-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fruh2mquBgaZPqGwZiq76fOptnrO0X2CuNAAdQaFVshZtfG5RDwvexuzx3YZ0uA9 ZUEu4N9odDrr+6yDBkpyiQ== 0000950144-01-509114.txt : 20020410 0000950144-01-509114.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950144-01-509114 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CT COMMUNICATIONS INC /NC CENTRAL INDEX KEY: 0000023259 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 561837282 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19179 FILM NUMBER: 1788182 BUSINESS ADDRESS: STREET 1: 68 CABARRUS AVE EAST STREET 2: P O BOX 227 CITY: CONCORD STATE: NC ZIP: 28025 BUSINESS PHONE: 7047880244 MAIL ADDRESS: STREET 1: 68 CABARRUS AVE EAST STREET 2: PO BOX 227 CITY: CONCORD STATE: NC ZIP: 28025 FORMER COMPANY: FORMER CONFORMED NAME: CONCORD TELEPHONE CO DATE OF NAME CHANGE: 19920703 10-Q 1 g72769e10-q.txt CT COMMUNICATIONS, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 0-19179 CT COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) NORTH CAROLINA 56-1837282 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 68 Cabarrus Avenue, East P.O. Box 227, Concord, NC 28025 (Address of principal executive offices) (Zip Code) (704)722-2500 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 18,786,516 shares of Common Stock outstanding as of November 1, 2001. CT COMMUNICATIONS, INC. INDEX Page No. -------- PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets-- September 30, 2001 and December 31, 2000 2 Consolidated Statements of Income-- Three and Nine Months Ended September 30, 2001 and 2000 4 Consolidated Statements of Cash Flows-- Nine Months Ended September 30, 2001 and 2000 5 Consolidated Statements of Comprehensive Income (Loss)-- Three and Nine Months Ended September 30, 2001 and 2000 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 19 1 PART I. Item 1. FINANCIAL INFORMATION CT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) September 30, December 31, 2001 2000 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 7,148,453 $ 8,060,015 Accounts receivable, net of allowance for doubtful accounts of $519,732 and $329,732 23,129,032 18,987,133 Other accounts receivable 459,322 197,046 Materials and supplies 4,268,743 3,476,188 Income tax receivable 140,976 -- Deferred income taxes 134,875 134,875 Prepaid expenses and other assets 805,631 1,139,921 ------------- ------------- Total current assets 36,087,032 31,995,178 ------------- ------------- Investment securities 17,548,663 23,900,094 Other investments 184,363 484,363 Investments in unconsolidated companies 38,066,742 38,310,831 Property and equipment: Land, buildings, and general equipment 54,502,478 49,007,911 Central office equipment 128,064,234 105,679,164 Poles, wires, cables and conduit 117,982,286 106,279,321 Construction in progress 23,101,441 10,058,370 ------------- ------------- 323,650,439 271,024,766 Less accumulated depreciation (131,854,843) (119,241,009) ------------- ------------- Net property and equipment 191,795,596 151,783,757 Intangible and other assets, net 33,722,811 13,048,058 ------------- ------------- TOTAL ASSETS $ 317,405,207 $ 259,522,281 ============= ============= See accompanying notes to consolidated financial statements. 2 CT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Balance Sheets, (Continued) (Unaudited) September 30, December 31, 2001 2000 ------------- ------------ LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Redeemable preferred stock $ 12,500 $ $ 12,500 Accounts payable 10,935,575 11,232,108 Short-term borrowings -- 5,000,000 Customer deposits and advance billings 2,196,991 2,294,164 Accrued payroll 2,913,580 1,968,699 Income taxes payable -- 87,202 Accrued pension cost 2,218,695 1,000,933 Other accrued liabilities 2,792,665 2,724,648 ------------ ------------ Total current liabilities 21,070,006 24,320,254 ------------ ------------ Long-term debt 96,000,000 34,000,000 ------------ ------------ Deferred credits and other liabilities: Deferred income taxes 13,901,652 13,605,547 Investment tax credits 488,261 574,425 Post-retirement benefits other than pension 10,710,398 10,612,354 Other 472,116 942,686 ------------ ------------ Total deferred credits and other liabilities: 25,572,427 25,735,012 ------------ ------------ Redeemable Preferred Stock: 4.8% series, $100 par value; 5,000 shares authorized; 1,250 shares issued and outstanding in 2001 and 2000 100,000 100,000 ------------ ------------ Total liabilities 142,742,433 84,155,266 ------------ ------------ Stockholders' equity: Preferred stock not subject to mandatory redemption: 5% series, $100 par value; 3,356 shares outstanding in 2001 and 2000 335,600 335,600 4.5% series, $100 par value; 614 shares outstanding in 2001 and 2000 61,400 61,400 Common Stock 18,800,545 and 18,846,541 shares outstanding in 2001 and 2000, respectively 41,834,823 42,574,584 Other capital 298,083 298,083 Unearned compensation (805,618) (836,005) Other accumulated comprehensive income 6,086,557 10,298,820 Retained earnings 126,851,929 122,634,533 ------------ ------------ Total stockholders' equity 174,662,774 175,367,015 ------------ ------------ TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $317,405,207 $259,522,281 ============ ============ See accompanying notes to consolidated financial statements. 3 CT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 ---- ---- ---- ---- Operating revenues $ 35,710,089 $ 28,640,072 $ 98,520,034 $ 85,450,227 Operating expenses 33,197,023 25,930,639 93,112,031 73,559,084 Restructuring expense -- -- 1,942,076 -- ------------ ------------ ------------ ------------ Operating income 2,513,066 2,709,433 3,465,927 11,891,143 ------------ ------------ ------------ ------------ Other income (expenses): Equity in income of 1,167,205 1,557,920 3,728,763 4,560,905 unconsolidated companies, net Interest, dividend income and gain on sale of investments 2,344,300 42,329,635 9,497,647 48,220,138 Other expenses, principally interest (1,238,713) (1,115,511) (3,332,956) (2,198,095) ------------ ------------ ------------ ------------ Total other income 2,272,792 42,772,044 9,893,454 50,582,948 ------------ ------------ ------------ ------------ Income before income taxes 4,785,858 45,481,477 13,359,381 62,474,091 Income taxes 1,988,673 18,147,704 5,445,635 24,970,647 ------------ ------------ ------------ ------------ Net income 2,797,185 27,333,773 7,913,746 37,503,444 Dividends on Preferred Stock 6,236 6,386 18,708 19,158 ------------ ------------ ------------ ------------ Earnings for Common Stock 2,790,949 27,327,387 7,895,038 37,484,286 ============ ============ ============ ============ Basic earnings per common share: Earnings per common share $ 0.15 $ 1.45 $ 0.42 $ 1.99 ============ ============ ============ ============ Diluted earnings per common share: Earnings per common share $ 0.15 $ 1.44 $ 0.42 $ 1.98 ============ ============ ============ ============ Basic weighted average shares outstanding 18,797,855 18,853,398 18,834,216 18,826,726 ============ ============ ============ ============ Diluted weighted average shares outstanding 18,845,088 18,942,032 18,875,177 18,942,034 ============ ============ ============ ============
See accompanying notes to consolidated financial statements. 4 CT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2001 2000 ------------ ------------ Cash flows from operating activities: Net income $ 7,913,746 $ 37,503,444 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,794,888 13,464,412 Postretirement benefits 98,044 (75,422) Gain on sales of investment securities (8,380,173) (8,206,690) Gain on sale of investment in unconsolidated companies -- (39,214,000) Undistributed income of unconsolidated companies (1,742,337) (4,581,672) Deferred income taxes and tax credits 2,648,836 (86,164) Changes in operating assets and Liabilities, net of effects of acquisitions: Accounts receivable (4,554,175) 1,061,400 Materials & supplies (792,555) (624,740) Other assets (434,597) (269,341) Accounts payable (296,533) 1,334,713 Customer deposits and advance billings (97,173) (80,080) Accrued liabilities 1,755,555 (685,028) Income taxes payable (228,178) 14,797,654 ------------ ------------ Net cash provided by operating activities 13,685,348 14,338,486 ------------ ------------ Cash flows from investing activities: Capital expenditures, net (51,327,560) (40,682,659) Purchase of investments in unconsolidated companies -- (6,352,956) Purchase of other investments -- (475,000) Purchase of investment securities (2,110,512) (6,872,313) Proceeds from sale of investment in unconsolidated companies -- 39,214,000 Proceeds from sale of investment securities 10,490,958 14,415,815 Capital distribution from unconsolidated companies 1,986,426 3,976,852 Purchase of wireless spectrum (2,397,840) -- Acquisitions, net of cash (23,310,434) (794,454) ------------ ------------ Net cash (used in) provided by investing activities (66,668,962) 2,429,285 ------------ ------------ Cash flows from financing activities: Proceeds from new credit facility 96,000,000 -- Proceeds from new debt -- 19,000,000 Repayment of debt (39,000,000) -- Dividends paid (3,665,972) (3,688,349) Repurchase of Common Stock (1,334,214) (11,561) Proceeds from Common Stock issuances 72,238 545,611 ------------ ------------ Net cash provided by financing activities 52,072,052 15,845,701 ------------ ------------ Net (decrease) increase in cash and cash equivalents (911,562) 32,613,472 Cash and cash equivalents - beginning of period 8,060,015 1,561,778 ------------ ------------ Cash and cash equivalents - end of period $ 7,148,453 $ 34,175,250 ============ ============
See accompanying notes to consolidated financial statements. 5 CT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ----------------------------- ----------------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net income $ 2,797,185 $ 27,333,773 $ 7,913,746 $ 37,503,444 Other copmrehensive income, net of tax: Unrealized holding gains (losses) on available-for-sale securities (519,656) (19,183,349) 1,162,780 (24,318,832) Less reclassification adjustment for gains realized in net income (1,397,732) (1,741,936) (5,375,043) (5,263,771) ----------- ------------ ----------- ------------ Comprehensive income $ 879,797 $ 6,408,488 $ 3,701,483 $ 7,920,841 =========== ============ =========== ============
See accompanying notes to consolidated financial statements. 6 CT COMMUNICATIONS, INC. AND SUBSIDIARIES (Unaudited) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management of CT Communications, Inc. (the "Company"), the accompanying unaudited financial statements contain all adjustments consisting of only normal recurring accruals necessary to present fairly the financial position as of September 30, 2001 and 2000, and the results of operations for the three and nine months then ended and cash flows for the nine months then ended. These financial statements should be read with the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2000 and do not include all disclosures associated with annual financial statements. 2. In certain instances, amounts previously reported in the 2000 consolidated financial statements have been reclassified to conform with the 2001 consolidated financial statements presentation. Such reclassifications have no effect on net income or retained earnings as previously reported. 3. The results of operations for the nine months ended September 30, 2001 and 2000 are not necessarily indicative of the results to be expected for the full year. 4. All common stock share amounts have been adjusted to reflect a 2-for-1 stock dividend paid on April 5, 2000. 5. The following is a summary of common stock transactions during the nine months ended September 30, 2001. Shares Value ------ ----- Outstanding at December 31, 2000 18,846,541 $42,574,584 Purchase of Common Stock (106,730) (1,604,880) Issuance of Common Stock 60,734 865,119 ---------- ----------- Outstanding at September 30, 2001 18,800,545 $41,834,823 =========== =========== Basic Diluted ----- ------- Weighted average shares outstanding for the nine months ended September 30, 2001 18,834,216 18,875,177 Weighted average shares outstanding for the nine months ended September 30, 2000 18,826,726 18,942,034 The Company began a stock repurchase program in April 2001 and intends to repurchase up to 1,000,000 shares of its outstanding common stock periodically through April 2002. As of September 30, 2001, 89,950 shares had been repurchased at a cost of approximately $1.3 million. 6. SECURITIES AVAILABLE-FOR-SALE The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value for the Company's investments by major security type and class of security at September 30, 2001 and December 31, 2000 were as follows: September 30, 2001 ------------------ Securities Amortized Gross Unrealized Gross Unrealized Fair Available-for-Sale Cost Holding Gains Holding Losses Value - ------------------ ---- ------------- -------------- ----- Equity securities $8,143,040 $11,112,024 $(1,706,401) $17,548,663 ========== =========== =========== =========== 7 December 31, 2000 ----------------- Securities Amortized Gross Unrealized Gross Unrealized Fair Available-for-Sale Cost Holding Gains Holding Losses Value - ------------------ ---- ------------- -------------- ----- Equity securities $7,843,313 $16,827,470 $ (770,689) $23,900,094 ========== =========== =========== =========== In the nine months ended September 30, 2001, the Company sold 345,000 shares of Illuminet Holdings, Inc. ("Illuminet") common stock. As of September 30, 2001, the Company owned over 298,000 shares of Illuminet common stock with a market value of approximately $11.4 million and over 800,000 shares of ITC-DeltaCom, Inc. ("ITC-DeltaCom") common stock with a market value of approximately $1.0 million. 7. INVESTMENTS IN UNCONSOLIDATED COMPANIES September 30, 2001 December 31, 2000 ------------------ ----------------- Equity Method: Palmetto MobileNet, L.P. $ 12,356,948 $ 12,472,551 Wireless One of North Carolina, L.L.C. 8,744,992 8,874,129 Other 110,791 110,140 Cost Method: ITC Holding Company 2,215,534 2,215,534 Maxcom Telecomunicaciones, S.A. de C.V. 14,638,477 14,638,477 ------------ ------------ TOTAL $ 38,066,742 $ 38,310,831 ============ ============ On September 14, 2001, the Company's wholly owned subsidiary, CT Wireless Cable, Inc. (CTWC), and Wireless One of North Carolina, L.L.C. (WONC), entered into a Limited Liability Company Interest Purchase Agreement with Wireless One, Inc. and Worldcom Broadband Solutions, Inc. pursuant to which WONC will purchase from Wireless One, Inc. its entire 50% interest in WONC. As a result of the purchase, CTWC will own more than 99% of the equity interest in WONC. The purchase is subject to FCC approval, and it is expected the transaction will close in the first quarter of 2002. The total purchase price for Wireless One, Inc.'s interest in WONC is approximately $20.7 million, which is payable $3 million in cash at closing and an interest bearing promissory note of WONC for the remainder. The promissory note is payable over the ten year period following the closing, with a $7 million payment due in one year (which payment may be deferred for up to an additional two years) and the remainder payable in equal annual installments beginning after six years. In the event the $7 million payment is not made when due, either CTWC or Wireless One, Inc. may cause WONC to transfer certain of its licensed frequencies to Wireless One, Inc. in payment of the outstanding principal amount of the promissory note. The promissory note is secured by a pledge of WONC's channel rights. 8. RESTRUCTURING LIABILITY In 2001, the Company recorded restructuring charges of $1,942,076 in connection with an early retirement plan and the closing of competitive local exchange carrier operations in Raleigh, North Carolina. The related liabilities are included in other accrued liabilities and accrued pension cost in the accompanying consolidated balance sheets and were established to accrue for estimated retirement and severance costs related to 17 employees primarily within the network department, lease termination costs, Raleigh transport costs, and other costs associated with the restructuring action. A summary of restructuring liability activity for the nine months ended September 30, 2001 is as follows: Balance at December 31, 2000 $ -- Early retirement and severance costs 1,178,369 Lease termination costs 241,110 Raleigh transport costs 307,093 Other costs 215,504 ----------- Restructuring charge incurred 1,942,076 Cash payments: Early retirement and severance costs (115,369) Raleigh transport costs (307,093) Other costs (215,504) ----------- Balance at September 30, 2001 $ 1,304,110 =========== 8 9. LONG-TERM DEBT Long-term debt consists of the following: The Company has a $90.0 million revolving five year line of credit with interest at LIBOR plus a spread based on various financial ratios, currently 1.25%. The interest rate on September 30, 2001 was 4.896%. The credit facility provides for quarterly payments of interest until maturity on March 31, 2006. As of September 30, 2001, $46.0 million was outstanding under the revolving credit agreement. The Company also has a 7.32% fixed rate $50.0 million term loan that matures at December 31, 2014. All $50.0 million was outstanding as of September 30, 2001. The Company has an interest rate swap transaction to fix $10.0 million of the outstanding revolving line of credit at a rate of 5.9% plus a spread, currently 0.5%. The fair value of the swap as of September 30, 2001 was ($622,603). The Company also has an additional line of credit for $10.0 million. As of September 30, 2001, the Company had no amounts outstanding under this credit line. 10. PARTITIONING The Company effected the partitioning of its portion of the Cingular DCS Network on June 1, 2001. As a result, the Company acquired 47 cell sites, approximately 13,100 additional subscribers and a license for spectrum for Cabarrus, Rowan, and Stanly Counties in North Carolina and the southern portion of Iredell County, North Carolina. This partitioned area contains a population of approximately 440,000 people. This transaction has been accounted for under the purchase method of accounting. The total purchase price was $23.2 million. The Company paid $19.3 million in June 2001 and $3.9 million in September 2001. Allocation of the transaction is summarized below: Property and equipment $ 4,635,875 Intangible and other assets 18,724,559 Liabilities (150,000) ------------ Total purchase price $ 23,210,434 ============ While the Company has ownership of the assets and customer accounts within its partitioned area, the Company will continue to purchase pre-defined services from the DCS Partnership, such as switching, and will remain subject to certain conditions including certain branding requirements, offering partnership service plans and adherence to partnership technical and customer care standards. 11. RECENT ACCOUNTING PRONOUNCEMENTS Effective January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires the recognition of all derivative financial instruments as either assets or liabilities in the statement of financial condition and measurement of those instruments at fair value. Changes in the fair value of those derivatives will be reported in earnings or other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. We have identified the interest rate swap 9 agreement as our only derivative instrument. In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS No. 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. The Company is required to adopt the provisions of SFAS No. 141 immediately. In July 2001, the Financial Accounting Standards Board issued SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 prohibits the amortization of goodwill into earnings and instead requires companies to continually review these assets for impairment. The Company plans to adopt SFAS No. 142 effective January 1, 2002 in accordance with the standard. SFAS No. 141 will require, upon adoption of SFAS No. 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in prior purchase business combinations, and to make any necessary reclassifications in order to conform with the new criteria in SFAS No. 141 for recognition apart from goodwill. Upon adoption of SFAS No. 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of SFAS No. 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. The Financial Accounting Standards Board issued SFAS No. 143, "Accounting For Asset Retirement Obligations", which is effective January 1, 2003. This statement requires, among other things, the accounting and reporting of legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or normal operation of a long-lived asset. The Company has not yet determined the impact of the adoption of this standard on its financial position, results of operations and cash flows. The Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is effective January 1, 2002. This statement addresses accounting and reporting of all long-lived assets, except goodwill, that are either held and used or disposed of through sale or other means. The Company has not yet determined the impact of the adoption of this standard on its financial position, results of operations and cash flows. 12. SEGMENT INFORMATION Effective December 31, 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." As a result of the reorganization of internal reporting, the Company has defined and reports six segments as follows: the incumbent local exchange carrier ("ILEC") which provides local telephone service, the competitive local exchange carrier ("CLEC") which provides competitive local telephone services to customers outside the ILEC's operating area, the satellite local exchange carrier ("SLEC") which provides telecommunications services to new mixed-use developments outside the ILEC's operating area, long distance services ("LD"), the internet service provider ("ISP") which provides dial-up and high-speed internet access, web design, web hosting and other data related services, and the digital wireless group ("DCS") which provides wireless phone services. Prior to January 2001, the results of the SLEC segment were included within the CLEC. Therefore, any comparison of current results with those of prior periods may require further adjustments(1). Accounting policies of the segments are 10 the same as those described in the summary of significant accounting policies included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000, as amended. The Company evaluates performance based on operating profit before other income/(expenses) and income taxes. Intersegment revenues and expenses are excluded for purposes of calculating operating earnings before interest, taxes, depreciation, and amortization ("Operating EBITDA") and segment operating profit/(loss). Selected data by business segment for the three and nine months ended September 30, 2001 and 2000, is as follows:
THREE MONTHS ENDED SEPTEMBER 30, 2001 ILEC CLEC SLEC LD ISP DCS OTHER TOTAL ----------------------------------------------------------------------------------------------------- External revenues $ 20,758,566 $ 2,391,981 $ 416,043 $ 3,704,263 $ 2,533,842 $ 5,900,429 $ 4,965 $ 35,710,089 Intersegment revenues 1,391,570 -- -- -- -- 24,637 -- 1,416,207 External expenses 10,302,101 3,927,307 1,196,829 1,765,571 2,703,960 4,435,246 2,399,580 26,730,594 Intersegment expenses 100,140 53,096 51,275 769,528 397,223 48,677 (3,732) 1,416,207 Operating EBITDA 10,456,465 (1,535,326) (780,786) 1,938,692 (170,118) 1,465,183 (2,394,615) 8,979,495 Depreciation and amortization 4,284,670 544,909 204,632 299,991 580,237 297,028 254,962 6,466,429 Segment operating proft/(loss) 6,171,795 (2,080,235) (985,418) 1,638,701 (750,355) 1,168,155 (2,649,577) 2,513,066 Segment assets 174,518,935 14,944,412 11,802,873 4,504,430 15,615,951 27,046,178 68,972,428 317,405,207 THREE MONTHS ENDED SEPTEMBER 30, 2000 ILEC CLEC LD ISP DCS OTHER TOTAL --------------------------------------------------------------------------------------- External revenues 20,144,466 938,329 3,478,852 1,874,518 2,091,407 112,500 28,640,072 Intersegment revenues 1,440,662 -- -- -- 14,298 -- 1,454,960 External expenses 10,266,811 3,502,971 1,988,977 2,256,729 2,457,140 700,238 21,172,866 Intersegment expenses 92,380 27,305 795,875 518,039 21,361 -- 1,454,960 Operating EBITDA 9,877,655 (2,564,642) 1,489,875 (382,211) (365,733) (587,738) 7,467,206 Depreciation and amortization 3,758,344 322,093 303,773 354,636 13,632 5,295 4,757,773 Segment operating proft/(loss) 6,119,311 (2,886,735) 1,186,102 (736,847) (379,365) (593,033) 2,709,433 Segment assets 141,542,777 13,672,669 5,481,404 8,263,665 810,640 111,994,061 281,765,216 NINE MONTHS ENDED SEPTEMBER 30, 2001 ILEC CLEC SLEC LD ISP DCS OTHER TOTAL ----------------------------------------------------------------------------------------------------- External revenues 62,002,366 6,364,989 1,043,014 10,389,054 7,087,835 11,627,551 5,225 98,520,034 Intersegment revenues 4,835,467 -- -- -- -- 63,826 -- 4,899,293 External expenses 32,593,123 12,329,536 3,471,481 5,176,583 7,317,701 10,296,617 6,074,178 77,259,219 Intersegment expenses 315,445 181,743 51,275 2,378,838 1,812,647 106,694 52,651 4,899,293 Operating EBITDA 29,409,243 (5,964,547) (2,428,467) 5,212,471 (229,866) 1,330,934 (6,068,953) 21,260,815 Depreciation and amortization 12,543,909 1,417,499 522,974 889,489 1,670,376 334,555 416,086 17,794,888 Segment operating proft/(loss) 16,865,334 (7,382,046) (2,951,441) 4,322,982 (1,900,242) 996,379 (6,485,039) 3,465,927 Segment assets 174,518,935 14,944,412 11,802,873 4,504,430 15,615,951 27,046,178 68,972,428 317,405,207 NINE MONTHS ENDED SEPTEMBER 30, 2000 ILEC CLEC LD ISP DCS OTHER TOTAL --------------------------------------------------------------------------------------- External revenues 60,795,700 3,272,145 10,464,943 5,067,534 5,512,405 337,500 85,450,227 Intersegment revenues 3,891,796 -- -- -- 39,921 -- 3,931,717 External expenses 31,292,678 9,397,013 5,874,522 5,639,009 6,642,517 1,328,773 60,174,512 Intersegment expenses 250,700 71,610 2,210,687 1,340,665 58,055 -- 3,931,717 Operating EBITDA 29,503,022 (6,124,868) 4,590,421 (571,475) (1,130,112) (991,273) 25,275,715 Depreciation and amortization 10,814,675 678,470 819,980 1,013,577 41,981 15,889 13,384,572 Segment operating proft/(loss) 18,688,347 (6,803,338) 3,770,441 (1,585,052) (1,172,093) (1,007,162) 11,891,143 Segment assets 141,542,777 13,672,669 5,481,404 8,263,665 810,640 111,994,061 281,765,216
11 Reconciliation to Net Income Before Tax Three Months Ended Three Months Ended September 30, 2001 September 30, 2000 ------------------ ------------------ Segment operating profit $ 2,513,066 $ 2,709,433 Total other income 2,272,792 42,772,044 ------------ ------------ Income before income taxes $ 4,785,858 $ 45,481,477 ============ ============ Nine Months Ended Nine Months Ended September 30, 2001 September 30, 2000 ------------------ ------------------ Segment operating profit $ 3,465,927 $ 11,891,143 Total other income 9,893,454 50,582,948 ------------ ------------ Income before income taxes $ 13,359,381 $ 62,474,091 ============ ============ (1) CLEC combined with SLEC for presentation consistent with 2000 format is as follows: THREE MONTHS ENDED NINE MONTHS ENDED September 30, 2001 September 30, 2001 ------------------ ------------------ External revenues 2,808,024 7,408,003 Intersegment revenues -- -- External expenses 5,124,136 15,801,017 Intersegment expenses 104,371 233,018 Operating EBITDA (2,316,112) (8,393,014) Depreciation and amortization 749,541 1,940,473 Segment operating proft/(loss) (3,065,653) (10,333,487) Segment assets 26,747,285 26,747,285 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Three Months Ended September 30, 2001 and September 30, 2000 - ------------------------------------------------------------ Operating revenues increased $7.1 million or 24.7% to $35.7 million for the three months ended September 30, 2001 when compared to the three months ended September 30, 2000. Excluding intersegment revenues, ILEC revenue was $20.8 million for the three months ended September 30, 2001, a $0.6 million or 3.0% increase over the three months ended September 30, 2000. Revenue growth is due to additional customers, increased custom call feature and pay per use revenue, as well as increased access revenue. At September 30, 2001, the total number of local access lines in the ILEC's three-county service area equaled approximately 123,000. The Company is currently a party to two interconnection agreements and one resale agreement that provide other CLEC's access to the Company's local telephone service market. Other CLEC's may request interconnection agreements in the future. Additional interconnection agreements would be expected to provide increased competition to the ILEC. CLEC revenue was $2.4 million for the three months ended September 30, 2001, a $1.5 million or 154.9% increase over the three months ended September 30, 2000. This increase was primarily caused by the addition of 9,909 access lines since September 30, 2000, bringing the total lines in service to 17,852. This increase reflects growth in facilities based services for the northern Charlotte, North Carolina market and the Greensboro, North Carolina region. On January 1, 2001, the Company began tracking results of its SLEC separately. Prior to January 1, 2001, the results were included within the CLEC operating segment. SLEC revenue for the three months ended September 30, 2001 was $0.4 million and was due primarily to the approximately 1,000 lines located at Concord Mills Mall in Concord, North Carolina. In total, 2,167 access lines were in service in 28 developments as of September 30, 2001. The SLEC unit has entered into preferred provider agreements with 43 residential and business developments and projects located primarily in Charlotte and Raleigh, North Carolina as of September 30, 2001. Revenues from these projects will continue to grow as access lines are placed in service, however the Company does not expect to receive significant revenues from these agreements until late 2001 at the earliest. LD revenue was $3.7 million for the three months ended September 30, 2001, a $0.2 million or 6.5% increase over the three months ended September 30, 2000. Although long distance lines increased 2.3% since September 30, 2000, decreases in price plans offered to customers have resulted in level revenues. The pricing of long distance price plans has decreased as the market demands new and more competitive offerings. The Company expects LD revenue to remain at present levels. ISP revenue was $2.5 million for the three months ended September 30, 2001, a $0.7 million or 35.2% increase over the same period last year. This increase was primarily caused by an increase in the number of web hosting, dedicated high speed, and digital subscriber line (DSL) customers, as well as the integration of WebServe, Inc. which was acquired by the Company in December 2000. While traditional dial-up customers have decreased by approximately 2,700 in the last 12 months, over 1,700 DSL subscribers and dedicated high speed customers have been added since September 30, 2000. DCS revenue was $5.9 million for the three months ended September 30, 2001, a $3.8 million or 182.1% increase over the three months ended September 30, 2000. This increase was attributable to the addition of approximately 17,500 subscribers since September 30, 2000, bringing the total number of subscribers to approximately 29,527. This increase includes approximately 13,100 subscribers added as a result of the partitioning of the 13 predefined area of the Cingular Wireless digital network. See footnote 10 to unaudited financial statements for a further explanation of this partitioning. Operating expenses, exclusive of depreciation and amortization, increased $5.6 million or 26.2% to $26.7 million for the three months ended September 30, 2001 when compared to the three months ended September 30, 2000. Excluding intersegment expenses, ILEC operating expenses were $10.3 million for the three months ended September 30, 2001, which were approximately equal to such expenses for the three months ended September 30, 2000. CLEC operating expenses were $3.9 million for the three months ended September 30, 2001, a $0.4 million or 12.1% increase over the three months ended September 30, 2000. The majority of the increase is a result of the expanding operations in the Charlotte and Greensboro, North Carolina markets and related transport and inter-connection costs. CLEC operating expenses have increased throughout 2001, although at a slower pace than during 2000, and are expected to continue increasing in the fourth quarter of 2001. SLEC expenses were $1.2 million for the three months ended September 30, 2001. These expenses are associated with the existing approximately 1,000 lines located at Concord Mills Mall, as well as the growth of the business unit due to work on new developer agreements discussed above. LD operating expenses were $1.8 million for the three months ended September 30, 2001, a $0.2 million or 11.2% decrease over the same period last year. This decrease was mainly due to a continuing decline in access expense due to lower rates on negotiated carrier termination contracts. ISP operating expenses were $2.7 million for the three months ended September 30, 2001, a $0.4 million or 19.8% increase over the same period last year. This increase was mainly due to the inclusion of $0.8 million of WebServe operating expenses for the three months ended September 30, 2001. DCS operating expenses were $4.4 million for the three months ended September 30, 2001, a $2.0 million or 80.5% increase over the three months ended September 30, 2000. This increase was mainly due to the increase in DCS subscribers and the costs associated with customer acquisition. Other operating unit expenses were $2.4 million for the three months ended September 30, 2001 compared to $0.7 million for the three months ended September 30, 2000. This increase reflects $2.2 million of expenses related to the continued development and launch of broadband wireless services in Fayetteville, North Carolina by the Company's WaveTel, LLC subsidiary. WaveTel provides broadband data and second-line voice service to its customers. Depreciation and amortization expense increased $1.7 million or 35.9% to $6.5 million for the three months ended September 30, 2001 when compared to the three months ended September 30, 2000. This increase reflects the significant increase in depreciable assets over the last 12 months. Other income (expenses) decreased $40.5 million for the three months ended September 30, 2001 when compared to the three months ended September 30, 2000. This decrease was primarily due to a $39.2 million pre-tax gain on sale of the Company's interest in BellSouth Carolinas PCS, L.P. included in the 2000 results. Exclusive of the BellSouth gain, other income (expenses) decreased $1.3 million due to $0.4 million lower income from the equity interest in Palmetto MobileNet, L.P., higher interest expense associated with debt of $96 million, and a $0.5 million decrease in gains on securities sales when compared with the three months ended September 30, 2000. 14 Income taxes decreased $16.2 million or 89.0% to $2.0 million for the three months ended September 30, 2001 compared with the three months ended September 30, 2000 due primarily to the decrease in taxable income of $40.7 million. Net income decreased $24.5 million or 89.8% to $2.8 million for the three months ended September 30, 2001 compared to the three months ended September 30, 2000. Nine Months Ended September 30, 2001 and September 30, 2000 - ----------------------------------------------------------- Operating revenues increased $13.1 million or 15.3% to $98.5 million for the nine months ended September 30, 2001 when compared to the nine months ended September 30, 2000. Excluding intersegment revenues, ILEC revenue was $62.0 million for the nine months ended September 30, 2001, a 2.0% or $1.2 million increase over the nine months ended September 30, 2000. This increase was primarily caused by an increased number of customers and increased custom call feature and pay per use revenue, as well as increased access revenue. As of September 30, 2001, the total number of local access lines in the ILEC's three-county service area equaled approximately 123,000. CLEC revenue was $6.4 million for the nine months ended September 30, 2001, a $3.1 million or 94.5% increase over the nine months ended September 30, 2000. This increase is due to the additional CLEC lines placed in service as a result of the expansion of the Company's CLEC business in the Charlotte and Greensboro, North Carolina markets. SLEC revenue for the nine months ended September 30, 2001 was $1.0 million and was due primarily to the lines located at Concord Mills Mall in Concord, North Carolina. The SLEC unit has agreements in place with 43 residential and business developments located in Charlotte and Raleigh, North Carolina, 24 of which were entered into during the nine months ended September 30, 2001. LD revenue was $10.4 million for the nine months ended September 30, 2001, which is comparable to revenue for the nine months ended September 30, 2000. Despite an increase in long distance access lines and a corresponding increase in minutes, revenue has remained relatively flat due to the continued introduction of new, more competitive LD price plans. These plans have resulted in a decline in the average revenue per minute. ISP revenue was $7.1 million for the nine months ended September 30, 2001, a $2.0 million or 39.9% increase over the same period last year. This increase was primarily caused by an increase in the number of web hosting, dedicated high speed, and digital subscriber line (DSL) customers, as well as the integration of WebServe. DSL subscribers have increased by almost 1,700 from September 30, 2000 to September 30, 2001. Traditional dial-up customers have decreased as many make the transition to DSL or dedicated high-speed access lines. DCS revenue was $11.6 million for the nine months ended September 30, 2001, a $6.1 million or 110.9% increase over the nine months ended September 30, 2000. In the first nine months of 2001, the DCS unit added over 4,000 customers and acquired approximately 13,100 more as a result of the partitioning of the Company's predefined area of the Cingular Wireless digital network. See footnote 10 to the unaudited financial statements for a further explanation of this partitioning. Operating expenses, exclusive of depreciation and amortization, increased $17.1 million or 28.4% to $77.3 million for the nine months ended September 30, 2001 when compared to the nine months ended September 30, 2000. $1.9 million of this increase is attributable to a restructuring charge incurred in the first quarter of 2001. Exclusive of the restructuring charge, operating expenses increased $16.0 million or 27.0%. Excluding intersegment expenses, ILEC operating expenses were $32.6 million for the nine months ended September 30, 2001, a $1.3 million or 4.2% increase over the nine months ended September 30, 2000. This increase was mainly due to $1.2 million of restructuring 15 costs incurred during 2001 associated with an early retirement plan offered to 22 employees in specific departments. Costs associated with rent and leases of work equipment and buildings as well as utilities increased during the nine months ended September 30, 2001. These increases were offset by decreases in interconnection expenses. CLEC operating expenses were $12.3 million for the nine months ended September 30, 2001, a $2.9 million or 31.2% increase over the nine months ended September 30, 2000. Approximately one-quarter of this increase, or $0.7 million, is attributable to a restructuring charge incurred during 2001 based on the decision to slow expansion of the CLEC into Raleigh. The remainder of the increase is a result of the expanding operations in the Charlotte and Greensboro, North Carolina markets. SLEC expenses were $3.5 million for the nine months ended September 30, 2001. These expenses are associated with both the operation of the 2,167 access lines in service, as well as the continued growth of the business unit due to work on new developer agreements discussed above. LD operating expenses were $5.2 million for the nine months ended September 30, 2001, a $0.7 million or 11.9% decrease over the same period last year. This decrease is attributable to the continued renegotiation of carrier termination contracts at lower, more favorable rates. ISP operating expenses were $7.3 million for the nine months ended September 30, 2001, a $1.7 million or 29.8% increase over the same period last year. This increase was mainly due to the inclusion of $2.1 million of WebServe operating expenses for the nine months ended September 30, 2001. DCS operating expenses were $10.3 million for the nine months ended September 30, 2001, a $3.7 million or 55.0% increase over the nine months ended September 30, 2000. This increase was mainly due to the increase in DCS subscribers and the costs associated with customer acquisition. Other operating unit expenses were $6.1 million for the nine months ended September 30, 2001 compared to $1.3 million for the nine months ended September 30, 2000. This increase reflects $4.7 million of expenses related to WaveTel's operations. Depreciation and amortization expense increased $4.4 million or 33.0% to $17.8 million for the nine months ended September 30, 2001 when compared to the nine months ended September 30, 2000. This increase reflects the significant increase in depreciable assets over the last 12 months. Other income (expenses) decreased $40.7 million for the nine months ended September 30, 2001 when compared to the nine months ended September 30, 2000. This was primarily due to the $39.2 million gain on sale of the Company's investment in the BellSouth PCS partnership in 2000. In addition, the Company recognized an increase in interest expense of $1.2 million associated with the increase in long-term debt since September 30, 2000, a decrease in equity in income of unconsolidated companies of $0.8 million due to lower Palmetto MobileNet cellular partnership earnings, offset by a $0.5 million increase in pre-tax gain that resulted from our sale of shares of Illuminet stock during the nine months ended September 30, 2001 as compared with our sale of shares of Illuminet and ITC-DeltaCom stock during the nine months ended September 30, 2000. Income taxes decreased $19.5 million or 78.2% to $5.4 million for the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000 due primarily to the decrease in taxable income of $49.1 million. Net income decreased $29.6 million or 78.9% to $7.9 million for the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000. 16 Liquidity and Capital Resources - ------------------------------- The liquidity of the Company increased during the nine-month period ended September 30, 2001. Current assets exceeded current liabilities by $15.0 million at September 30, 2001. In comparison, current assets exceeded current liabilities by $7.7 million at December 31, 2000. Current assets increased by $4.1 million when compared to December 31, 2000. This increase is primarily the result of an increase in accounts receivable of $4.1 million due to increases in volume and the initial billing for additional customers acquired with the DCS partitioning. Materials and supplies also increased $0.8 million due primarily to timing of wireless cell site construction. Current liabilities decreased by $3.3 million from December 31, 2000 to September 30, 2001. This decrease is primarily attributable to the repayment of short-term borrowings of $5.0 million and a $0.1 million decrease in taxes payable partially offset by increases in accrued pension of $1.2 million due to the early-retirement program obligations and accrued payroll of $0.9 million for incentive compensation. The Company's principal sources of liquidity were cash provided by operations of $13.7 million, proceeds from the sale of investment securities of $10.5 million, partnership capital distributions of $2.0 million, and proceeds from a new credit facility of $96.0 million. Uses of cash during the nine months ended September 30, 2001 included net capital expenditures of $51.3 million, purchases of investment securities of $2.1 million, a purchase of wireless spectrum of $2.4 million, DCS partitioning costs of $23.2 million, repayment of existing long-term debt of $39.0 million, payment of dividends of $3.7 million, and the repurchase of Common Stock of the Company of $1.3 million. At September 30, 2001, the fair market value of the Company's investment securities was $17.5 million, all of which could be pledged to secure additional borrowing, or sold, if needed for liquidity purposes. The Company has a $90.0 million revolving five year line of credit with interest at LIBOR plus a spread based on various financial ratios, currently 1.25%. The interest rate on September 30, 2001 was 4.896%. The credit facility provides for quarterly payments of interest until maturity on March 31, 2006. As of September 30, 2001, $46.0 million was outstanding under the revolving credit agreement. The Company also has a 7.32% fixed rate $50.0 million term loan that matures at December 31, 2014. All $50.0 million was outstanding as of September 30, 2001. The Company also has an additional line of credit for $10.0 million. As of September 30, 2001, the Company had no amounts outstanding under this credit line. The Company anticipates that all of the capital requirements in 2001 associated with its construction program, expansion of its CLEC operations, payments associated with long-term debt and investments as summarized above will be provided by cash flows from operations, existing cash, cash equivalents and short-term investments, sales of investment securities, and the available lines of credit. Cautionary Note Regarding Forward-Looking Statements - ---------------------------------------------------- The foregoing discussion contains "forward-looking statements," as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Management has based these forward-looking statements on its current expectations and projections about future events and trends affecting the financial condition and operations of the Company's business. These forward-looking statements are subject to certain risks, uncertainties, and assumptions about us that could cause actual results to differ materially from those reflected in the forward-looking statements. 17 Factors that may cause actual results to differ materially from these forward-looking statements are (1) the Company's ability to respond effectively to the sweeping changes in industry conditions caused by the Telecommunications Act of 1996, and related state and federal legislation and regulations, (2) the Company's ability to recover the substantial costs to be incurred in connection with the implementation of its various new businesses, (3) the Company's ability to retain its existing customer base against local and long distance service competition, and to market such services to new customers, (4) the Company's ability to effectively manage rapid changes in technology, and (5) the Company's ability to effectively respond to the actions of its competitors. In some cases, these forward-looking statements can be identified by the use of words such as "may," "will," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project" or "potential" or the negative of these words or other comparable words. In making forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are also directed to consider the risks, uncertainties and other factors discussed in documents filed by us with the Securities and Exchange Commission, including those matters summarized under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2000, as amended. All forward-looking statements should be viewed with caution. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company has a $90.0 million revolving five year line of credit with interest at LIBOR plus a spread based on various financial ratios, currently 1.25%. The interest rate on September 30, 2001 was 4.896%. The credit facility provides for quarterly payments of interest until maturity on March 31, 2006. As of September 30, 2001, $46.0 million was outstanding under the revolving credit agreement. The Company also has a 7.32% fixed rate $50.0 million term loan that matures at December 31, 2014. All $50.0 million was outstanding as of September 30, 2001. The Company also has an additional line of credit for $10.0 million. As of September 30, 2001, the Company had no amounts outstanding under this credit line. The Company has an interest rate swap transaction to fix $10.0 million of the outstanding revolving line of credit at a rate of 5.9% plus a spread, currently 0.5%. The fair value of the swap as of September 30, 2001 was ($622,603). The interest rate swap will protect the Company against an upward movement in interest rates, but subjects the Company to above market interest costs if interest rates decline. Management believes that reasonably foreseeable movements in interest rates will not have a material adverse effect on the Company's financial condition or operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None 18 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description of Exhibit ----------- ---------------------- 10 Amendment No. 1 to CT Communications, Inc. 2001 Employee Stock Purchase Plan 11 Computation of Earnings per Share (b) Reports on Form 8-K On September 28, 2001, the Company filed a Current Report on Form 8-K announcing that on September 14, 2001, the Company's wholly owned subsidiary, CT Wireless Cable, Inc., and Wireless One of North Carolina, L.L.C. (WONC) entered into a Limited Liability Company Interest Purchase Agreement with Wireless One, Inc. and Worldcom Broadband Solutions, Inc. pursuant to which WONC will purchase the entire 50% interest of Wireless One, Inc. in WONC. On September 12, 2001, the Company filed a Current Report on Form 8-K announcing that L. D. Coltrane III had resigned as the Chairman of the Board of Directors of CT Communications, Inc., that Michael R. Coltrane, President and Chief Executive Officer, was elected the Board's new Chairman, and that Raymond C. Groth was chosen to serve as a Board member. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CT COMMUNICATIONS, INC. (Company) /s/ Amy M. Justis - ----------------------------- Amy M. Justis Vice President and Chief Accounting Officer November 14, 2001 - ----------------------------- Date (The above signatory has dual responsibility as a duly authorized officer and chief accounting officer of the Registrant.) 20 EXHIBIT INDEX Exhibit No. Description of Exhibit ----------- ---------------------- 10 Amendment No. 1 to CT Communications, Inc. 2001 Employee Stock Purchase Plan 11 Computation of Earnings per Share 21 EX-10 3 g72769ex10.txt AMEND NO.1 TO CTC 2001 EMPLOYEE STOCK PURCHASE Exhibit 10 Amendment No. 1 to CT Communications, Inc. 2001 Employee Stock Purchase Plan The CT Communications, Inc. 2001 Employee Stock Purchase Plan (the "Plan") is hereby amended as set forth below, effective as of the date of adoption of this amendment ("Amendment") by the Board of Directors of CT Communications, Inc. (the "Company"): 1. Section 28 of the Plan is hereby amended and restated in its entirety to read as follows: SECTION 28. SHAREHOLDER RIGHTS Any dividends paid with respect to shares of Common Stock credited to a participating employee's account will be credited to such account and, if paid in cash, will automatically be reinvested in whole and fractional shares of Common Stock on the next Purchase Date. The Company will deliver to each participating employee who purchases shares of Common Stock under the Plan, as promptly as practicable by mail or otherwise, all notices of meetings, proxy statements, proxies and other materials distributed by the Company to its shareholders. Any shares of Common Stock held by the Agent for an employee's account will be voted in accordance with the employee's duly delivered and signed proxy instructions. There will be no charge to participating employees in connection with such notices, proxies and other materials. 2. The Plan shall otherwise be unchanged by this Amendment. * * * This Amendment was duly adopted and approved by the Board of Directors of the Company on August 24, 2001. EX-11 4 g72769ex11.txt COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 CT COMMUNICATIONS, INC. AND SUBSIDIARIES Computation of Earnings Per Share Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 ---- ---- ---- ---- Computation of share totals used in computing earnings per share: Weighted average number of shares outstanding 18,797,855 18,853,398 18,834,216 18,826,726 Basic average shares a-outstanding 18,797,855 18,853,398 18,834,216 18,826,726 Incremental shares arising, from outstanding stock options 47,233 88,634 40,961 115,308 ----------- ----------- ----------- ----------- b-Totals 18,845,088 18,942,032 18,875,177 18,942,034 =========== =========== =========== =========== c-Net Income $ 2,797,185 $27,333,773 $ 7,913,746 $37,503,444 =========== =========== =========== =========== Net Income Per Share Basic - c/a $ 0.15 $ 1.45 $ 0.42 $ 1.99 =========== =========== =========== =========== Net Income Per Share assuming full dilution c/b $ 0.15 $ 1.44 $ 0.42 $ 1.98 =========== =========== =========== =========== -----END PRIVACY-ENHANCED MESSAGE-----