SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No.1
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 14, 1996
(May 31, 1996)
Conestoga Enterprises, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 33-30715 23-256-5087
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
202 East First Street, Birdsboro, Pennsylvania 19508
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code 610-582-8711
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets.
On May 31, 1996 (the "Effective Date") Conestoga Enterprises,
Inc., a Pennsylvania corporation ("CEI"), CB Merger Corporation, a
Pennsylvania corporation ("CB"), and Buffalo Valley Telephone Company, a
Pennsylvania corporation ("BVT") consummated a transaction in which BVT was
merged into CB, the name of CB was changed to Buffalo Valley Telephone Company
and each share of the outstanding common stock of BVT will be exchanged by CEI
for $65.00 in cash, one share of CEI $3.42 Series A Convertible Preferred
Stock, par value $65.00 per share, or 2.4 shares of CEI Common Stock. As a
result of the merger, on the Effective Date all properties and assets of every
kind held by BVT, including the right to provide telephone utility services in
parts of Union and Northumberland Counties of Pennsylvania, became properties
and assets of CB, and CB became liable for all the debts, liabilities and
other obligations of BVT.
The total value of the transaction is approximately Fifty-eight
Million Dollars ($58,000,000.00). The shareholders of BVT have been furnished
with election forms to elect cash, CEI $3.42 Series "A" Convertible Preferred
Stock or CEI Common Stock in exchange for their BVT shares. Their elections
are subject to allocation so that no more than fifty percent (50%) of the
aggregate consideration paid by CEI will be in cash. If the elections by the
BVT shareholders would result in more than fifty percent (50%) of the
aggregate consideration being cash, CEI will issue CEI $3.42 Series "A"
Convertible Preferred Stock proportionately to the BVT shareholders electing
cash for the amounts in excess of 50%. Any BVT shareholder who does not
submit an election form to CEI will receive CEI common shares. The election
forms must be submitted to CEI by 5:00 P.M., New York time, on June 28, 1996
(the "Election Deadline").
BVT will be operated as a wholly owned subsidiary of CEI and will
continue to conduct business as an independent local exchange carrier
providing local telephone service to Union and Northumberland Counties in
Central Pennsylvania.
The merger was approved by the BVT shareholders at a shareholders'
meeting held on May 18, 1996. The CEI $3.42 Series A Convertible Preferred
Stock and the issuance of the CEI $3.42 Series A Convertible Preferred Stock
and the CEI Common Stock to the shareholders of BVT in the transaction were
authorized by the CEI shareholders at a shareholders' meeting held on May 22,
1996.
The purchase price for the BVT stock, as well as all the terms of
the merger, was the result of arms-length negotiations between representatives
of CEI and BVT. In arriving at the terms of the Agreement and Plan of Merger,
the Boards of Directors of CEI and BVT considered many factors, including,
without limitation, information concerning the financial condition, current
business and future prospects of CEI and BVT, the enhanced geographic market
of the combined entity, and changes taking place in the telecommunications
field, both from a regulatory and a technological stand-point. In addition,
the Boards of Directors of CEI and BVT considered stock market data for CEI
and BVT, the financial terms of other recent combinations in the
telecommunications industry, the compatibility of management, operations and
equipment of CEI and BVT, and the tax consequences of the merger to the BVT
shareholders.
Prior to October 18, 1995, the date of the Plan and Agreement of
Merger, there was no material relationship between CEI and BVT or any of their
affiliates, directors, or officers, or any associate of any director or
officer, except that CEI owned 16,000 BVT common shares out of a total of
899,154 outstanding. However, effective on or about December 26, 1995, CEI
provided advisory services to BVT by appointing Kenneth A. Benner, a Director
and the Secretary/Treasurer of CEI, as Transition Manager pending the
consummation of the merger and assigning him to BVT.
CEI has arranged financing totalling Twenty-two Million Dollars
($22,000,000.00) from Principal Mutual Life Insurance Company for the cash
portion of the purchase price. If shareholders of BVT elect cash in the
transaction exceeding Twenty-two Million Dollars ($22,000,000.00), CEI will
fund the excess with cash on hand or bank financing.
Item 5. Other Events.
As of the Effective Date the name of CB was amended to Buffalo
Valley Telephone Company.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired:
1. Buffalo Valley Telephone Company Audited Balance Sheets
as of December 31, 1995 and 1994 and the related Audited
Statements of Income, Stockholders Equity and Cash Flows for
each of the three years in the period ended December 31, 1995.
2. Buffalo Valley Telephone Company Unaudited Balance Sheets
as of March 31, 1996 and 1995 and the related Statements of
Income and Cash Flows for the three months then ended.
(b) Pro Forma Financial Information
(c) Exhibits
2 Agreement and Plan of Merger dated as of October
18, 1995 (incorporated by reference to Appendix
A to Amendment No. 2 to CEI's Form S-4
Registration Statement No. 33-65367 filed on
April 19, 1996).
23 Consent of William R. Maslo
99 Press Release issued May 31, 1996.
Item 7 (a) 1
INDEPENDENT AUDITOR'S REPORT
Buffalo Valley Telephone Company
20 South Second Street
Lewisburg, Pennsylvania 17837
Gentlemen:
I have audited the accompanying balance sheets of the Buffalo Valley
Telephone Company as of December 31, 1995 and 1994 and the related statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis
for my opinion.
As described in Note 11, the Company has restated its 1994 and 1993
financial statements to accrue the net present value of estimated benefit
payable under two employee supplemental income agreements and to charge to
expense the regulatory assets related to deferred extraordinary retirements
in the years the plant was retired.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Buffalo Valley
Telephone Company as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
William R. Maslo
Reading, Pennsylvania
February 22, 1996
Item 7 (a) 1
BUFFALO VALLEY TELEPHONE COMPANY
BALANCE SHEETS
DECEMBER 31, 1995 AND DECEMBER 31, 1994
December 31, 1995 December 31, 1994
ASSETS
CURRENT ASSETS
Cash and Equivalents. . $2,330,204.73 $2,501,313.80
Temporary Cash Investments 2,007,655.00 1,967,580.00
Accounts Receivable less
allowance for doubtful
accounts: 1995-$77,185.80;
1994-$65,650.83. . . . . 2,567,318.30 2,662,815.53
Material and Supplies
At Average Costs. . . . . . 247,672.43 240,882.51
Prepaid Expenses. . . . . . 229,615.60 13,383.84
Total Current Assets . . . . 7,382,466.06 7,385,975.68
NONCURRENT ASSETS
Investments in Marketable
Equity Securities . . . . 150,889.65 107,910.16
Nonregulated Investments
less accumulated
depreciation: 1995-$202,242.48;
1994-$63,228.36 . . . . . . 2,259,668.70 2,021,782.24
Unamortized Debt Issuance Expense . 970.05 1,371.45
Cash Surrender Value-Life Insurance 371,714.00 323,542.79
Prepaid Pensions. . . . . . . . . . 526,039.00 493,105.00
Deposits. . . . . . . . . . . . . . 2,410.63 50,000.00
Total Noncurrent Assets. . . . . . .3,311,692.03 2,997,711.64
PROPERTY, PLANT AND EQUIPMENT
Telephone Plant in Service. . . . .28,200,741.65 26,278,393.06
Telephone Plant Under Construction. 284,471.28 850,778.58
Non-Operating Plant . . . . . . . 28,051.89 28,051.89
28,513,264.82 27,157,223.53
Less: Accumulated Depreciation. . 12,491,877.53 10,845,153.98
Net Property, Plant and Equipment 16,021,387.29 16,312,069.55
TOTAL ASSETS . . . . . . . . . . $26,715,545.38 $26,695,756.87
BUFFALO VALLEY TELEPHONE COMPANY
BALANCE SHEETS
DECEMBER 31, 1995 AND DECEMBER 31, 1994
December 31, 1995 December 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-
Term Debt. . . . . . . . . . $ 81,000.00 $ 81,000.00
Accounts Payable. . . . . . . 1,051,294.93 1,071,362.73
Customer Deposits . . . . . . 1,990.00 2,140.00
Accrued Taxes . . . . . . . . 0.00 128,921.76
Accrued Interest, Pension
and Other . . . . . . . . . . 225,097.05 159,826.00
Total Current Liabilities. . . 1,359,381.98 1,443,250.49
LONG-TERM DEBT
Notes Payable . . . . . . . . 1,404,000.00 1,485,000.00
Total Long-Term Debt . . . . 1,404,000.00 1,485,000.00
OTHER LIABILITIES AND DEFERRED CREDITS
Unamortized Investment Tax
Credit Net . . . . . . . . . 332,965.15 393,670.76
Deferred Income Taxes . . . . 3,109,992.01 3,107,588.27
Other Deferred Credits
and Liabilities. . . . . . . 524,539.94 554,051.44
Total Other Liabilities
and Deferred Credits . . . . . 3,967,497.10 4,055,310.47
STOCKHOLDERS' EQUITY
Common Stock No Par: authorized
5,000,000 shares, issued
900,000 shares . . . . . . . . 600,000.00 600,000.00
Preferred Stock $50.00 Par:
authorized 10,000 shares, issued
issued 1995 0 shares; 1994
8,000 shares . . . . . . . . 0.00 400,000.00
Total Stock Issued . . . . . . 600,000.00 1,000,000.00
Additional Paid-In Capital. . . 467,279.96 467,279.96
Less: Treasury Stock
846 Common Shares. . . . . . . 38,628.36 38,628.36
Retained Earnings . . . . . . . 18,893,342.90 18,261,056.86
Net Unrealized Appreciation
on Marketable Securities. . . . 62,671.80 22,487.45
Total Stockholders' Equity . . . 19,984,666.30 19,712,195.91
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . $26,715,545.38 $26,695,756.87
BUFFALO VALLEY TELEPHONE COMPANY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
OPERATING REVENUES
Local Service . . . . . . . . $2,035,135.50 $1,942,071.82 $1,871,107.84
Interstate Access Service . . . 3,625,017.80 3,745,432.69 3,265,079.10
Intrastate Access Service . . . 2,529,272.14 2,665,357.90 2,489,753.18
Long Distance Service . . . . . 1,853,597.16 1,837,614.04 1,757,527.48
Miscellaneous . . . . . . . . . 1,369,676.72 1,344,073.73 1,278,495.19
Less: Uncollectibles. . . . . . 92,028.92 99,509.29 130,028.52
Total Operating Revenue. . . . 11,320,670.40 11,435,040.89 10,531,934.27
OPERATING EXPENSES
Plant Specific. . . . . . . . . 1,311,963.25 1,267,403.11 1,168,598.54
Plant Non-Specific
Network and Other . . . . . . 1,260,610.25 1,322,031.57 1,213,571.38
Depreciation and Amortization . . 2,034,671.30 1,748,466.92 1,694,998.58
Customer Operations . . . . . . 1,077,003.84 1,026,726.25 989,155.17
Corporate Operations. . . . . . 797,979.65 1,163,460.27 717,443.06
Total Operating Expenses . . . 6,482,228.29 6,528,088.12 5,783,766.73
NET OPERATING REVENUE 4,838,442.11 4,906,952.77 4,748,167.54
OPERATING TAXES
Investment Credit Net . . . . (60,705.61) (61,632.58) (62,541.07)
Income Taxes Current. . . . . . 1,754,850.28 1,909,010.88 1,678,702.16
Income Taxes Deferred . . . . . (45,312.00) (152,713.88) 51,217.46
Other Operating Taxes . . . . . 483,589.59 467,671.65 436,293.13
Total Operating Taxes. . . . . . 2,132,422.26 2,162,336.07 2,103,671.68
NET OPERATING INCOME 2,706,019.85 2,744,616.70 2,644,495.86
OTHER INCOME AND EXPENSES
Dividend Income . . . . . . . . 4,282.53 8,656.30 9,664.37
Interest Income . . . . . . . . 227,928.45 194,518.46 128,120.88
Merger Expenses . . . . . . . . (624,993.74) 0.00 0.00
Other Income and Expense Net. . 172,614.38 (50,022.36) (10,796.71)
Deregulated Activities Net. . . (87,135.62) 16,715.38 (32,076.11)
Total Other Income and Expenses. (307,304.00) 169,867.78 94,912.43
INCOME AVAILABLE FOR FIXED
CHARGES 2,398,715.85 2,914,484.48 2,739,408.29
FIXED CHARGES
Interest and Amortization . . . 131,952.61 165,442.85 226,679.03
NET INCOME . . . . . . . . . . $2,266,763.24 $2,749,041.63 $2,512,729.26
EARNINGS PER SHARE COMMON STOCK $2.50 $3.04 $2.78
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING. . . . . . . . . . 899,154 899,154 899,154
BUFFALO VALLEY TELEPHONE COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
Additional
Common Preferred Paid-In Treasury Retained
Stock Stock Capital Stock Earnings
Balance,
December
31, 1992
as
previously
reported $600,000.00 $400,000.00 $467,279.96 $38,628.36 $16,198,023.05
Adjustments
to beginning
balance
applicable
to prior years (217,511.96)
Net Income 2,512,729.26
Cash dividend
on common stock (1,438,646.40)
Cash dividend on
preferred stock (16,000.00)
Balance,
December 31,
1993 600,000.00 400,000.00 467,279.96 38,628.36 17,038,593.95
Net Income 2,749,041.63
Cash dividend
on common stock (1,510,578.72)
Cash dividend on
preferred stock (16,000.00)
Net change in
unrealized appreciation
on investments available
for sale, net of
taxes of $16,223.78
Balance,
December 31,
1994 600,000.00 400,000.00 467,279.96 38,628.36 18,261,056.86
Net Income 2,266,763.24
Cash dividend
on common stock (1,618,477.20)
Cash dividend on
preferred stock (16,000.00)
Redemption of
preferred stock (400,000.00)
Net change in
unrealized appreciation
on investments available
for sale, net of
taxes of $26,594.74
Balance,
December 31,
1995 $600,000.00 $ 0.00 $467,279.96 $38,628.36 $18,893,342.90
Net Unrealized
Appreciation
(Depreciation)
on Investment
Securities Total
Balance,
December
31,1992
as
Previously
Reported $0.00 $17,626,674.65
Adjustments
to Beginning
balance
applicable
to prior years (217,511.96)
Net Income 2,512,729.26
Cash Dividend
on Common Stock (1,438,646.40)
Cash Dividend on
Preferred Stock (16,000.00)
Balance
December 31,
1993 0.00 18,467,245.55
Net Income 2,749,041.63
Cash Dividend
on Common Stock (1,510,578.72)
Cash Dividend on
Preferred Stock (16,000.00)
Net Change in
Unrealized Appreciation
on Investments Available
for Sale, net of
taxes of $16,223.78 22,487.45 22,487.45
Balance
December 31,
1994 22,487.45 19,712,195.91
Net Income 2,266,763.24
Cash Dividend
on Common Stock (1,618,477.20)
Cash Dividend on
Preferred Stock (16,000.00)
Redemption of
Preferred Stock (400,000.00)
Net Change in
Unrealized Appreciatin
on Investments Available
for sale, net of
taxes of $26,594.74 40,184.35 40,184.35
Balance
December 31,
1995 $62,671.80 $19,984,666.30
BUFFALO VALLEY TELEPHONE COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $2,266,763.24 $2,749,041.63 $2,512,729.26
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities
Depreciation 2,175,368.53 1,896,828.12 1,788,130.77
Amortization (17,523.60) 654.68 1,161.24
Deferred Income Taxes and
Investment Tax Credit. . . . (117,755.61) (199,209.73) 16,364.95
Net gain on Sale of Investments 0.00 (6,244.25) 0.00
Net Changes in: Accounts
Receivable (Increase) Decrease. 95,497.23 (56,901.64) (4,864.09)
Material and Supplies
(Increase) Decrease. . . . . . (6,789.92) 44,637.52 101,681.97
Prepaid Expenses
(Increase) Decrease . . . . . (216,231.76) 10,228.58 (751.08)
Prepaid Pension Asset
(Increase) Decrease. . . . . . (32,934.00) 10,407.00 (123,622.62)
Deposits and Other Assets
(Increase) Decrease. . . . . . 47,589.37 12,405.22 (10,777.42)
Accounts Payable
Increase (Decrease) . . . . . (20,067.80) (148,773.00) 94,702.77
Customer Deposits
Increase (Decrease). . . . . (150.00) (130.00) (100.00)
Accrued Expenses
Increase (Decrease) . . . . (63,650.71) (11,439.61) 116,134.36
Other Deferred Credits and
Reserves Increase (Decrease). . 3,347.50 206,553.64 (44,144.23)
Cash Provided by
Operating Activities . . . . . 4,113,462.47 4,508,058.16 4,446,645.88
CASH FLOWS FROM INVESTING ACTIVITIES
Addition of Plant (Including
Work Under Construction). . . (1,871,749.82) (2,699,345.22) (1,301,428.84)
Addition of Deregulated
Telephones and Other . . . . (376,900.58) (35,581.39) (232,546.83)
Salvage from Plant Retired . . . 188,053.77 30,318.00 36,077.66
Cost of Removal of
Plant Retired . . . . . . . . (61,976.10) (52,883.06) (52,482.83)
Purchase of Marketable
Equity Securities . . . . . . (4,639.53) (8,259.30) (9,644.37)
Increase in Cash Surrender
Value . . . . . . . . . . . . (48,171.21) (43,915.74) (42,224.45)
Sale of Marketable Equity
Securities . . . . . . . . . 0.00 136,230.69 0.00
Purchase of Temporary Cash
Investments . . . . . . . . (1,493,710.87) (1,989,931.00) (2,000,000.00)
Proceeds from Sale of
Temporary Cash Investments . 1,500,000.00 1,886,274.51 0.00
Cash Used by Investing
Activities . . . . . . . . . (2,169,094.34) (2,777,092.51) (3,602,249.66
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments of
Long-Term Debt . . . . . . . (81,000.00) (1,081,000.00) (81,000.00)
Redemption of Preferred Stock. (400,000.00) 0.00 0.00
Dividends Paid . . . . . . . . (1,634,477.20) (1,526,578.72) (1,454,646.40)
Cash Used by Financing
Activities . . . . . . . . . . (2,115,477.20) (2,607,578.72) (1,535,646.40)
ee is being accrued over the expected
remaining years of employment. The Company's expense related to these
agreements was $40,960.00, $333,988.00, and $17,532.00 for the years 1995,
1994, and 1993.
NOTE 6 PREFERRED STOCK
Preferred stock is preferred as to liquidation and dividends which are
cumulative at 4% per annum. Shares are callable on any dividend payment date
at par value plus accrued dividends. The preferred stock was redeemed by the
Company in 1995.
NOTE 7 COMMON STOCK AND RETAINED EARNINGS
Covenants contained in the note agreement covering long-term debt referred to
above include a provision that the Company will not declare or pay any
dividends on any shares of its capital stock of any class (other than
dividends in shares of its common stock); or to make any payment to purchase,
redeem or otherwise acquire any such shares, if the aggregate amount of all
dividends, distributions, and payments made on all shares of its capital stock
of all classes after December 31, 1977, would exceed an amount equal to the
retained earnings accumulated after December 31, 1977. The unrestricted
retained earnings at December 31, 1995 is $16,726,695.46.
NOTE 8 EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan covering
substantially all employees. The plan provides benefits which are calculated
based upon years of service and compensation levels. Contributions are
intended to provide not only benefits attributed to service to date but also
for those expected to be earned in the future.
A summary of the components of net periodic income for the plan for 1995,
1994, and 1993 is as follows:
1995 1994 1993
Service cost-benefits
earned during the period $112,393 $118,075 $83,528
Interest cost on projected
benefit obligation 212,118 196,474 160,023
Actual return on plan assets (942,018) (49,693) (329,052)
Net amortization and deferral 584,573 (318,797) (76,542)
Net periodic pension income $(32,934) $(53,941) $(162,043)
Assumptions used in the determination of pension plan information for 1995,
1994, and 1993 consisted of the following:
1995 1994 1993
Discount rate 7.5% 7.5% 7.5%
Rate of increase in
compensation levels 5.5% 5.5% 5.5%
Expected long term rate
of return of plan assets 8.5% 8.5% 9.0%
The following table sets forth the funded status and amounts recognized in the
balance sheet at December 31, 1995
and 1994 for the Company's defined benefit plan:
1995 1994
Actuarial present value of benefit obligations:
Vested benefit obligation $1,526,237 $1,571,467
Accumulated benefit obligation $1,835,668 $1,994,013
Projected benefit obligation $(2,672,310) $(2,797,945)
Plan assets at fair value 4,099,814 3,667,392
Plan assets in excess of projected
benefit obligation 1,427,504 869,447
Unrecognized net (gain) loss (424,663) 148,140
Unrecognized net assets net of amortization (731,324) (804,456)
Unrecognized prior service costs 254,522 279,974
Net pension asset recognized in
the balance sheet $526,039 $493,105
Plan assets at December 31, 1995 and 1994 were invested in listed common
stocks, U.S. Government securities, short-term money market instruments, and
corporate bonds and mortgages.
The Company also has a 401(k) plan whereby participants may contribute up to
fifteen percent of their salaries. The Company currently contributes up to
twenty-five percent of the employees' contribution up to the first eight
percent of their salaries. The Company contributed $32,788 during 1995,
$31,024 during 1994, and $26,675 during 1993.
NOTE 9 INCOME TAXES
Net deferred tax liabilities consist of the following components as of
December 31, 1995 and 1994:
Deferred tax liabilities 1995 1994
Plant $3,043,428.61 $3,078,056.30
Prepaid pensions 213,527.35 206,660.31
Investments 42,818.52 16,223.78
3,299,774.48 3,300,940.39
Deferred Tax Assets
Liabilities under supplemental income
agreements 158,452.75 165,837.87
Other 31,329.72 27,514.25
189,782.47 193,352.12
$3,109,992.01 $3,107,588.27
The provision for income taxes for the years ended December 31, 1995, 1994
and 1993 was as follows:
1995 1994 1993
Current:
Federal $1,203,329.63 $1,402,924.45 $1,165,270.64
State 379,592.65 562,064.10 453,062.34
1,582,922.28 1,964,988.55 1,618,332.98
Deferred:
Federal (43,019.00) (100,742.46) 55,649.92
State (14,031.00) (36,834.69) 23,256.10
Amortization of investment
tax credit (60,705.61) (61,632.58) (62,541.07)
(117,755.61) (199,209.73) 16,364.95
$1,465,166.67 $1,765,778.82 $1,634,697.93
The provision for income taxes is included in the accompanying statements of
income as follows:
1995 1994 1993
Operating taxes $1,648,832.67 $1,694,664.42 $1,667,378.55
Other income and expense, net (197,870.00) 33,677.88 (9,415.06)
Deregulated activities, net 14,204.00 37,436.52 (23,265.56)
$1,465,166.67 $1,765,778.82 $1,634,697.93
The income tax provision differs from the amount of income tax determined by
applying the federal income tax rate to pretax income for the years ended
December 31, 1995, 1994 and 1993 due to the following:
1995 1994 1993
Normal statutory federal income
tax rate 34.0% 34.0% 34.0%
Increase (decrease) resulting from:
State income tax, net of
federal tax benefit 6.5 7.7 7.6
Amortization of investment
tax credits (1.6) (1.4) (1.5)
Other .4 (1.2) (.7)
39.3% 39.1% 39.4%
NOTE 10 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to establish the fair value
of each class of financial instruments for which it is practicable to
estimate the value:
Cash, cash equivalents, accounts receivable and accounts payable
The carrying amount approximates fair value because of the short maturity of
those instruments.
Temporary cash investments and investments in marketable equity securities
The fair values of investments in equity securities are based on quoted market
prices.
Note payable and long term-debt
The carrying amount approximates fair value.
NOTE 11 RESTATEMENT
The financial statements for the years ended December 31, 1994 and 1993 have
been retroactive 20,265,733 19,913,968 19,984,666
Total Liabilities and
Stockholders' Equity $27,565,906 $26,977,300 $26,715,545
Note - Long-term debt consisted of the
following at March 31, 1996, March 31, 1995 and December 31, 1995
20 year long- term note at 8.5% due 1998 1,485,000 1,566,000 1,485,000
Less current Maturities 81,000 81,000 81,000
$1,404,000 $1,485,000 $1,404,000
**Certain items have been restated for comparative purposes
BUFFALO VALLEY TELEPHONE COMPANY
STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 and 1995
1996 1995
Operating Revenues:
Local Service $523,423 $487,683
Access Service 1,658,179 1,581,935
Long Dist. Service 499,760 450,977
Nonreg. Sales & Lease 227,460 280,711
Miscellaneous 308,916 289,144
3,217,738 3,090,451
less uncollectible
operating revenues 24,233 22,231
3,193,506 3,068,220
Operating Expenses:
Plant Specific 327,704 313,668
Plant Non-Specific:
Network & Other 344,113 318,611
Depreciation 537,368 460,274
Customer Operations 294,828 282,831
Corporate Operations 191,865 251,622
Nonreg. Sales & Lease 236,210 314,422
Operating taxes, other 104,451 112,729
2,036,539 2,054,157
Operating 1,156,967 1,014,063
Other Income(Deductions), Net:
Interest Expense (31,661) (35,336)
Other, Net 27,720 45,869
(3,941) 10,533
Income Before Income Taxes 1,153,026 1,024,596
Income Taxes 455,626 410,205
Net Income 697,400 614,391
Preferred Dividend 0 8,000
Net Income Applicable to C $697,400 $606,391
Earnings per common share $0.78 $0.67
Dividends per common share $0.45 $0.45
BUFFALO VALLEY TELEPHONE COMPANY
Statement of Cash Flow (Unaudited)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
Cash Flows from Operating Activities:
Net Income $697,400 $614,391
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & Amortization 537,368 460,274
Changes in assets and liabilities:
Accounts Receivable 37,381 70,091
Inventories (9,515) 14,645
Other Current Assets and Prepaid Expen 352,474 (61,948)
Accounts Payable 583,133 25,759
Other accrued Expenses 46,638 215,051
Income Taxes Payable 0 179,026
Deferred Taxes (25,420) 15,646
Net Deferred Charges/Credits (40,445) (338,100)
776,666 580,444
Net Cash Provided by
Operating Activities $1,474,066 $1,194,835
Cash Flows From Investing Activities:
Capital Expenditures (209,990) (748,948)
Increase in Investments 0 0
Net Cash Used in
Investing Activities ($209,990) ($748,948)
Cash Flows From Financing Activities:
Proceeds from Notes Payable (credit lin 0 0
Proceeds from Long Term Debt 0 0
Principal Payments of Long Term Debt 0 0
Dividends Paid (404,619) (412,619)
Net Cash Provided
By Financing Activities ($404,619) ($412,619)
Net Increase in Cash & Cash Equivalents $859,457 $33,268
Cash & Cash Equivalents at
Beginning Of Year 4,337,860 4,468,894
Cash & Cash Equivalents at JUNE 30 $5,197,317 $4,502,162
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Payments for:
Interest $0 $0
Income Taxes $63,032 $118,500
Item 7 (b)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1996 gives effect to the Merger and the acquisition of all outstanding
common stock of BVT as though they had occurred on March 31, 1996. The
following Unaudited Pro Forma Condensed Consolidated Statements of Income for
the three months ended March 31, 1996 and the year ended December 31, 1995
give effect to the Merger as though it had occurred on January 1, 1995. The
Pro Forma Condensed Consolidated Statement of Income and Balance Sheet are not
necessarily indicative of the actual results of operations or financial
position which would have been reported if the Merger transaction had occurred
on the respective dates referred to above nor do they purport to indicate the
results of future operations or the future financial position of CEI. In the
opinion of management, all adjustments necessary to present fairly such pro
forma financial statements have been made.
CONESTOGA ENTERPRISES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March, 31 1996
(Dollars in Thousands)
(Unaudited)
Conestoga Buffalo Valley
Enterprises,Telephone
Inc. Company
March 31, March 31, Acquisition Pro
1996 (Actual1996 (ActualAdjustments Forma
ASSETS
Current Assets
Cash and cash equivalents $1,353 $5,197 $0 $6,550
Accounts receivable, net,
including unb 4,247 2,530 0 6,777
Inventories, at average cost 580 257 0 837
Prepaid expenses 102 582 0 684
Total current as 6,282 8,566 0 14,848
Property, Plant and Equipment
Telephone plant 85,747 28,657 0 114,404
Other property, plant and equi 2,313 2,487 (999)(b) 3,801
Total property, plant and equi 88,060 31,144 (999) 118,205
Accumulated depr 42,404 13,202 (241)(b) 55,365
Net property, plant and equipm 45,656 17,942 (758) 62,840
Investments 5,057 138 (776)(c) 4,419
Prepaid pension costs 1,461 545 0 2,006
Intangible assets 0 0 57,165 (a) 39,091
450 (b)
776 (c)
965 (d)
(g) Adjustments to reflect interest on debt issued to fund $22,000,000
of the cash portion of the purchase price.
(h) Adjustment to remove expenses related to the Merger, net of taxes.
(i) Adjustments to reflect tax benefits associated with the interest
expense on debt issued to fund $22,000,000 of the cash portion of the
purchase price.
(j) Adjustment to reflect dividends on CEI $3.42 Series A Preferred
Shares issued to fund the acquisition of stock, at $3.42 per shares per
annum.
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 hereunto duly authorized.
CONESTOGA ENTERPRISES, INC.
By:/s/ John R. Bentz
Name: John R. Bentz
Title: President
Date: August 14, 1996
Item 7 (c)
Exhibit 23
CONSENT OF INDEPENDENT AUDITOR
I hereby consent to the use of my independent auditor's report dated February
22, 1996 on my audit of the financial statements of Buffalo Valley Telephone
Company as of December 31, 1995 and 1994 and for the three years in the period
ended December 31, 1995 included in this Form 8-K of Conestoga Enterprises,
Inc.
William R. Maslo
Reading, Pennsylvania
August 14, 1996
Exibit 99
CONESTOGA ENTERPRISES, INC. NEWS RELEASE
FOR IMMEDIATE RELEASE MAY 31, 1996
Birdsboro, PA - May 31, 1996 - Conestoga Enterprises, Inc. (NASDAQ-CENI) and
Buffalo Valley Telephone Company (OTC-BUFF) today announced that they have
completed their merger that was announced in October, 1995. Buffalo Valley
Telephone Company (BVT) is a Lewisburg, Pennsylvania, based independent
telephone company providing local telephone service in Union and Northumberland
Counties in Central Pennsylvania with approximately 18,200 telephone access
lines at April 30, 1996. BVT will continue to operate as a wholly owned
subsidiary of Conestoga Enterprises, Inc. (CEI). Mr. Kenneth A. Benner, a
member of the CEI Board of Directors, will assume operations responsibility of
BVT as Vice President and General Manager.
Conestoga Enterprises, Inc. is a Birdsboro, Pennsylvania, based
telecommunications company with subsidiaries providing local exchange telephone
service, telephone equipment sales and leasing, the resale of long distance
services, and radio paging services. With this acquisition, CEI now provides
service to almost 65,000 telephone access lines and 5,000 paging access, making
CEI one of the 30 largest telephone companies in the United States.
Contact: Suzanne Torak
Corporate Stock Administrator
Conestoga Telephone Company
202 E. First St.
Birdsboro PA 19508
(610) 582-6202
