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
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