CTE Reports Second Quarter 1998 Results.DALLAS Dallas, city (1990 pop. 1,006,877), seat of Dallas co., N Tex., on the Trinity River near the junction of its three forks; inc. 1871. The second largest Texas city, after Houston, and the eighth largest U.S. , Pa.--(BUSINESS WIRE)--August 5, 1998-- Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Revenues Grow 15% Over Prior Year CLEC (Competitive Local Exchange Carrier) An organization offering local telephone service that is not one of the traditional telephone companies. The Telecommunications Act of 1996 allowed competition to the incumbent telcos (ILECs), enabling new companies (CLECs) Revenues Grow 28% Over Prior Quarter Commonwealth Telephone Enterprises, Inc. ("CTE (Coefficient of Thermal Expansion) The difference between the way two materials expand when heat is applied. This is very critical when chips are mounted to printed circuit boards, because the silicon chip expands at a different rate than the plastic board. ") (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CTCO CTCO Chicago Transportation Coordination Office , CTCOB) today announced its 1998 second quarter financial results, reporting record consolidated revenue growth of 15% over the 1997 second quarter; industry-leading ILEC (Incumbent Local Exchange Carrier) A traditional local telephone company such as one of the Regional Bell companies (RBOCs). Contrast with CLEC. See ELEC and TELRIC. (traditional telephone operation) switched access line growth of 8% over last year; and a 28% sequential One after the other in some consecutive order such as by name or number. quarterly increase in the revenues generated by the company's facilities-based CLEC operation. The 1998 second quarter results marked CTE's second consecutive quarter of 15% consolidated revenue growth and 8% or higher ILEC switched access line growth. CTE's consolidated results reflect the combined financial performance of its unique combination of telecom assets: Commonwealth Telephone Company, its Incumbent Local Exchange Carrier ILEC, short for incumbent local exchange carrier, is a local telephone company in the United States that was in existence at the time of the break up of AT&T into the Regional Bell Operating Companies (RBOCs) also known as the "Baby Bells". ("ILEC"); and CTSI CTSI Census Tract Street Index (US Census Bureau) CTSI California Traffic Safety Institute CTSI Corbett Technology Solutions, Inc. (Chantilly, VA) CTSI Central Terminal Signaling Interface , Inc., its facilities-based Competitive Local Exchange Carrier ("CLEC"). CTE Consolidated Results For the 1998 second quarter, CTE's consolidated revenues reached $55.7 million versus $48.6 million in the 1997 first quarter, an increase of 15%. The strong revenue growth was primarily driven by the solid growth in switched access lines and increased penetration The successful unauthorized breach of a security perimeter. See penetration test. of vertical services in CTE's ILEC business, as well as strong access line additions and revenue growth in CTE's rapidly expanding facilities-based CLEC. As expected, the reduction in consolidated diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. versus the 1997 second quarter reflects the impact of increased operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. associated with the expansion of the company's facilities-based CLEC into two additional markets since last year's second quarter. On a consolidated basis, CTE reported diluted EPS of $0.25 on income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $6.0 million, versus diluted EPS of $0.29 on income from continuing operations of $6.5 million in the year ago quarter. (Diluted EPS for the second quarter of 1998 on the basis of the ILEC operation alone was $0.37.) "We are very pleased with the overall financial and operating performance of CTE," said Michael I Michael I, Byzantine emperor Michael I (Michael Rangabe), d. c.845, Byzantine emperor (811–13), son-in-law of Nicephorus I. He supported orthodoxy against iconoclasm and recalled Theodore of Studium from exile. . Gottdenker, CTE president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "We are highly focused on the continuing successful execution of our strategic plan, on growing CTE's overall revenues and cash flow, and on enhancing value for our shareholders." Strong ILEC (Traditional Telephone Operation) Results - Year over Year Comparison In the 1998 second quarter, Commonwealth Telephone Company ("CT") achieved very strong financial and operating results. Highlights of the quarter, versus the 1997 second quarter, include: -- 8% switched access line growth -- 8% revenue growth -- 9% EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become growth -- 12% operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. growth -- 15% net income growth At the end of the 1998 second quarter, CT reached 267,542 switched access lines in service, an 8% increase versus the 248,834 access lines in service at the end of the 1997, or net switched access line additions of 18,708 over the past year. The growth in switched access lines was primarily driven by CT's highly successful residential second line marketing crusade. The 8% increase in revenues versus the 1997 second quarter was driven by the solid gain in switched access lines, along with increased penetration of high-margin vertical services, particularly Caller ID A telephone company service that sends the caller's telephone number between the first and second ring of the call. If the calling number is not blocked, the calling number is displayed on the handset or base station of the called party. and Voice Mail. "Our ILEC business continues to achieve impressive results across all key performance indicators Key Performance Indicators (KPI) are financial and non-financial metrics used to quantify objectives to reflect strategic performance of an organization. KPIs are used in Business Intelligence to assess the present state of the business and to prescribe a course of action. . We have diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d focused on increasing the deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of second lines and vertical services in our rural markets and have been very successful to date as indicated by our fourth consecutive quarter of 8% or better revenue growth," said Gottdenker. "Our relative penetration levels versus the industry imply additional opportunity to successfully market these products and services to our customers." On April 1, 1998, CT implemented a revenue neutral rate rebalancing Rebalancing The process of realigning the weightings of one's portfolio of assets. Notes: For example, if your portfolio's proportion of stock has grown too large for your intended assets weightings and risk tolerance, you might rebalance by selling some stock and putting . This rebalancing resulted in an increase in basic service rates (only CT's second basic service rate increase in nearly 40 years) and a corresponding decrease in network access charges and prices charged for certain other services. CTE enjoys a very favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. position including the ability to rebalance rates and a pure price cap arrangement covering intrastate in·tra·state adj. Relating to or existing within the boundaries of a state. Adj. 1. intrastate - relating to or existing within the boundaries of a state; "intrastate as well as interstate commerce" operations. CLEC Continues Successful Expansion - Sequential Quarter Comparison In the 1998 second quarter, CTSI, Inc. ("CTSI") continued to construct network, add lines and grow revenues at a record pace. Highlights of the quarter, versus the 1998 first quarter, include: -- 26% sequential quarterly switched access line growth -- 28% sequential quarterly revenue growth At the end of the 1998 second quarter, CTSI reached 29,169 switched access lines in service versus 4,796 lines in service at the end of the 1997 second quarter, and versus the 23,211 switched access lines in service at the end of the 1998 first quarter, or a sequential quarterly increase of 26%. CTSI's revenues reached $5.0 million in the 1998 second quarter versus $0.8 million in the 1997 second quarter, and versus $3.9 million in the 1998 first quarter, or a sequential quarterly growth rate of 28%. CTSI's EBITDA loss was $2.4 million in both the 1998 and 1997 second quarters, and $2.5 million in the 1998 first quarter. "Our CLEC operation continues to perform ahead of plan," said Gottdenker. "We are continuing to expand our direct sales force and increase our penetration of the business customers in the four select markets we currently serve - Northeastern north·east n. 1. Abbr. NE The direction or point on the mariner's compass halfway between due north and due east, or 45° east of due north. 2. An area or region lying in the northeast. 3. PA, Harrisburg Harrisburg, city (1990 pop. 52,376), state capital and seat of Dauphin co., SE Pa., on the Susquehanna River; settled c.1710 by John Harris, who established a trading post and operated a ferry there; inc. 1791. PA, Central PA and Southern Upstate New York Upstate New York is the region of New York State north of the core of the New York metropolitan area. It has a population of 7,121,911 out of New York State's total 18,976,457. Were it an independent state, it would be ranked 13th by population. ." "Our CLEC EBITDA loss continues to narrow as we gain scale in terms of switched access lines and revenues," said Gottdenker. "We continue to employ a strict success-based capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. model and have been very successful at achieving a high-percentage of lines both on-net Connected to the Internet, or connected to a LAN or WAN. Contrast with off-net. and on-switch, thereby enhancing our margin performance. At the end of the 1998 second quarter, 94% of our CLEC switched access lines were served by our owned switches, with 35% served solely by our owned network with no reliance on leased facilities from the incumbent Refers to an entity that is currently in power. For example, in politics, the "incumbent senator" is the person who holds that office today. An "incumbent company" is an organization that has been providing goods and services for some time. See ILEC. provider." About CTE Headquartered in Dallas, PA, Commonwealth Telephone Enterprises, Inc., is a diversified diversified (di·verˑ·s telecommunications company See telecom company. providing advanced solutions to deliver communications, information and entertainment services to business and residential users in a rapidly expanding set of select United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. markets. CTE is organized into two principal operating segments: Commonwealth Telephone Company ("CT"), the nation's 11th largest independent incumbent local exchange carrier ("ILEC") which has been operating in various rural Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York markets since 1897, and CTSI, Inc. ("CTSI"), a competitive local exchange carrier ("CLEC") which formally commenced operations in 1997. Additionally, CTE operates three support businesses that provide expertise to its two principal operating segments. These businesses consist of Commonwealth Communications, a telecommunications engineering Telecommunications Engineers or Telecom Engineers come in a variety of different types from basic circuit designers to strategic mass developments. A Telecom Engineer is responsible for designing and overseeing the installation of telecommunications equipment and facilities, such and consulting business, epix(R) Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Services (www.epix.net) and Commonwealth Long Distance Company. A web site featuring current information regarding CTE can be reached at www.ct-enterprises.com. -0-
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000'S)
2ND QUARTER 1998
CT CTSI OTHER TOTAL
Sales $38,470 $4,989 $12,220 $55,679
Costs & Expenses before
Corporate Management Fees
and Depreciation & Amortization 14,739 7,225 11,386 33,350
Corporate Management Fees 1,347 175 428 1,950
Depreciation & Amortization 7,241 1,029 683 8,953
------- ------------------------
Operating income (loss) 15,143 (3,440) (277) 11,426
Interest & Dividend income 605 - 21 626
Interest expense (1,795) - (1,327) (3,122)
Other (expense) income, net (129) 421 25 317
------- ------------------------
Income (loss) from continuing
operations before income taxes 13,824 (3,019) (1,558) 9,247
Provision (benefit) for income taxes 5,710 (777) (575) 4,358
Income (loss) from continuing
operations before equity in
unconsolidated entities 8,114 (2,242) (983) 4,889
Equity in income of
unconsolidated entities - 1,072 - 1,072
---------- ------------------------
Income (loss) from continuing
operations 8,114 (1,170) (983) 5,961
Discontinued operations - - (36) (36)
------------------------------
Net income (loss) 8,114 (1,170) (1,019) 5,925
Preferred Stock Dividend and
Accretion Requirements - - 1,063 1,063
----------------------------------
Net Income (Loss) to Common
Shareholders $8,114 ($1,170)($2,082) $4,862
==================================
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000'S)
2ND QUARTER 1997
CT CTSI OTHER TOTAL
Sales $35,523 $818 $12,212 $48,553
Costs & Expenses before Corporate
Management Fees and Depreciation
& Amortization 13,536 3,110 11,401 28,047
Corporate Management Fees 1,526 59 233 1,818
Depreciation & Amortization 6,885 120 529 7,534
-------------------------------
Operating income (loss) 13,576 (2,471) 49 11,154
Interest & Dividend income 730 48 1 779
Interest expense (2,066) - 12 (2,054)
Other (expense) income, net (36) (8) 403 359
------- ----------- ----------
Income (loss) from continuing
operations before income taxes 12,204 (2,431) 465 10,238
Provision (benefit) for income taxes 5,134 (871) 563 4,826
------- ----------- ----------
Income (loss) from continuing
operations before equity in
unconsolidated entities 7,070 (1,560) (98) 5,412
Equity in income of
unconsolidated entities - - 1,113 1,113
---------------------------------
(more)
Income (loss) from continuing
operations 7,070 (1,560) 1,015 6,525
Discontinued operations - - (19,484)(19,484)
-------------------------------
Net income (loss) 7,070 (1,560 (18,469)(12,959)
Preferred Stock Dividend and Accretion
Requirements - - 1,063 1,063
-------------------------------
Net Income (Loss) to Common
Shareholders $7,070($1,560)($19,532)($14,022)
===============================
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000'S)
SIX MONTHS ENDED JUNE 30, 1998
CT CTSI OTHER TOTAL
---------- ---------- -------- -----
Sales $76,334 $8,879 $23,701 $108,914
Costs & Expenses before Corporate
Management Fees and Depreciation &
Amortization 29,787 13,430 22,011 65,228
Corporate Management Fees 2,672 311 830 3,813
Depreciation & Amortization 14,384 1,849 1,310 17,543
---------------------------------
Operating income (loss) 29,491 (6,711) (450) 22,330
Interest & Dividend income 1,533 - 122 1,655
Interest expense (3,634) - (2,568) (6,202)
Other (expense) income, net (198) 458 27 287
---------------------------------
Income (loss) from continuing
operations before income taxes 27,192 (6,253) (2,869) 18,070
Provision (benefit) for income taxes 11,213 (1,767) (1,213) 8,233
---------------------------------
Income (loss) from continuing
operations before equity in
unconsolidated entities 15,979 (4,486) (1,656) 9,837
Equity in income of unconsolidated
entities - 1,190 - 1,190
-------------------------------
Income (loss) from continuing
operations 15,979 (3,296) (1,656) 11,027
Discontinued operations - - (31) (31)
--------------------------------
Net income (loss) 15,979 (3,296) (1,687) 10,996
Preferred Stock Dividend and Accretion
Requirements - - 2,125 2,125
------------------------------------
Net Income (Loss) to Common
Shareholders $15,979 ($3,296) ($3,812) $8,871
==================================
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000'S)
SIX MONTHS ENDED JUNE 30, 1998
CT CTSI OTHER TOTAL
--------- ---------- ------- -------
Sales $70,591 $1,112 $23,263 $94,966
Costs & Expenses before Corporate
Management Fees and Depreciation &
Amortization 27,617 4,600 22,104 54,321
Corporate Management Fees 2,927 111 442 3,480
Depreciation & Amortization 13,524 179 1,060 14,763
---------------------------------
Operating income (loss) 26,523 (3,778) (343) 22,402
Interest & Dividend income 1,702 63 1 1,766
Interest expense (4,133) - - (4,133)
Other (expense) income, net (170) (10) 1,226 1,046
---------------------------------
Income (loss) from continuing
operations before income taxes 23,922 (3,725) 884 21,081
Provision (benefit) for income taxes 9,846 (1,304) 689 9,231
---------------------------------
Income (loss) from continuing
operations before equity in
unconsolidated entities 14,076 (2,421) 195 11,850
Equity in income of unconsolidated
entities - - 1,221 1,221
--------------------------------
Income (loss) from continuing
operations 14,076 (2,421) 1,416 13,071
Discontinued operations - - (32,369) (32,369)
---------------------------------
Net income (loss) 14,076 (2,421) (30,953) (19,298)
Preferred Stock Dividend and Accretion
Requirements - - 2,125 2,125
-------------------------------
Net Income (Loss) to Common
Shareholders $14,076 ($2,421)($33,078)($21,423)
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
June 30, June 30,
----------------------- ----------
1998 1997 1998 1997
SALES $55,679 $48,553 $108,914 $94,966
COSTS & EXPENSES, EXCLUDING
MANAGEMENT FEES AND
DEPRECIATION AND AMORTIZATION 33,350 28,047 65,228 54,321
MANAGEMENT FEES 1,950 1,818 3,813 3,480
DEPRECIATION AND AMORTIZATION 8,953 7,534 17,543 14,763
------------------------------------
OPERATING INCOME 11,426 11,154 22,330 22,402
INTEREST & DIVIDEND INCOME 626 779 1,655 1,766
INTEREST EXPENSE (3,122) (2,054) (6,202) (4,133)
OTHER INCOME, NET 317 359 287 1,046
------------------------------------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 9,247 10,238 18,070 21,081
PROVISION FOR INCOME TAXES 4,358 4,826 8,233 9,231
------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE EQUITY IN UNCONSOLIDATED
ENTITIES 4,889 5,412 9,837 11,850
EQUITY IN INCOME OF UNCONSOLIDATED
ENTITIES 1,072 1,113 1,190 1,221
------------------------------------
INCOME FROM CONTINUING OPERATIONS 5,961 6,525 11,027 13,071
DISCONTINUED OPERATIONS (36) (19,484) (31) (32,369)
------------------------------------
NET INCOME (LOSS) 5,925 (12,959) 10,996 (19,298)
PREFERRED STOCK DIVIDEND AND
ACCRETION REQUIREMENTS 1,063 1,063 2,125 2,125
------------------------------------
NET INCOME (LOSS) TO COMMON
SHAREHOLDERS $4,862 ($14,022) $8,871 ($21,423)
====================================
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
------------------------------------
1998 1997 1998 1997
BASIC EARNINGS (LOSS)
PER AVERAGE COMMON SHARE
INCOME FROM CONTINUING
OPERATIONS $0.26 $0.30 $0.48 $0.60
========================================
DISCONTINUED OPERATIONS - $1.06 - $1.77
=========================================
NET INCOME (LOSS) TO COMMON
SHAREHOLDERS $0.26 ($0.76) $0.48 ($1.17)
===========================================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 18,390,518 18,322,513 18,364,052 18,319,757
DILUTED EARNINGS (LOSS)
PER AVERAGE COMMON SHARE
INCOME FROM CONTINUING
OPERATIONS $0.25 $0.29 $0.47 $0.59
===========================================
DISCONTINUED OPERATIONS - $1.05 - $1.75
============================================
NET INCOME (LOSS) TO COMMON
SHAREHOLDERS $0.25 ($0.76) $0.47 ($1.16)
==========================================
WEIGHTED AVERAGE COMMON
SHARES AND COMMON STOCK
EQUIVALENTS OUTSTANDING 19,064,792 18,505,371 18,998,854 18,463,554
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
June 30, December 31,
1998 1997
------------------------
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $9,466 $14,017
Accounts receivable from related parties 521 3,743
Other current assets 54,420 48,510
Deferred income taxes 6,647 5,170
-------------------------
Total current assets 71,054 71,440
-------------------------
PROPERTY, PLANT AND EQUIPMENT
(NET OF ACCUMULATED DEPRECIATION OF
$237,141 as of June 30, 1998 AND
$223,051 IN 1997) 314,072 287,956
-------------------------
INVESTMENTS 8,859 8,815
--------------------------
DEFERRED CHARGES AND OTHER ASSETS 7,705 5,456
--------------------------
TOTAL ASSETS $401,690 $373,667
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $9,010 $9,010
Advance billings & customer deposits 3,359 3,540
Accrued taxes 1,927 1,498
Accrued interest 580 638
Accounts payable to related parties 3,031 7,944
Other current liabilities 60,157 52,828
--------------------------
Total current liabilities $78,064 $75,458
--------------------------
COMMONWEALTH TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
June 30, December 31,
1998 1997
-------------------------
LONG-TERM DEBT $182,343 $167,347
-------------------------
DEFERRED INCOME TAXES AND INVESTMENT
TAX CREDITS 42,113 42,086
-------------------------
OTHER DEFERRED CREDITS 8,638 8,328
-------------------------
REDEEMABLE PREFERRED STOCK 43,341 42,517
-------------------------
COMMON SHAREHOLDERS' EQUITY:
Common stock 22,380 22,377
Additional paid-in capital 149,904 151,041
Retained earnings 11,970 3,750
Treasury stock at cost, 3,988,652 shares
at June 30, 1998 and 4,048,218 shares
at December 31, 1997 (137,063) (139,237)
---------------------------
Total common shareholders' equity 47,191 37,931
---------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $401,690 $373,667
=============================
CONTACT: David G. Weselcouch (Investors)
(717) 674-2805
or
Mike Burnside (Media)
(717) 674-2806
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