North Pittsburgh Systems (MM) (NASDAQ:NPSI)
Historical Stock Chart
From Oct 2019 to Oct 2024
North Pittsburgh Systems, Inc. (NASDAQ:NPSI) today
announced earnings for fourth quarter and full year 2005. NPSI's
President, Harry R. Brown, stated that he was pleased to report net
income of $6,873,000, or $.46 per share, for fourth quarter 2005 as
compared to net income of $5,194,000, or $.35 per share, for fourth
quarter 2004. For full year 2005, NPSI's net income increased
$4,096,000, or 21.6%, to $23,056,000 from $18,960,000 in 2004 with
earnings per share for 2005 amounting to $1.54 versus $1.26 for 2004,
an increase of $.28 per share.
Addressing fourth quarter 2005 first, Mr. Brown reported that
operating revenues increased $823,000, or 3.2%, from $25,945,000 for
fourth quarter 2004 to $26,768,000 for fourth quarter 2005. The
increase was partially due to the Company's ability to continue to
effectively penetrate its Competitive Local Exchange Carrier's (CLEC)
edge-out markets and to the further expansion of broadband service
offerings. In addition, access revenues during the fourth quarter of
2005 benefited from an increase in revenues, on a comparative basis,
recorded from the National Exchange Carrier Association (NECA) pooling
arrangements in which the Company's Incumbent Local Exchange Carrier
(ILEC) participates. In the fourth quarter of 2005, the ILEC's
required pool settlement contributions for the most recent two-year
monitoring period were determined by NECA to be approximately $275,000
lower than had been projected and accrued, resulting in a positive
adjustment to settlement revenues. In contrast, the fourth quarter of
2004 was negatively impacted by an approximately $300,000 cumulative
reduction to estimated settlement revenues pursuant to the Company's
analysis of the Federal Communications Commission's (FCC) Memorandum
Opinion and Order adopted November 30, 2004 concerning the suspension
and investigation of the NECA tariff then currently in effect as well
as other matters which had been recently addressed by the FCC
concerning local exchange carriers' over-earnings refund obligations.
Operating expenses for fourth quarter 2005 decreased $1,469,000,
or 7.4%, in relation to the prior year. Mr. Brown noted that the
decrease in operating expenses was predominantly due to a $1,789,000
decrease in depreciation expense. During 2005, the Company conducted a
comprehensive review of the useful life estimates of certain main
categories of its ILEC's telephone plant and equipment. Pursuant to
that review, effective October 1, 2005, the Company increased its
useful life estimates for certain classes of its plant and equipment
in order to more closely align the remaining depreciable lives of
these assets with their true economic lives. These changes in
accounting estimates decreased the Company's fourth quarter 2005
depreciation expense by $1,955,000. The overall decrease in operating
expenses was also attributable to the fourth quarter of 2004 being
negatively impacted by a $190,000 increase in expenses recorded
pursuant to a dispute with a wireless carrier over intercarrier
compensation covering a two-year period. The foregoing factors were
partially offset by increases in the direct costs associated with the
growth in access lines and access line equivalents, such as fees paid
for leasing unbundled network elements in the portions of the CLEC
edge-out markets that the Company does not wholly provision over its
own facilities, and fees paid to terminate the increased local, toll
and Internet traffic generated by the Company's growing customer base.
Other income (net) for the fourth quarter of 2005 decreased
$164,000 from the prior year comparable period due primarily to a
$581,000 decrease in equity income recorded from the Company's
partnership investments (which consist primarily of limited partner
interests in three wireless partnerships). The decrease in equity
income was due to adjustments that were made to the wireless
partnerships' financial results of operations as a result of their
annual audits for the year ended December 31, 2004. The adjustments
resulted in the Company recording during its fourth quarter of 2005 a
$143,000 reduction in equity income pertaining to the partnerships'
results of operations for 2004 and a $279,000 reduction in equity
income pertaining to the partnerships' results of operations for the
first three quarters of 2005 (which were similarly impacted by the
same cause underlying the partnerships' 2004 adjustments). The
adjustments were not individually significant for any of the seven
quarters which they impacted, and therefore the Company recorded their
cumulative effect in its fourth quarter of 2005, when the Company
learned the amounts of the adjustments. The decrease in equity income
was offset by a $322,000 increase in interest income earned on the
Company's higher cash and temporary investment balances and a $95,000
decrease in interest expense as a result of the Company's continued
debt reduction.
For comparative purposes, the Company's effective tax rate for
fourth quarter 2005 was 36.7% versus 41.2% for fourth quarter 2004.
The decrease in the effective tax rate was partially a result of the
elimination of a valuation allowance for state net operating loss
carryforwards at one of the Company's subsidiaries pursuant to the
subsidiary's current history of producing state taxable income. The
decrease in the effective tax rate was also impacted by a positive
true-up of the Company's income tax liability during the fourth
quarter of 2005. These factors beneficially impacted income tax
expense in the amount of $510,000 for the fourth quarter of 2005.
Addressing full year 2005 results, Mr. Brown stated that the
$4,096,000, or 21.6%, increase in net income was predominately a
result of the favorable impact of a settlement agreement reached with
a carrier in the second quarter of 2005, a decrease in depreciation
expense pursuant to changes in useful life estimates as previously
described, an increase in annual earnings recorded from the Company's
investment in three wireless partnerships and an increase in income
recorded from the Company's temporary investments. The settlement
agreement, which covered the exchange of traffic between the Company's
ILEC and the carrier over a multi-year period of time, resulted in a
$1,604,000 increase in revenues and an $800,000 decrease in operating
expenses, or a combined $2,404,000 pre-tax benefit to the Company.
Mr. Brown further reported that operating revenues for 2005
increased $3,722,000, or 3.5%, over 2004. As noted above, the impact
from the aforementioned settlement agreement contributed $1,604,000 to
this increase. Revenues from all other sources increased $2,118,000,
or 2.0%, in 2005. The majority of this growth was attributable to the
Company's continued penetration into its edge-out markets and to the
further expansion of its broadband service offerings. This ability to
grow end-user revenues was partially offset by decreases in the
Company's access revenues.
Full year operating expenses for 2005 decreased $637,000, or 0.8%,
from 2004. Operating expenses were positively impacted by a $1,161,000
decrease in depreciation expense for full year 2005. In addition, 2005
benefited from the $800,000 cumulative reduction to operating expenses
associated with the aforementioned carrier settlement agreement. Those
items were partially offset by increases in the direct costs
associated with the growth in access lines and access line
equivalents. In addition, combined labor and benefit expenses
increased approximately $800,000, or 3.0%, during 2005.
Other income (net) for full year 2005 increased $1,775,000 over
the prior year due partially to a $1,051,000 increase in interest
income earned on the Company's higher cash and temporary investment
balances. In addition, the Company benefited from a $292,000 decrease
in interest expense as a result of the Company's continued debt
reduction and a $379,000 increase in equity income recorded from the
Company's partnership investments.
For comparative purposes, the Company's effective tax rate for
full year 2005 was 39.9% versus 41.2% for full year 2004. The decrease
in the annual effective tax rate was a result of the previously
mentioned elimination of a valuation allowance for state net operating
loss carryforwards and positive true-up of the Company's income tax
liability, both of which occurred in the fourth quarter of 2005.
Turning to operations, Mr. Brown reported that as of December 31,
2005, the Company had a total of 70,409 access lines in its ILEC
territory, 60,578 CLEC access line equivalents (including 2,152 DSL
subscribers) and a total of 14,386 DSL subscribers across all
subsidiaries. He noted that although ILEC access lines had decreased
2.6% during 2005, total CLEC access line equivalents and consolidated
DSL subscribers had grown 3.6% and 19.3%, respectively, during 2005.
Mr. Brown concluded his remarks by commenting that he was pleased
with the Company's strong results for 2005. Looking forward, he noted
that 2006 would be an exciting year for the Company, as it will be
celebrating its 100th year anniversary. Mr. Brown stated that the
century-long perseverance of the Company, which has been successfully
guided through many significant transformations in the technological
and regulatory environments in which it operates, is a strong
testament to the hard work and dedication of both the Company's past
and current employees.
North Pittsburgh Systems, Inc. has total assets of $159 million
and operates an integrated high-technology telecommunications business
in Western Pennsylvania providing competitive and local exchange
services, long distance and Internet services through its
subsidiaries, North Pittsburgh Telephone Company, Penn Telecom, Inc.
and Pinnatech, Inc. (d/b/a Nauticom).
In addition to historical information, this information may
contain forward-looking statements regarding events, performance,
financial trends and accounting policies that may affect the Company's
future operating results, financial position or cash flows. Such
forward-looking statements are based on assumptions and estimates and
involve risks and uncertainties. Various factors could affect future
results and could cause actual results to differ materially from those
expressed in or implied by the forward-looking statements. Factors
that could cause such a difference include, but are not limited to: a
change in economic conditions; government and regulatory policies (at
both the federal and state levels); unanticipated higher capital
spending for, or delays in, the deployment of new technologies; the
pricing and availability of equipment, materials and inventories;
changes in the competitive environment; and the Company's ability to
continue to penetrate its edge-out markets. This information should be
read in conjunction with the Company's periodic reports filed with the
Securities and Exchange Commission, the most recent of which is the
Company's Annual Report on Form 10-K for the year ended December 31,
2005.
-0-
*T
NORTH PITTSBURGH SYSTEMS, INC.
SUMMARIZED FINANCIAL INFORMATION
(Unaudited)
(Amounts in Thousands - Except Per Share Data)
For the Three Months For the Twelve Months
Ended December 31 Ended December 31
--------------------- ---------------------
2005 2004(a) 2005 2004(a)
---------- ---------- ---------- ----------
Total operating revenues $26,768 $25,945 $109,804 $106,082
Total operating expenses 18,346 19,815 78,066 78,703
---------- ---------- ---------- ----------
Net operating income 8,422 6,130 31,738 27,379
Other income, net 2,488 2,652 6,911 5,136
---------- ---------- ---------- ----------
Income from continuing
operations before
income taxes 10,910 8,782 38,649 32,515
Provision for income taxes 4,002 3,620 15,407 13,408
---------- ---------- ---------- ----------
Income from continuing
operations 6,908 5,162 23,242 19,107
Gain (loss) from
discontinued
operations(a) (35) 32 (186) (147)
---------- ---------- ---------- ----------
Net income $6,873 $5,194 $23,056 $18,960
========== ========== ========== ==========
Common shares outstanding 15,005 15,005 15,005 15,005
========== ========== ========== ==========
Basic and diluted earnings
per share $.46 $.35 $1.54 $1.26
========== ========== ========== ==========
Dividends per share $.19 $.18 $.75 $.72
========== ========== ========== ==========
December 31 December 31
2005 2004
----------- -----------
Cash and temporary investments $55,567 $42,569
Total assets 159,200 155,500
Total debt 21,597 24,682
Total shareholders' equity 99,517 86,861
(a) During the fourth quarter of 2005, the Company sold its business
telecommunications equipment operations, which engaged primarily
in selling and maintaining Nortel key systems and private branch
exchanges. The results of these operations have been classified as
discontinued operations, with prior year period amounts
reclassified to conform to the current year's presentation. These
reclassifications did not affect net income amounts.
*T