North Pittsburgh Systems, Inc. [NASDAQ:NPSI] today announced
earnings for the fourth quarter and full year 2006. NPSI�s
President, Harry R. Brown, stated that net income was $5,176,000,
or $.34 per share, for the fourth quarter of 2006 as compared to
net income of $6,873,000, or $.46 per share, for the fourth quarter
of 2005. For the full year 2006, NPSI�s net income increased
$8,699,000, or 37.7%, to $31,755,000 from $23,056,000 in 2005, with
earnings per share for 2006 amounting to $2.12 versus $1.54 for
2005, an increase of $.58 per share. As discussed in more detail
below in the analysis of full year 2006 results, net income for the
full year 2006 was positively impacted by $11,479,000, or $.76 per
share, from a gain realized on the redemption of an investment.
Addressing the fourth quarter of 2006 first, Mr. Brown reported
that operating revenues decreased $1,147,000, or 4.3%, from
$26,768,000 for the fourth quarter of 2005 to $25,621,000 for the
fourth quarter of 2006. He noted that the decrease in revenues was
attributable to several sources, including a $531,000 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 (NECA) average schedule
formulas applicable to the Company�s Incumbent Local Exchange
Carrier (ILEC). In addition, revenues were negatively impacted by a
$427,000 decrease in toll revenues due to competitive pricing
pressures experienced on the Company�s toll offerings, a $221,000
decrease in local dial tone revenues as a result of a decrease in
the Company�s overall number of access lines and by a $53,000
decline in revenue generated from Primary Rate Interface (PRI)
circuits provisioned to Internet Service Providers. 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 by the further expansion of broadband
service offerings. Mr. Brown noted that the Company�s quarterly
access revenues were influenced by true-ups and settlements of
regulated revenue requirements and pooling arrangements. Although
historically having a nominal impact on revenues realized for a
full year period, these true-ups and settlements can be noteworthy
on a comparative quarterly basis. Access revenues for the fourth
quarter of 2006 benefited from a favorable true-up of the Company�s
ILEC�s intrastate revenue requirement, which resulted in
approximately $790,000 of revenue recorded in the fourth quarter of
2006 pursuant to the annual revenue requirement true-up that
related to prior quarters. In comparison, during the fourth quarter
of 2005 access revenues benefited from an increase in revenues
recorded from the NECA pooling arrangements in which the Company�s
ILEC participates. In the fourth quarter of 2005, NECA determined
that the ILEC�s required pool settlement contributions for the most
recent settled two-year monitoring period were approximately
$275,000 lower than had been projected and accrued, resulting in a
positive adjustment to our ILEC�s settlement revenues. Operating
expenses for the fourth quarter of 2006 increased $1,120,000, or
6.1%, compared to the prior year comparable quarter. Mr. Brown
observed that the increase in operating expenses was partially due
to an approximately $480,000 increase in combined labor and benefit
expenses and a $398,000 increase in depreciation expense. In
addition, the Company recorded $298,000 of curtailment expenses
during the fourth quarter of 2006 in conjunction with an amendment
to the Company�s North Pittsburgh Telephone Company (NPTC)
subsidiary�s qualified defined benefit pension plan that effective
December 31, 2006 froze the benefit accrual for participants not
covered by its collective bargaining agreement. Other income (net)
for the fourth quarter of 2006 increased $29,000 from the prior
year comparable period due primarily to a $983,000 increase in
equity income recorded from the Company�s partnership investments
(which consist primarily of limited partner interests in three
wireless partnerships). The increase in equity income was a result
of the continued strong operating results of the wireless
partnerships as well as partially due to the fact that the fourth
quarter of 2005 was negatively impacted by $422,000 in adjustments
to the wireless partnerships� financial results of operations as a
result of the partnerships� annual audits for the year ended
December 31, 2004. The Company also benefited from a $136,000
increase in interest earned from higher interest rates on invested
cash and a $67 decrease in interest expense resulting from
continued debt reductions. The above-mentioned items were mostly
offset by a $1,123,000 decrease in dividend income earned because
of the redemption of NPTC�s Rural Telephone Bank (RTB) stock in
April of 2006. Prior to the redemption, the Company had during its
fourth quarter in recent previous years received annual dividends
on the RTB Class C stock that its NPTC subsidiary held. For
comparative purposes, the Company�s effective tax rate on income
from continuing operations for the fourth quarter of 2006 was
40.3%, as contrasted with 36.7% for the fourth quarter of 2005. The
increase 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 during the
fourth quarter of 2005 because of the subsidiary�s current history
of producing state taxable income. The increase in the effective
tax rate was also partially the result of the impact of a positive
true-up of the Company�s income tax liability during the fourth
quarter of 2005. These factors contributed to a $510,000 decrease
in income tax expense for the fourth quarter of 2005. Addressing
full year 2006 results, Mr. Brown stated that significant items
that were not routine in nature impacted the $8,699,000, or 37.7%,
increase in net income. During the second quarter of 2006, the
Company�s NPTC subsidiary received a payment of $19,622,000 from
the RTB for the redemption of NPTC�s RTB stock and recognized a
gain on the full amount of the proceeds received; this gain, on an
after tax basis, contributed $11,479,000, or $.76 per share, to the
net income recorded during 2006. In addition, depreciation expense
decreased $4,616,000 during 2006, 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.
With respect to the prior year, 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 2005. Mr. Brown further
reported that operating revenues for 2006 decreased $6,339,000, or
5.8%, from 2005. As noted above, the impact from the aforementioned
carrier settlement agreement in 2005 accounted for $1,604,000 of
this comparative decrease in 2006. Revenues from all other sources
decreased $4,735,000, or 4.4%, in 2006. The majority of this
decrease was a result of declines in revenues generated from access
services, toll and data PRI circuits. Full year operating expenses
for 2006 increased $458,000, or 0.6%, over 2005. For comparative
purposes, operating expenses in 2005 benefited from the $800,000
cumulative reduction to operating expenses associated with the
aforementioned carrier settlement agreement. In 2006, the Company
experienced increases in the direct costs associated with the
growth in access lines and access line equivalents in the Company�s
CLEC edge-out markets and fees paid to terminate the increased
voice and Internet traffic generated by the Company�s customer
bases. In addition, combined labor and benefit expenses increased
approximately $1,470,000, or 5.6%, during 2006 and operational
support system expenses increased approximately $285,000 in
conjunction with one of the Company�s subsidiaries migrating to a
new billing system. Operating expenses for 2006 were favorably
impacted by the aforementioned $4,616,000 decrease in depreciation
expense. Other income (net) for the full year 2006 increased
$22,365,000 over the prior year due primarily to the aforementioned
$19,622,000 gain recognized on the redemption of NPTC�s RTB stock.
In addition, other income (net) benefited from a $2,622,000
increase in equity income recorded from the Company�s partnership
investments, a $1,089,000 increase in interest earned from higher
interest rates on higher average balances of invested cash, and a
$237,000 decrease in interest expense as a result of the Company�s
continued debt reduction. These factors were partially offset by a
$1,123,000 decrease in dividend income because of the redemption of
NPTC�s RTB stock. For comparative purposes, the Company�s effective
tax rate on income from continuing operations for the full year
2006 was 41.5%, as contrasted with 39.9% for the full year 2005.
The increase 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, 2006, the Company had a total of 63,317
access lines in its ILEC territory, 65,723 CLEC access line
equivalents (including 2,332 DSL subscribers) and a total of 15,592
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 10.1% decrease in access lines in its
ILEC territory during 2006. He noted that, in contrast, total CLEC
access line equivalents and consolidated DSL subscribers had grown
8.5% and 8.4%, respectively, in 2006. North Pittsburgh Systems,
Inc. has total assets of $157 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, 2006. NORTH PITTSBURGH SYSTEMS, INC. SUMMARIZED FINANCIAL
INFORMATION (Unaudited) (Amounts in Thousands - Except Per Share
Data) � For the Three Months Ended December 31 For the Twelve
Months Ended December 31 � � 2006� � 2005� � 2006� � 2005� � Total
operating revenues $ 25,621� $ 26,768� $ 103,465� $ 109,804� �
Total operating expenses � 19,466� � 18,346� � 78,524� � 78,066� �
Net operating income 6,155� 8,422� 24,941� 31,738� � Other income,
net � 2,517� � 2,488� � 29,276� � 6,911� � Income from
continuing�operations before income taxes 8,672� 10,910� 54,217�
38,649� � Provision for income taxes � 3,498� � 4,002� � 22,473� �
15,407� � Income from continuing operations 5,174� 6,908� 31,744�
23,242� � Income (loss) from discontinued�operations(a) � 2� � (35)
� 11� � (186) � Net income $ 5,176� $ 6,873� $ 31,755� $ 23,056� �
Common shares outstanding � 15,005� � 15,005� � 15,005� � 15,005� �
Basic and diluted earnings per share $ .34� $ .46� $ 2.12� $ 1.54�
� Dividends per share $ .20� $ .19� $ 1.79� $ .75� December 312006
December 312005 � Cash and temporary investments $ 49,518� $
55,567� Total assets 157,433� 159,200� Total debt 18,512� 21,597�
Total shareholders� equity 101,296� 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.
North Pittsburgh Systems (MM) (NASDAQ:NPSI)
Historical Stock Chart
From Sep 2024 to Oct 2024
North Pittsburgh Systems (MM) (NASDAQ:NPSI)
Historical Stock Chart
From Oct 2023 to Oct 2024