North Pittsburgh Systems, Inc. (NASDAQ:NPSI) today announced net
income of $5,035,000, or $.34 per share, on operating revenues of
$27,532,000 for the third quarter of 2005. This compares to net
income of $4,721,000, or $.31 per share, on operating revenues of
$27,091,000 for the comparable period last year. NPSI's President,
Harry R. Brown, stated that the increase in third quarter 2005 net
income was attributable primarily to a $280,000 increase in
investment earnings recorded from the Company's temporary
investments, a $72,000 increase in net operating income and a
$61,000 decrease in interest expense as a result of the Company's
continued debt reduction. Mr. Brown reported that operating
revenues increased $441,000, or 1.6%, during third quarter 2005 as
compared to third quarter 2004. The increase was principally due to
the Company's ability to continue to effectively penetrate its
Competitive Local Exchange Carrier's (CLEC) edge-out markets and
the further expansion of its broadband service offerings. This
ability to grow end-user customer revenues was offset in part by
decreases in the Company's access revenues and telecommunication
equipment sales. Operating expenses for the third quarter of 2005
increased $369,000, or 1.8%, in relation to the prior year period.
Mr. Brown noted that the increase in operating expenses was
predominantly due to increases in the direct costs associated with
the growth in access lines and access line equivalents, such as
fees paid for leasing unbundled network elements in the portions of
the CLEC edge-out markets that the Company does not wholly
provision over its own facilities, and fees paid to terminate the
increased local, toll and Internet traffic generated by the
Company's growing customer base. In addition, depreciation expense
increased as a result of a 3.9% increase in the Company's
depreciable asset base over the prior year comparable period. Other
income (net) for the third quarter of 2005 increased $436,000 over
the prior year comparable period due partially to a $280,000
increase in interest income earned on higher cash and temporary
investment balances. In addition, the Company benefited from a
$61,000 decrease in interest expense as a result of the Company's
continued debt reduction and a $39,000 increase in equity income
recorded from the Company's partnership investments (which consist
primarily of limited partner interests in three wireless
partnerships). For the first nine months of 2005, net income
increased $2,417,000, or 17.6%, to $16,183,000 from $13,766,000 for
the first nine months of 2004, and earnings per share amounted to
$1.08 as compared to $.92 for the first nine months of 2004. In
addition, for the first nine months of 2005, operating revenues
increased $2,668,000, or 3.3%, while operating expenses increased
$556,000, or 0.9%, and Other income (net) increased $1,940,000, as
compared to the first nine months of 2004. Many of the factors
described above in the third quarter analysis also contributed to
the net income increase for the first nine months of 2005. In
addition, net income for the first nine months of 2005 was
positively impacted by a settlement agreement reached with a
carrier in the second quarter of 2005. 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
increase in year-to-date net income for 2005, or $.09 per share.
Turning to operations, Mr. Brown reported that as of September 30,
2005, the Company had a total of 71,003 access lines in its ILEC
territory, 60,812 CLEC access line equivalents (including 2,311 DSL
subscribers) and a total of 13,687 DSL subscribers across all
subsidiaries. He noted that although ILEC access lines had
decreased 2.6% during the twelve-month period ended September 30,
2005, total CLEC access line equivalents and consolidated DSL
subscribers had grown 5.5% and 18.1%, respectively, over that same
twelve-month period. Mr. Brown concluded his remarks by stating
that he was pleased with the continued strong growth in broadband
circuits, which he sees as vital to the long-term success of the
Company. He explained that these broadband circuits are essential
to establishing a critical link to the Company's customer base that
will serve as the platform on which the Company will be able to
offer the next generation of enhanced services and applications.
North Pittsburgh Systems, Inc. has total assets of $156 million and
operates an integrated high-technology telecommunications business
in Western Pennsylvania providing competitive and local exchange
services, long distance, business phone systems 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
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2005. -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 ---------------------
-------------------- 2005 2004(a) 2005 2004(a) ----------
---------- ---------- --------- Total operating revenues $27,532
$27,091 $84,575 $81,907 Total operating expenses 20,655 20,286
61,519 60,963 ---------- ---------- ---------- --------- Net
operating income 6,877 6,805 23,056 20,944 Other income, net 1,667
1,231 4,424 2,484 ---------- ---------- ---------- --------- Income
before income taxes 8,544 8,036 27,480 23,428 Provision for income
taxes 3,509 3,315 11,297 9,662 ---------- ---------- ----------
--------- Net income $5,035 $4,721 $16,183 $13,766 ==========
========== ========== ========= Common shares outstanding 15,005
15,005 15,005 15,005 ========== ========== ========== =========
Basic and diluted earnings per share $.34 $.31 $1.08 $.92
========== ========== ========== ========= Dividends per share $.19
$.18 $.56 $.54 ========== ========== ========== ========= *T -0- *T
September 30 December 31 2005 2004 ------------ ------------ Cash
and temporary investments $49,270 $42,569 Total assets 155,778
155,500 Total debt 22,368 24,682 Total shareholders' equity 94,628
86,861 (a)Certain prior year operating revenues and expenses have
been reclassified to conform to the current year's presentation.
These reclassifications did not affect the net operating income or
net income amounts. *T
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