North Pittsburgh Systems (MM) (NASDAQ:NPSI)
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From Oct 2019 to Oct 2024
North Pittsburgh Systems, Inc. (NASDAQ:NPSI) today
announced net income of $16,398,000, or $1.09 per share, on operating
revenues of $25,713,000 for the second quarter of 2006. This compares
to net income of $6,459,000, or $.43 per share, on operating revenues
of $28,741,000 for the comparable period last year. NPSI's President,
Harry R. Brown, noted that significant items that were not routine in
nature impacted both the second quarter of 2006 and second quarter of
2005. During the second quarter of 2006, the Company's North
Pittsburgh Telephone Company subsidiary received a payment of
$19,622,000 from the Rural Telephone Bank (RTB) for the redemption of
its RTB stock and recognized a gain on the full amount of the proceeds
received, which, on an after tax basis, contributed $11,479,000 to the
net income recorded during the 2006 second quarter, or $.76 per share.
The second quarter of 2006 was also favorably affected by a reduction
of approximately $1,536,000 ($899,000 after tax, or $.06 per share) in
depreciation expense that resulted from an increase in October 2005 in
the estimates of the remaining useful lives of certain assets. With
respect to the prior year period, the second quarter of 2005 was
favorably impacted by a settlement agreement reached with a carrier.
The $2,404,000 settlement, which covered the exchange of traffic
between the Company's Incumbent Local Exchange Carrier (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;
on an after tax basis, the settlement contributed $1,406,000 to the
net income recorded during the 2005 second quarter, or $0.09 per
share.
Mr. Brown reported that operating revenues decreased $3,028,000,
or 10.5%, during second quarter 2006 as compared to the second quarter
2005. He noted that a main contributor to the decrease was the impact
of the aforementioned 2005 carrier settlement, which resulted in a
$1,604,000 increase in operating revenues during the second quarter of
2005. He said that the decrease in revenues was also partially
attributable to several other sources, including a $280,000 decline in
revenue generated from Primary Rate Interface circuits provisioned to
Internet Service Providers (ISPs), a $751,000 decrease in access
revenues (exclusive of the prior year settlement discussed separately
above), mostly due to a decrease in overall access minutes of use on
the Company's network and an uncharacteristically high level of
adjustments that during 2006 have processed through the National
Exchange Carrier Association pooling arrangements in which the
Company's ILEC participates, and a $270,000 decrease in toll revenues.
These revenue decreases were partially offset by the Company's ability
to continue to penetrate its Competitive Local Exchange Carrier's
(CLEC) edge-out markets and to the further expansion of broadband
service offerings.
Operating expenses for second quarter 2006 increased $456,000, or
2.4%, from the comparable prior year period. Mr. Brown noted that for
comparative purposes, the second quarter of 2005 benefited from the
aforementioned carrier settlement, which resulted in a cumulative
$800,000 reduction in traffic terminating costs from the amount that
had been estimated and accrued over a multi-year period. The Company
also experienced increases in the direct costs associated with the
growth in access lines in the Company's CLEC edge-out markets and fees
paid to terminate the increased local, toll and Internet traffic
generated by the Company's customer base. In addition, combined labor
and benefit expenses increased approximately $220,000 over the prior
year second quarter, and operational support system expenses increased
by approximately $200,000 in conjunction with the Company migrating to
a new billing system at one of its subsidiaries. These increases in
operating expenses were partially offset by a $1,650,000 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 useful
life estimates had the impact of decreasing the Company's second
quarter 2006 depreciation expense by approximately $1,536,000 from the
amount which would have been recorded if there had been no change in
the estimated useful life of these assets.
Other income (net) for the second quarter of 2006 improved
$20,522,000 from the prior year period due principally to the
aforementioned $19,622,000 gain realized from the RTB stock
redemption. In addition, equity income recorded from the Company's
partnership investments (which consist primarily of limited partner
interests in three wireless partnerships) increased by $433,000 over
the prior year comparable period and the Company also benefited from a
$362,000 increase in interest income earned from higher rates on
higher average invested balances and a $59,000 decrease in interest
expense resulting from continued debt reduction.
For the first six months of 2006, net income increased
$10,836,000, or 97.2%, to $21,984,000 from $11,148,000 for the first
six months of 2005, and earnings per share amounted to $1.47 as
compared to $.74 for the first six months of 2005. In addition, for
the first six months of 2006, operating revenues decreased $3,517,000,
or 6.3%, while operating expenses decreased $431,000, or 1.1%, and
Other income (net) increased $21,633,000 as compared to the first six
months of 2005. The factors described above in the second quarter
analysis, including the $19,622,000 gain the RTB stock redemption
($11,479,000 after tax, or $.76 per share) recorded in the Company's
second quarter of 2006 and the $2,404,000 carrier settlement
($1,406,000 after tax, or $.09 per share) recorded in the Company's
second quarter of 2005, were also the main contributors to the change
in net income for the first six months of 2006.
Turning to operations, Mr. Brown reported that as of June 30,
2006, the Company had a total of 68,143 access lines in its ILEC
territory, 63,295 CLEC access line equivalents (including 2,428 DSL
subscribers) and a total of 15,120 DSL subscribers across all
subsidiaries. He noted that although ILEC access lines had decreased
4.6% over the past twelve-month period ended June 30, 2006, total CLEC
access line equivalents and consolidated DSL subscribers had grown
3.3% and 13.4%, respectively, over that same twelve-month period. Mr.
Brown concluded his remarks by commenting on the recent achievement of
the Company's CLEC, Penn Telecom, Inc., which, to the best of the
Company's knowledge, became the first regional competitive
telecommunications provider to supply the entire communications
infrastructure for a sporting event with global exposure. While Penn
Telecom was meeting the challenge during the recent Major League
Baseball All-Star Game and related events held in Pittsburgh from July
7th through July 11th, the Company's ISP, Pinnatech, Inc. (d/b/a
Nauticom), was providing the Internet service for the related
broadband facilities. Mr. Brown stated that the selection by Major
League Baseball and the host Pittsburgh Pirates of Penn Telecom and
Nauticom provides a strong endorsement of both companies' reputations
for providing both quality services and responsiveness in meeting
dynamic customer demands.
North Pittsburgh Systems, Inc. has total assets of $158 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. (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 Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2006.
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NORTH PITTSBURGH SYSTEMS, INC.
SUMMARIZED FINANCIAL INFORMATION
(Unaudited)
(Amounts in Thousands - Except Per Share Data)
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------- -------------------
2006 2005(a) 2006 2005(a)
--------- ---------- --------- ---------
Total operating revenues $25,713 $28,741 $52,438 $55,955
Total operating expenses 19,782 19,326 39,179 39,610
--------- ---------- --------- ---------
Net operating income 5,931 9,415 13,259 16,345
Other income, net 22,131 1,609 24,390 2,757
--------- ---------- --------- ---------
Income from continuing
operations before income
taxes 28,062 11,024 37,649 19,102
Provision for income taxes 11,670 4,536 15,671 7,857
--------- ---------- --------- ---------
Income from continuing
operations 16,392 6,488 21,978 11,245
Income (loss) from
discontinued operations,
net of income taxes(a) 6 (29) 6 (97)
--------- ---------- --------- ---------
Net income $16,398 $6,459 $21,984 $11,148
========= ========== ========= =========
Common shares outstanding 15,005 15,005 15,005 15,005
========= ========== ========= =========
Basic and diluted earnings per
share $1.09 $.43 $1.47 $.74
========= ========== ========= =========
Dividends per share $1.20 $.19 $1.39 $.37
========= ========== ========= =========
June 30 Dec. 31
2006 2005
---------- ---------
Cash and temporary investments $50,938 $55,567
Total assets 157,791 159,200
Total debt 20,055 21,597
Total shareholders' equity 100,654 99,517
(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.
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