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UNITED STATES
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 March 31, 1996
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: 0-18587
HECTOR COMMUNICATIONS CORPORATION
...............................................................................
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1666660
...............................................................................
(State or other jurisdiction of (Federal Employer
incorporation or organization) Identification No.)
211 South Main Street, Hector, MN 55342
...............................................................................
(Address of principal executive offices) (Zip Code)
(320) 848-6611
...............................................................................
Registrant's telephone number, including area code
...............................................................................
(Former name, former address, 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES _ NO ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
CLASS Outstanding at April 30, 1996
Common Stock, par value 1,880,294
$.01 per share
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Total Pages (12) Exhibit at Page 12
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HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information 11
2
PART I. FINANCIAL INFORMATION
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31 December 31
Assets: 1996 1995
____________ ____________
Current assets:
Cash and cash equivalents $11,234,952 $9,040,138
Marketable securities 1,459,266
Construction fund 19,198 108,828
Accounts receivable, net 678,180 723,081
Materials, supplies and inventories 129,650 120,641
Prepaid expenses 33,289 35,992
____________ ____________
Total current assets 12,095,269 11,487,946
Property, plant and equipment 24,861,649 24,647,253
less accumulated depreciation (10,444,555) (10,038,377)
____________ ____________
Net property, plant and equipment 14,417,094 14,608,876
Other assets:
Excess of cost over net assets
acquired, net 886,969 906,950
Marketable securities 2,021,969
Acquisition costs -
Ollig Utilities Company 2,829,624 2,790,236
Cellular telephone investment 1,040,365 1,260,448
Other investments 785,188 1,038,545
Deferred debenture issue costs, net 1,111,035 1,158,313
Other assets 644,686 267,130
____________ ____________
Total other assets 9,319,836 7,421,622
____________ ____________
Total Assets $35,832,199 $33,518,444
____________ ____________
____________ ____________
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $479,950 $530,248
Accrued expenses 384,353 653,681
Income taxes payable 169,375 132,522
Current portion of long-term debt 492,900 492,900
____________ ____________
Total current liabilities 1,526,578 1,809,351
Long-term debt, less current portion 22,388,101 22,096,419
Deferred investment tax credits 120,486 128,339
Deferred income taxes 2,162,988 1,349,988
Stockholders' Equity 9,634,046 8,134,347
_____________ _____________
Total Liabilities and
Stockholders' Equity $35,832,199 $33,518,444
______________ ______________
______________ ______________
See notes to consolidated financial statements.
3
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended March 31
_____________________________
1996 1995
____________ ____________
Revenues:
Local network $355,676 $242,780
Network access 885,614 832,973
Billing and collection 51,745 55,511
Nonregulated activities 78,644 64,867
Cable television revenues 294,239 137,758
____________ ____________
Total revenues 1,665,918 1,333,889
Costs and expenses:
Plant operations 206,658 204,754
Depreciation and amortization 447,931 368,087
Customer operations 69,664 87,056
General and administrative 363,672 288,454
Other operating expenses 205,549 115,109
____________ ____________
Total costs and expenses 1,293,474 1,063,460
Operating income 372,444 270,429
Other income and (expenses):
Investment income 163,700 94,902
Interest expense (434,782) (294,717)
Marketable securities gains (losses) 687,947 (217,433)
Cellular partnership income 31,500 15,000
____________ ____________
Other income (expense), net 448,365 (402,248)
Income before income taxes 820,809 (131,819)
Income taxes (benefit) 327,000 (55,000)
____________ ____________
Net income (loss) $493,809 ($76,819)
____________ ____________
____________ ____________
Net income (loss) per common and
common equivalent share $ .22 ($ .03)
_____________ ____________
_____________ ____________
Net income (loss) per common share
- assuming full dilution $ .19 ($ .03)
____________ ____________
____________ ____________
Average common and common equivalent
shares outstanding 2,256,000 2,254,000
____________ ____________
____________ ____________
See notes to consolidated financial statements.
4
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
Unrealized
Marketable
Additional Unearned Securities
Preferred Stock Common Stock Paid-in Retained ESOP Gains
Shares Amount Shares Amount Capital Earnings Shares (Losses) Total
________ ________ _________ ________ ________ __________ _________ _________ __________
BALANCE at December 31, 1994 392,287 $392,287 1,877,850 $18,778 $48,001 $7,903,703 ($132,800) $8,229,969
Net loss (76,539) (76,539)
Issuance of common stock under
Employee Stock Purchase Plan 3,844 39 22,833 22,872
Purchase of common stock (4,200) (42) (164) (30,066) (30,272)
Issuance of common stock in
exchange for preferred stock (2,800) (2,800) 2,800 28 2,772 0
ESOP shares purchased, net of
shares allocated 773 (12,456) (11,683)
________ ________ _________ ________ ________ __________ _________ _________ __________
BALANCE at December 31, 1995 389,487 389,487 1,880,294 18,803 74,215 7,797,098 (145,256) 8,134,347
Net income 493,809 493,809
Unrealized gain on marketable
securities, net of deferred
taxes $1,005,890 1,005,890
________ ________ _________ ________ ________ __________ _________ _________ __________
BALANCE at March 31, 1996 389,487 $389,487 1,880,294 $18,803 $74,215 $8,290,907 ($145,256)$1,005,890 $9,634,046
________ ________ _________ ________ ________ __________ _________ _________ __________
________ ________ _________ ________ ________ __________ _________ _________ __________
See notes to consolidated financial statements.
5
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31
_____________________________
1996 1995
_____________ _____________
Cash Flows from Operating Activities:
Net income (loss) $493,809 ($76,819)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 495,209 391,726
Loss (gain) on marketable securities (687,947) 217,433
Income from cellular partnerships (31,500) (15,000)
Changes in assets and liabilities:
Sales of marketable securities 1,499,073
Decrease in accounts receivable 44,901 175,576
Increase in prepaid income taxes (120,496)
Decrease in prepaid expenses 2,703 9,777
Increase (decrease) in accounts payable (50,298) 168,595
Increase (decrease) in accrued expenses (269,328) 189,889
Increase (decrease) in income taxes payable 36,853 (692,853)
Decrease in deferred investment credits (7,853) (10,494)
Increase in deferred taxes 813,000
_____________ _____________
Net cash provided by operating activities 2,338,622 237,334
Cash Flows from Investing Activities:
Capital expenditures, net (213,763) (199,811)
Sales of marketable securities 553,645
Increase in Ollig Utilities acquisition costs (39,388)
Decrease (increase) in construction fund 89,630 (27,171)
Increase in inventories (9,009) (5,574)
Purchases of other investments (3,415)
Sales of other investments 256,772 4,425
Decrease in deferred charges 16,777
Increase in other assets (399,962) (8,872)
_____________ _____________
Net cash provided by (used in) investing activities 234,510 (220,226)
Cash Flows from Financing Activities:
Repayment of long-term debt (108,318) (1,418,338)
Proceeds from issuance of long-term debt 400,000 12,821,000
Convertible debenture issue costs (1,323,787)
_____________ _____________
Net cash provided by financing activities 291,682 10,078,875
_____________ _____________
Net Increase in Cash and Cash Equivalents 2,864,814 10,095,983
Cash and Cash Equivalents at Beginning of Period 9,040,138 3,654,748
_____________ _____________
Cash and Cash Equivalents at End of Period $11,904,952 $13,750,731
_____________ _____________
_____________ _____________
Supplemental disclosures of cash flow information:
Interest paid during the period $656,686 $159,945
Income taxes paid during the period 155,106 767,748
See notes to consolidated financial statements.
6
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The balance sheet and statement of stockholders' equity as of March 31,
1996, the statements of income for the three month periods ended March 31, 1996
and 1995 and the statements of cash flows for the three month periods ended
March 31, 1996 and 1995 have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and changes in cash flows at March 31, 1996 and 1995 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 1995 Annual Report to
Shareholders. The results of operations for the periods ended March 31 are not
necessarily indicative of the operating results for the entire year.
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123). SFAS 123 required expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to its
stock-based compensation awards to employees and will disclose the required pro
forma effect on net income and earnings per share.
NOTE 3 - MARKETABLE SECURITIES AND GAINS ON SALES OF INVESTMENTS
In February, 1996, Rural Cellular Corporation ("RCC") completed an initial
offering of its common stock to the public. Prior to the offering, the Company
owned 3.72% of RCC, which was classified as an other investment. As part of the
offering, the Company sold 27% of its interest in RCC, with a book value of
$69,000 and recorded a gain on sale of $485,000. The balance of the Company's
investment in RCC has been transferred to marketable securities and classified
as available-for-sale. The unrealized gain on the available-for-sale marketable
securities at March 31, 1996 was $1,006,000 (net of deferred taxes of $670,000)
which is accounted for as a separate component of stockholders' equity. Rural
Cellular Corporation trades on the Nasdaq National Market System under the
symbol RCCC.
In February, 1996, the Company sold its investment in Telephone and Data
Systems, Inc. ("TDS") common stock in a series of cash transactions. Gross
proceeds from the stock sales were $1,499,000 and the Company recognized a gain
on sale of $203,000.
NOTE 4 - INCOME TAXES AND INVESTMENT CREDITS
Income taxes have been calculated in proportion to the earnings and tax
credits generated by operations. Investment tax credits have been deferred and
are included in income over the estimated useful lives of the related assets.
7
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - NET INCOME PER SHARE
Net income per common and common equivalent share was computed by dividing
net income by the weighted average number of common and common equivalent shares
outstanding during the periods. Common equivalent shares include the dilutive
effect of outstanding stock options, warrants and convertible preferred stock,
which are common stock equivalents. Net income per common share - assuming full
dilution for 1996 was calculated assuming all outstanding convertible debentures
were converted to common stock effective January 1, 1996. The effect of the
convertible debentures on per share earnings in the 1995 period was
anti-dilutive. The calculation of the Company's earnings per share is included
as Exhibit 11 to this Form 10-Q.
NOTE 6 - ISSUANCE OF CONVERTIBLE SUBORDINATED DEBENTURES
In February 1995 the Company completed a public offering of convertible
subordinated debentures. The debentures carry an interest rate of 8.5% and
mature February 15, 2002. The debentures are convertible into common stock of
the Company at a rate of 112.5 common shares per $1,000 par value debenture. The
debentures are callable under certain circumstances and include restrictions on
payment of dividends to the Company's shareholders. The Company may incur up to
$4,000,000 of senior indebtedness to which the debentures will be subordinated.
Total value of the offering was $12,650,000. Proceeds to the Company after
underwriting, accounting and legal expenses were approximately $11,300,000. The
offering's underwriters also received warrants to purchase 123,750 shares of the
Company's common stock at a price of $8.70 per share. The warrants are
exercisable beginning February 15, 1996 and expire February 15, 2000.
NOTE 7 - ACQUISITION OF OLLIG UTILITIES COMPANY
On April 25, 1996, a newly formed subsidiary of the Company, Alliance
Telecommunications Corporation ("Alliance"), purchased Ollig Utilities Company
("Ollig") for $80,000,000 in cash. The Company owns 68% of Alliance with the
remaining interest owned by Golden West Telecommunications Cooperative, Inc. of
Wall, SD and Split Rock Telecom Cooperative, Inc. of Garretson, SD. Alliance
financed the acquisition using the combined equity investments of its
shareholders and debt financing provided by St. Paul Bank. The Company's
investment in Alliance is approximately $16,950,000, which includes $6,000,000
of short-term borrowing by the Company from St. Paul Bank and $2,830,000 of
purchase price deposits and acquisition costs incurred prior to March 31, 1996.
Ollig Utilities Company owns four local exchange telephone companies which
serve 25,000 access lines in 25 communities in Minnesota, South Dakota and Iowa.
Ollig also owns eight cable television systems serving 1,700 customers in twelve
Minnesota communities and four systems serving 1,500 customers in South Dakota.
Ollig is an investor in cellular telephone partnerships serving five rural
service areas in Minnesota and North Dakota and in the partnership providing
cellular service in the Sioux Falls, SD metropolitan area. Ollig is also an
investor in Rural Cellular Corporation, Minnesota Equal Access Network Services,
Inc., South Dakota Network, Iowa Network Services, Inc., Fibernet Communications
LLC, Independent Information Services and Val-Ed Joint Venture. Ollig's 1995
revenues were approximately $19,000,000.
8
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months Ended March 31, 1996 Compared to
Three Months Ended March 31, 1995
Consolidated revenues increased $332,000 or 25%. Revenues from telephone
operations increased $176,000, or 15%. Local network revenues increased
$113,000, or 47% due to the local service rate increase granted the Company's
Wisconsin telephone subsidiary in December, 1995. The increase was required to
offset the impact of regulatory changes on this subsidiary. Network access
revenues increased $53,000 or 6% due to higher settlement payments on interstate
access revenues from the National Exchange Carriers Association (NECA). Revenues
from billing and collection services provided by the Company to interexchange
carriers declined $4,000 or 7%. Revenues from nonregulated activities increased
$14,000, or 21%. Cable television revenues increased $156,000 or 114%. The
increase was due to the August, 1995 acquisition of 22 cable television systems
in south central Minnesota.
Operating costs and expenses, excluding depreciation and amortization,
increased $150,000, or 22%. Telephone operating costs and administrative
expenses increased $58,000, or 10% due to increased corporate expenses. Cable
television operating costs and administrative expenses increased $92,000, or 92%
due to the acquisition of additional cable systems. Depreciation and
amortization expenses increased $80,000, or 22%, due to additional expense
associated with the cable system acquisition. Operating income increased
$102,000, or 38%.
Interest expense increased $140,000, or 48%, due to interest expense on the
Company's outstanding subordinated debentures issued in February, 1995.
Investment income increased $69,000 due to increased cash balances available for
investment. Income accrued on investments in cellular telephone partnerships
increased $16,000. The Company recorded gains on sales of marketable securities
of $688,000 in the 1996 quarter due to sales of investments in Rural Cellular
Corporation and Telephone and Data Systems, Inc. The 1995 quarter included an
unrealized loss on marketable securities of $217,000 due to declines in
marketable securities valuations in that period.
Income before income taxes was $821,000 in the 1996 period compared to a
loss before income taxes of $132,000 in the 1995 period. Net income was $494,000
in 1996 compared to a net loss of $77,000 in 1995.
Liquidity and Capital Resources
On April 25, 1996, the Company, in association with two co-investors
(Golden West Telecommunications Cooperative, Inc. and Split Rock Telecom
Cooperative, Inc.), acquired Ollig Utilities Company ("Ollig"), a privately
owned telecommunications firm for $80 million in cash. The purchase was
accomplished through a newly formed subsidiary, Alliance Telecommunications
Corporation ("Alliance"). The Company owns 68% of Alliance.
Alliance financed the purchase of Ollig using a combination of debt
financing provided by St. Paul Bank and equity capital provided by Alliance's
owners. Borrowing by Alliance from St. Paul Bank was $55,250,000 which is in the
form of a term loan, with installment payments, maturing March 31, 2011.
Interest on the loan is at St. Paul Bank's cost of money plus 1.35% (currently
6.68%). Substantially all the assets of Alliance and Ollig are pledged as
collateral under the loan agreement.
9
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Liquidity and Capital Resources (continued)
The Company's equity investment in Alliance, including legal and purchase
costs, is approximately $16,950,000. The Company financed its investment using
internally held funds and a $6,000,000 short-term bridge loan from St. Paul
Bank. The bridge loan includes $4,000,000 of debt senior to the convertible
debentures issued in 1995 and $2,000,000 of junior debt. It bears interest at
St. Paul Bank's base lending rate for similar loans (currently 7.33%) and
matures March 31, 1997. The loan is secured by a pledge of the Company's cable
television assets and the stock of one of its local exchange carrier
subsidiaries. The Company is exploring various alternatives to refinance the
bridge loan, including use of public debt or equity markets.
The Company's telephone subsidiaries serve its telephone customers with a
100%-digital switching network and almost 100% buried outside plant. Telephone
plant additions were $133,000 in the first quarter of 1996. Telephone plant
additions for the remainder of 1996 are expected to total $1,500,000 and will
provide customers with additional advanced switching services as well as expand
the Company's use of high capacity fiber optics in its telephone network.
The Company has financed its telephone asset additions from internally
generated funds and drawdowns of Rural Utilities Service ("RUS") and Rural
Telephone Bank ("RTB") loan funds. The Company's average interest rate on
outstanding RUS and RTB loans is 4.8%. Substantially all of the Company's
telephone assets are pledged or are subject to mortgages to secure obligations
of its telephone subsidiaries to the RUS and RTB. In addition, the amount of
dividends on common stock that may be paid by the Company's LEC subsidiaries is
limited by covenants in the mortgages. The Company is currently applying to the
RUS and RTB for new loans, some of which have received preliminary approval. At
March 31, 1996, unadvanced loan commitments from the RUS and RTB totaled
$111,000.
In 1994, the Wisconsin public service commission ("WPSC") implemented a
rule for interexchange calls to nearby communities (Extended Community Calling
or "ECC") which significantly reduced the Company's intrastate access revenues
in Wisconsin. To compensate for the revenue loss, the Company applied for and
received a local service rate increase for its Wisconsin exchanges, which went
into effect in December, 1995. The Company's local network revenues in the first
quarter of 1996 were $100,000 more than in the comparable 1995 period as a
result of the rate increase.
In February 1995 the Company completed a public offering of convertible
subordinated debentures. Total value of the offering was $12,650,000. Through
March 31, 1996, the Company utilized the offering proceeds to pay down debt
associated with its cable television operation, finance cable television plant
additions, purchase additional cable television systems and for general
corporate purposes. The Company employed the remaining offering funds in the
Ollig acquisition.
In August 1995, the Company acquired 22 rural Minnesota cable systems,
serving approximately 2,000 customers, from Lake Cable Partnership for $2.2
million. Capital additions to support the Company's cable operations in the
first quarter of 1996 were $71,000. Cable television capital additions for the
balance of 1996 are estimated at $250,000.
The Company's investment income has been derived almost exclusively from
interest earned on its cash and cash equivalents. Interest income earned by the
Company has fluctuated in relation to changes in interest rates and availability
of cash for investment. At December 31, 1995, the Company's marketable
securities portfolio consisted primarily of 32,802 shares of Telephone and Data
Systems, Inc. ("TDS") common stock acquired in the sale of the Rochester,
Minnesota MSA. The Company sold its TDS stock in the first quarter of 1996.
Gross proceeds from the stock sales were $1,499,000 and the Company recorded a
gain on sale of $203,000. In February, 1996, Rural Cellular Corporation ("RCC")
completed an initial offering of its common stock to the
10
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Liquidity and Capital Resources (continued)
public. Prior to the offering, the Company owned 3.72% of RCC. As part of
the offering, the Company sold 27% of its interest in RCC, with a book value of
$69,000 and recorded a gain on sale of $485,000.
The Company produced cash from operating activities of $1,669,000 in the
first quarter of 1996. At March 31, 1996, the Company had cash, cash equivalents
and marketable securities of $13,257,000 and working capital of $10,569,000. By
utilizing committed loan funds, cash flow from operations and current cash
balances, the Company feels it has adequate resources to meet the liquidity and
capital expenditure requirements of its existing operations. Subsequent to the
end of the quarter, the Company utilized approximately $8,100,000 of cash and
cash equivalents and $6,000,000 of short-term borrowing to complete the
acquisition of Ollig Utilities Company. The Company believes it has sufficient
internal resources and sufficient access to capital markets to profitably
integrate this acquisition into its operations.
.
PART II. OTHER INFORMATION
Items 1 - 6. Not Applicable
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Hector Communications Corporation
By Charles A. Braun
Charles A. Braun
Chief Financial Officer
Date: May 13, 1996
11
HECTOR COMMUNICATIONS CORPORATION AND SUBSIDIARIES
EXHIBIT 11
CALCULATION OF EARNINGS PER SHARE
Three Months Ended March 31
___________________________
Primary: 1996 1995
_______ _____________ _____________
Net income (loss) $493,803 ($76,819)
_____________ _____________
_____________ _____________
Common and common equivalent shares:
Weighted average number of common
shares outstanding 1,880,294 1,877,850
Dilutive effect of convertible preferred
shares outstanding 389,487 392,287
Dilutive effect of stock options outstanding after
application of treasury stock method (1) 4,775
Weighted average number of unallocated shares
held by employee stock ownership plan (18,556) (16,137)
_____________ _____________
2,256,000 2,254,000
_____________ _____________
_____________ _____________
Net income (loss) per common and common equivalent share $.22 ($.03)
_____________ _____________
_____________ _____________
Fully Diluted (2):
_____________
Net income (loss) $493,803 ($76,819)
Interest on convertible debentures, net of tax 189,654
_____________ _____________
Adjusted net income (loss) $683,457 ($76,819)
_____________ _____________
_____________ _____________
Common and common equivalent shares:
Weighted average number of common
shares outstanding 1,880,294 1,877,850
Assumed conversion of convertible debentures
into common stock 1,423,125
Dilutive effect of convertible preferred
shares outstanding 389,487 392,287
Dilutive effect of stock options outstanding after
application of treasury stock method (1) 4,775
Weighted average number of unallocated shares
held by employee stock ownership plan (18,556) (16,137)
_____________ _____________
3,679,125 2,254,000
_____________ _____________
_____________ _____________
Net income (loss) per common share - assuming full dilution $.19 ($.03)
_____________ _____________
_____________ _____________
- ------------------------------------------------------------------------------------------------------
(1) The effect of outstanding stock options on net income per share is anti-dilutive for the 1995 period.
(2) The effect of the convertible debentures on net income per share is anti-dilutive for the 1995 period.
12