North Pittsburgh Systems (MM) (NASDAQ:NPSI)
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North Pittsburgh Systems, Inc. (NASDAQ:NPSI) today announced net income
of $4,595,000, or $.31 per share, on operating revenues of $25,408,000
for the third quarter of 2006. This compares to net income of
$5,035,000, or $.34 per share, on operating revenues of $27,081,000 for
the comparable period last year. NPSI’s
President, Harry R. Brown, stated that the decrease in net income was
attributable primarily to the decrease in revenues described in more
detail below, partially offset by a decrease in depreciation expense, an
increase in earnings recorded from the Company’s
investments in three wireless partnerships and an increase in income
recorded from the Company’s temporary
investments.
Mr. Brown reported that operating revenues decreased $1,673,000, or
6.2%, during third quarter 2006 as compared to the third quarter 2005.
He noted that the decrease in revenues was attributable to several
sources, including a $307,000 decline in revenue generated from Primary
Rate Interface circuits provisioned to Internet Service Providers, a
$1,016,000 decrease in access revenues, mostly due to a decrease in
overall access minutes of use on the Company’s
network and unfavorable changes in the National Exchange Carrier
Association average schedule formulas applicable to the Company’s
Incumbent Local Exchange Carrier (ILEC), and a $437,000 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 third quarter 2006 decreased $229,000, or 1.1%,
from the comparable prior year period. Mr. Brown noted that depreciation
expense decreased $1,610,000, mainly as a result of a decrease in
depreciation expense associated with certain ILEC assets whose useful
lives the Company in October 2005 reevaluated and extended. The decrease
in depreciation expense was partially offset by 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 $365,000 over the prior year third quarter, and
operational support system expenses increased by approximately $125,000
in conjunction with the Company migrating to a new billing system at one
of its subsidiaries.
Other income (net) for the third quarter of 2006 improved $702,000 from
the prior year period due principally to a $458,000 increase in equity
income recorded from the Company’s
partnership investments (which consist primarily of limited partner
interests in three wireless partnerships). The Company also benefited
from a $247,000 increase in interest income earned from higher interest
rates on higher average balances of invested cash and a $52,000 decrease
in interest expense resulting from continued debt reduction.
For the first nine months of 2006, net income increased $10,396,000, or
64.2%, to $26,579,000 from $16,183,000 for the first nine months of
2005, and earnings per share amounted to $1.77 as compared to $1.08 for
the first nine months of 2005. For the first nine months of 2006,
operating revenues decreased $5,204,000, or 6.3%, while operating
expenses decreased $674,000, or 1.1%, and Other income (net) increased
$22,335,000, as compared to the first nine months of 2005. Many of the
factors described above in the third quarter analysis, and also
non-routine items described below, contributed to the change in net
income for the first nine months of 2006.
Mr. Brown noted that significant items that were not routine in nature
impacted the year-to-date results. 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, or $.76 per share, to the net income
recorded during the nine-month period ended September 30, 2006. In
addition, during 2005, the Company conducted a comprehensive review of
the useful life estimates of certain categories of its ILEC’s
telephone assets. Pursuant to that review, effective October 1, 2005,
the Company increased its useful life estimates for certain of those
assets 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
depreciation expense for the nine-month period ended September 30, 2006
by approximately $3,322,000 ($1,944,000 after tax, or $.13 per share)
from the amount which would have been recorded if there had been no
change in the estimated useful lives of these 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
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,
or $.09 per share, to the net income recorded during the nine-month
period ended September 30, 2005.
Turning to operations, Mr. Brown reported that as of September 30, 2006,
the Company had a total of 66,347 access lines in its ILEC territory,
63,723 CLEC access line equivalents (including 2,349 DSL subscribers)
and a total of 15,389 DSL subscribers across all subsidiaries. He stated
that with the introduction during 2006 of telephony competition from the
two main cable companies whose service areas overlap the majority of the
Company’s ILEC territory, ILEC access line
losses have accelerated; the Company experienced a 6.6% decrease in
access lines in its ILEC territory during the twelve-month period ended
September 30, 2006. He noted that, in contrast, total CLEC access line
equivalents and consolidated DSL subscribers had grown 4.8% and 12.4%,
respectively, over that same twelve-month period.
Mr. Brown concluded his remarks by commenting that November 1, 2006
marked a very important date in the Company’s
history, the 100th year anniversary of North
Pittsburgh Telephone Company’s incorporation.
He stated that although so much has changed during the past century, one
core principle has not: our commitment to a simple goal of providing the
best possible products and services to the customers and communities
that the Company serves.
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, 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 September
30, 2006.
NORTH PITTSBURGH SYSTEMS, INC.
SUMMARIZED FINANCIAL INFORMATION
(Unaudited)
(Amounts in Thousands – Except Per
Share Data)
For the Three Months
Ended September 30
For the Nine Months
Ended September 30
2006
2005(a)
2006
2005(a)
Total operating revenues
$ 25,408
$ 27,081
$ 77,832
$ 83,036
Total operating expenses
19,881
20,110
59,046
59,720
Net operating income
5,527
6,971
18,786
23,316
Other income, net
2,369
1,667
26,759
4,424
Income from continuing operations before income taxes
7,896
8,638
45,545
27,740
Provision for income taxes
3,304
3,548
18,975
11,405
Income from continuing operations
4,592
5,090
26,570
16,335
Income (loss) from discontinued operations, net of income taxes(a)
3
(55)
9
(152)
Net income
$ 4,595
$ 5,035
$ 26,579
$ 16,183
Common shares outstanding
15,005
15,005
15,005
15,005
Basic and diluted earnings per share
$ .31
$ .34
$ 1.77
$ 1.08
Dividends per share
$ .20
$ .19
$ 1.59
$ .56
Sept. 30
Dec. 31
2006
2005
Cash and temporary investments
$ 49,548
$ 55,567
Total assets
158,125
159,200
Total debt
19,283
21,597
Total shareholders’ equity
102,360
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.
North Pittsburgh Systems, Inc. (NASDAQ:NPSI) today announced net
income of $4,595,000, or $.31 per share, on operating revenues of
$25,408,000 for the third quarter of 2006. This compares to net income
of $5,035,000, or $.34 per share, on operating revenues of $27,081,000
for the comparable period last year. NPSI's President, Harry R. Brown,
stated that the decrease in net income was attributable primarily to
the decrease in revenues described in more detail below, partially
offset by a decrease in depreciation expense, an increase in earnings
recorded from the Company's investments in three wireless partnerships
and an increase in income recorded from the Company's temporary
investments.
Mr. Brown reported that operating revenues decreased $1,673,000,
or 6.2%, during third quarter 2006 as compared to the third quarter
2005. He noted that the decrease in revenues was attributable to
several sources, including a $307,000 decline in revenue generated
from Primary Rate Interface circuits provisioned to Internet Service
Providers, a $1,016,000 decrease in access revenues, mostly due to a
decrease in overall access minutes of use on the Company's network and
unfavorable changes in the National Exchange Carrier Association
average schedule formulas applicable to the Company's Incumbent Local
Exchange Carrier (ILEC), and a $437,000 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 third quarter 2006 decreased $229,000, or
1.1%, from the comparable prior year period. Mr. Brown noted that
depreciation expense decreased $1,610,000, mainly as a result of a
decrease in depreciation expense associated with certain ILEC assets
whose useful lives the Company in October 2005 reevaluated and
extended. The decrease in depreciation expense was partially offset by
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 $365,000 over the prior year third
quarter, and operational support system expenses increased by
approximately $125,000 in conjunction with the Company migrating to a
new billing system at one of its subsidiaries.
Other income (net) for the third quarter of 2006 improved $702,000
from the prior year period due principally to a $458,000 increase in
equity income recorded from the Company's partnership investments
(which consist primarily of limited partner interests in three
wireless partnerships). The Company also benefited from a $247,000
increase in interest income earned from higher interest rates on
higher average balances of invested cash and a $52,000 decrease in
interest expense resulting from continued debt reduction.
For the first nine months of 2006, net income increased
$10,396,000, or 64.2%, to $26,579,000 from $16,183,000 for the first
nine months of 2005, and earnings per share amounted to $1.77 as
compared to $1.08 for the first nine months of 2005. For the first
nine months of 2006, operating revenues decreased $5,204,000, or 6.3%,
while operating expenses decreased $674,000, or 1.1%, and Other income
(net) increased $22,335,000, as compared to the first nine months of
2005. Many of the factors described above in the third quarter
analysis, and also non-routine items described below, contributed to
the change in net income for the first nine months of 2006.
Mr. Brown noted that significant items that were not routine in
nature impacted the year-to-date results. 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, or $.76 per share, to the net income recorded
during the nine-month period ended September 30, 2006. In addition,
during 2005, the Company conducted a comprehensive review of the
useful life estimates of certain categories of its ILEC's telephone
assets. Pursuant to that review, effective October 1, 2005, the
Company increased its useful life estimates for certain of those
assets 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
depreciation expense for the nine-month period ended September 30,
2006 by approximately $3,322,000 ($1,944,000 after tax, or $.13 per
share) from the amount which would have been recorded if there had
been no change in the estimated useful lives of these 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 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, or $.09 per share, to the net income recorded
during the nine-month period ended September 30, 2005.
Turning to operations, Mr. Brown reported that as of September 30,
2006, the Company had a total of 66,347 access lines in its ILEC
territory, 63,723 CLEC access line equivalents (including 2,349 DSL
subscribers) and a total of 15,389 DSL subscribers across all
subsidiaries. He stated that with the introduction during 2006 of
telephony competition from the two main cable companies whose service
areas overlap the majority of the Company's ILEC territory, ILEC
access line losses have accelerated; the Company experienced a 6.6%
decrease in access lines in its ILEC territory during the twelve-month
period ended September 30, 2006. He noted that, in contrast, total
CLEC access line equivalents and consolidated DSL subscribers had
grown 4.8% and 12.4%, respectively, over that same twelve-month
period.
Mr. Brown concluded his remarks by commenting that November 1,
2006 marked a very important date in the Company's history, the 100th
year anniversary of North Pittsburgh Telephone Company's
incorporation. He stated that although so much has changed during the
past century, one core principle has not: our commitment to a simple
goal of providing the best possible products and services to the
customers and communities that the Company serves.
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, 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
September 30, 2006.
-0-
*T
NORTH PITTSBURGH SYSTEMS, INC.
SUMMARIZED FINANCIAL INFORMATION
(Unaudited)
(Amounts in Thousands - Except Per Share Data)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
2006 2005(a) 2006 2005(a)
---------- --------- --------- ---------
Total operating revenues $25,408 $27,081 $77,832 $83,036
Total operating expenses 19,881 20,110 59,046 59,720
---------- --------- --------- ---------
Net operating income 5,527 6,971 18,786 23,316
Other income, net 2,369 1,667 26,759 4,424
---------- --------- --------- ---------
Income from continuing
operations before income
taxes 7,896 8,638 45,545 27,740
Provision for income taxes 3,304 3,548 18,975 11,405
---------- --------- --------- ---------
Income from continuing
operations 4,592 5,090 26,570 16,335
Income (loss) from
discontinued operations,
net of income taxes(a) 3 (55) 9 (152)
---------- --------- --------- ---------
Net income $4,595 $5,035 $26,579 $16,183
========== ========= ========= =========
Common shares outstanding 15,005 15,005 15,005 15,005
========== ========= ========= =========
Basic and diluted earnings
per share $.31 $.34 $1.77 $1.08
========== ========= ========= =========
Dividends per share $.20 $.19 $1.59 $.56
========== ========= ========= =========
Sept. 30 Dec. 31
2006 2005
--------- ---------
Cash and temporary
investments $49,548 $55,567
Total assets 158,125 159,200
Total debt 19,283 21,597
Total shareholders' equity 102,360 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.
*T