45,899) ($232,173)
Other, Net (138,809) ($199,592) (137,984) ($151,781)
(293,207) (408,999) (66,450) (78,130)
Income Before Income Taxes 2,871,129 8,485,091 2,800,734 8,575,581
Income Taxes 1,217,837 3,477,924 $1,221,412 3,631,735
Net Income 1,653,292 5,007,167 1,579,322 4,943,846
*Earnings per common share $0.43 $1.30 $0.41 $1.28
*Dividends per common share $0.30 $0.90 $0.29 $0.82
* Adjusted to reflect 5% stock dividend Paid February 28, 1995
**Certain items have been restated for comparative purposes
CONESTOGA ENTERPRISES, INC.
Consolidated Statement of Cash Flow (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
Cash Flows from Operating Activities:
Net Income $5,007,167 $4,943,846
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & Amortization $3,809,090 $3,586,547
Changes in assets and liabilities:
Accounts Receivable ($376,668) ($167,100)
Inventories $78,512 ($78,804)
Other Current Assets and Prepaid Expens ($277,336) ($66,625)
Accounts Payable ($145,053) ($237,507)
Other accrued Expenses $118,962 $200,630
Income Taxes Payable ($2,768) ($527,770)
Deferred Taxes $219,564 $24,224
Net Deferred Charges/Credits $117,556 $90,843
$3,541,859 $2,824,438
Net Cash Provided by
Operating Activities $8,549,026 $7,768,284
Cash Flows From Investing Activities:
Capital Expenditures (4,437,640) ($3,832,452)
Increase in Investments ($860,038) ($1,080,117)
Net Cash Used in
Investing Activities ($5,297,678) ($4,912,569)
Cash Flows From Financing Activities:
Increase in Minority Interest $98,937
Proceeds From Issuance of Common Stock:
Dividend Reinvestment $0 $0
Employee Stock Purchase Program $0 $0
Proceeds from Notes Payable (credit line$1,000,000 $500,000
Proceeds from Long Term Debt $0 $0
Refinancing of Long Term Debt $0 $0
Principal Payments of Long Term Debt ($292,500) ($292,500)
Dividends Paid (3,463,505) ($3,148,023)
Net Cash Provided
By Financing Activities (2,657,068) ($2,940,523)
Net Increase in Cash & Cash Equivalents $594,280 ($84,808)
Cash & Cash Equivalents at Beginning Of Yea $907,051 $928,691
Cash & Cash Equivalents at SEPTEMBER 30 $1,501,331 $843,883
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Payments for:
Interest $342,627 $357,230
Income Taxes $2,908,468 $3,199,189
CONESTOGA ENTERPRISES, INC.
The information shown in this interim report is unaudited for September 30, 1995
and September 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 Enterprise (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 paging services. CTT transferred its investment in deregulated paging
equipment and associated depreciation reserve to CEI as a non cash dividend, who
in turn transferred the paging 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 Pennsylvania 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 upcoming Federal Communications Commissions Personal
Communications Service (PCS) Spectrum Auction.
On October 19, 1995, CEI entered into a definitive agreement relating to the
acquisition of Buffalo Valley Telephone (BVT) Company by CEI. Pursuant to the
merger agreement BVT would become a subsidiary of CEI. The consideration to be
paid for each outstanding BVT share is either (i) $65.00 in cash, (ii) one share
of $65.00 convertible preferred stock of CEI, or (iii) 2.4 shares of CEI
common stock. Total consideration to be paid would be approximately $58 million.
FINANCIAL CONDITION
The cash and cash equivalents for the first nine months of the current
year increased $594,280, which is an increase over the previous year's first
nine months. The net cash provided by operating activities increased $717,421
for the current period, along with increases in investment activities of
$385,109 and decreases in financing activities of $283,455.
Capital expenditures are provided primarily by internally generated funds.
There was outside short term borrowing required during the third quarter and
outstanding on September 30, 1995 of $1,000,000.
RESULTS OF OPERATIONS
Net income for the first nine months increased 1.3% when compared with the
first nine 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:
CEI Parent Company $308,712
CT&T Local Exchange Carr$4,375,377
NCI Reseller of Long Di $379,836
CMS Paging Services ($43,453)
CWC PCS Company ($13,305)
OPERATING REVENUES
Operating Revenues for the third quarter of 1995 were $7,578,316, an increase
of 2.3% when compared with the third quarter of 1994. Operating Revenues for the
current quarter of this year, when compared with the second quarter decreased
7.1%. The current quarter included a one time negative adjustment in the access
revenues billed during the second quarter. The second quarter included the
settlement of the directory advertising for the 1993\94 directories.
Operating Revenues for the first nine months of 1995 were $23,075,177, an
increase of 1.0% when compared with the first nine months of 1994. The
increase in operating revenues is comprised of the following:
Increase/
(Decrease) %
Local Network Ser ($40,042) -0.9%
Network Access $356,670 5.2%
Long Distance Net($431,756) -5.3%
Nonregulated $387,785 13.7%
Miscellaneous (ne ($37,912) -6.0%
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, as well as revisions to the Extended Area
Service (EAS) settlements with Bell of Pa. resulting in a negative
settlement during 1995. Total telephone and pager access lines
increased 3.4% during the first nine months of 1995.
Network Access The increase in access revenues is a result of increased
minutes of use, on the interlata long distance network , of about 12.5% during
the first nine months of 1995.
Long Distance Networ The decrease in long distance revenues during the first
nine months of 1995, when compared with the same period of 1994 can be
attributed to the exceptionally 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. When a customer
selects an optional EAS plan they pay a slightly higher monthly fee, but then
have an extended local (free) calling area which reduces toll revenues.
Nonregulated Increases in nonregulated revenues were recorded on Conestoga
Telephone Company's non regulated lease and sale of equipment. Directory
advertising revenues also increased due to accrual of the 1994/95 directory
settlement. Conestoga Mobile Systems recorded increased revenues during this
period when compared with the same period of 1994.
OPERATING EXPENSES
Operating Expenses for the third quarter of 1995 were $5,000,394, an increase
of 7.1% when compared with the third quarter of 1994. Operating Expenses for
the current quarter of this year when compared with the second quarter
decreased 3.5% due to central office software upgrade during the second quarter.
Operating Expenses for the first nine months of 1995 were $14,999,085, an
increase of 4.6% when compared with the first nine months of 1994. The increase
in operating expenses is comprised of the following:
Increase/
(Decrease) %
Plant Specific $44,509 2.0%
Plant Non-Specifi $239,666 5.3%
Customer Operatio $111,342 3.4%
Corporate Operati $234,157 18.1%
Nonregulated ($31,097) -1.5%
Operating Taxes $57,527 6.3%
Plant Specific The increase in plant specific operating expenses is due in
part to building renovations during 1995. General Support expenses increased
about 45%, while outside operating plant expenses were generally down.
Plant Non-Specific Depreciation expense accounted for the majority of the
increase in plant non-specific operating expenses for the current period.
Depreciation expense increased $216,181 or 6.1% when compared with the same
period of 1994.
Customer Operations The increase in customer operating expenses during the first
nine months of 1995 can be attributed to several one time charges for outside
consulting and studies as well as one time charges for billing system changes.
Corporate Operations The increase in corporate operating expenses during the
current year can be attributed to several one time charges for legal fees and
consulting services. Compensation expense also increased due to the addition of
two administrative employees.
OTHER (INCOME) DEDUCTIONS, NET
Interest on Funded Debt for the first nine months of 1995 increased 12.7%,
which reflects the increase in the prime interest rate during 1995. The
interest rate with the local bank is at prime rate less 1/2%. As of
September 30, 1995 there is short term obligation outstanding
of $1,000,000.
The income from the two partnerships which provide cellular telephone
service increased substantially during the first nine months of 1995 when
compared with the first nine months of
1994. Net income for the first nine months of 1995 increased by 139% to
$554,194 when compared to $232,173 for the same period of 1994.
INCOME TAXES
Income taxes for the first nine months of 1995 are $3,477,924, a decrease
of 4.2% when compared with the first nine months of 1994. The Pa. corporate
tax rate for 1995 decreased from 11.99% in 1994 to 9.99%.
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 ______11/14/95_______ By_______/s/ John R Bentz____________
John R. Bentz
Executive Vice President
Date______11/14/95________ By____/s/ Albert H Kramer____________
Albert H. Kramer
Vice President, Finance and Administration
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