UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
Commission file number 1-11484
HUNGARIAN TELEPHONE AND CABLE CORP.
(Exact name of registrant as specified in its charter)
| Delaware | 13-3652685 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1201 Third Avenue, Suite 3400 Seattle, WA 98101-3034
(Address of principal executive offices)
(206) 654-0204
(Registrant’s telephone number, including area code)
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 ninety days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest possible date:
| Common Stock, $.001 par value |
12,680,417 Shares | |
| (Class) |
(Outstanding at November 12, 2004) |
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARY
Table of Contents
1
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARY
Consolidated Condensed Balance Sheets
(In thousands, except share data)
| September 30, 2004 |
December 31, 2003 |
||||||
| (unaudited) | |||||||
| Assets | |||||||
| Current assets: |
|||||||
| Cash and cash equivalents |
$ | 29,175 | 21,191 | ||||
| Restricted cash |
— | 12 | |||||
| Accounts receivable, net |
5,385 | 6,474 | |||||
| Current deferred tax asset |
1,025 | 2,714 | |||||
| Other current assets |
4,935 | 3,622 | |||||
| Total current assets |
40,520 | 34,013 | |||||
| Property, plant and equipment, net |
119,577 | 120,258 | |||||
| Goodwill |
9,114 | 8,727 | |||||
| Other intangibles, less accumulated amortization |
4,354 | 4,407 | |||||
| Deferred costs |
2,326 | 3,598 | |||||
| Deferred tax asset |
3,231 | 3,291 | |||||
| Other assets |
1,904 | 2,262 | |||||
| Total assets |
$ | 181,026 | 176,556 | ||||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: |
|||||||
| Current installments of long-term debt |
$ | 23,405 | 21,929 | ||||
| Excess cash amounts due under long-term debt agreement |
— | 3,820 | |||||
| Accounts payable |
3,037 | 2,263 | |||||
| Accruals |
3,749 | 2,803 | |||||
| Other current liabilities |
2,216 | 2,280 | |||||
| Due to related parties |
519 | 493 | |||||
| Total current liabilities |
32,926 | 33,588 | |||||
| Long-term debt, excluding current installments |
79,018 | 90,839 | |||||
| Deferred credits and other liabilities |
4,501 | 5,770 | |||||
| Total liabilities |
116,445 | 130,197 | |||||
| Commitments and Contingencies |
— | — | |||||
| Stockholders’ equity: |
|||||||
| Cumulative Convertible Preferred stock, $.01 par value; $70.00 liquidation value. Authorized 200,000 shares; issued and outstanding 30,000 shares in 2004 and 2003 |
— | — | |||||
| Common stock, $.001 par value. Authorized 25,000,000 shares; issued and outstanding 12,430,417 shares in 2004 and 12,230,670 in 2003 |
13 | 12 | |||||
| Additional paid-in capital |
146,417 | 145,616 | |||||
| Accumulated deficit |
(104,207 | ) | (119,548 | ) | |||
| Accumulated other comprehensive income |
22,358 | 20,279 | |||||
| Total stockholders’ equity |
64,581 | 46,359 | |||||
| Total liabilities and stockholders’ equity |
$ | 181,026 | 176,556 | ||||
See accompanying notes to consolidated condensed financial statements.
2
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARY
Consolidated Condensed Statements of Operations and Comprehensive Income
For the Three and Nine Month Periods Ended September 30, 2004 and 2003
(In thousands, except share and per share data)
(unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Telephone service revenues, net |
$ | 14,355 | $ | 14,246 | $ | 44,506 | $ | 44,238 | ||||||||
| Operating expenses: |
||||||||||||||||
| Operating and maintenance expenses |
6,121 | 5,090 | 17,514 | 15,770 | ||||||||||||
| Depreciation and amortization |
3,087 | 2,752 | 9,057 | 8,373 | ||||||||||||
| Total operating expenses |
9,208 | 7,842 | 26,571 | 24,143 | ||||||||||||
| Income from operations |
5,147 | 6,404 | 17,935 | 20,095 | ||||||||||||
| Other income (expenses): |
||||||||||||||||
| Foreign exchange gains (losses), net |
2,507 | 4,568 | 4,481 | (5,065 | ) | |||||||||||
| Interest expense |
(2,163 | ) | (2,178 | ) | (6,914 | ) | (6,846 | ) | ||||||||
| Interest income |
571 | 295 | 1,821 | 773 | ||||||||||||
| Other, net |
(93 | ) | (171 | ) | 42 | (360 | ) | |||||||||
| Net income before income taxes |
5,969 | 8,918 | 17,365 | 8,597 | ||||||||||||
| Income tax (expense) |
(669 | ) | (507 | ) | (1,945 | ) | (493 | ) | ||||||||
| Net income |
$ | 5,300 | $ | 8,411 | $ | 15,420 | $ | 8,104 | ||||||||
| Cumulative convertible preferred stock dividends |
(27 | ) | (27 | ) | (79 | ) | (79 | ) | ||||||||
| Net income attributable to common stockholders |
5,273 | 8,384 | 15,341 | 8,025 | ||||||||||||
| Comprehensive income adjustments |
2,247 | 2,110 | 2,079 | 1,342 | ||||||||||||
| Total comprehensive income |
$ | 7,520 | $ | 10,494 | $ | 17,420 | $ | 9,367 | ||||||||
| Earnings per common share: |
||||||||||||||||
| Basic |
$ | 0.42 | $ | 0.69 | $ | 1.24 | $ | 0.66 | ||||||||
| Diluted |
$ | 0.41 | $ | 0.65 | $ | 1.20 | $ | 0.63 | ||||||||
| Weighted average number of common shares outstanding: |
||||||||||||||||
| Basic |
12,429,504 | 12,195,680 | 12,359,301 | 12,167,957 | ||||||||||||
| Diluted |
12,956,570 | 12,938,269 | 12,900,342 | 12,877,024 | ||||||||||||
See accompanying notes to consolidated condensed financial statements.
3
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARY
Consolidated Condensed Statements of Stockholders’ Equity
(In thousands, except share and per share data)
(unaudited)
| Shares |
Common Stock |
Preferred Stock |
Additional Paid-in Capital |
Accumulated deficit |
Accumulated Other Comprehensive Income |
Total Stockholders’ Equity |
||||||||||||
| Balances at December 31, 2003 |
12,230,670 | $ | 12 | — | 145,616 | (119,548 | ) | 20,279 | $ | 46,359 | ||||||||
| Proceeds from exercise of options |
172,247 | — | — | 689 | — | — | 689 | |||||||||||
| Common stock granted to Employee/Directors |
27,500 | 1 | — | 112 | — | — | 113 | |||||||||||
| Cumulative convertible preferred stock dividends |
— | — | — | — | (79 | ) | — | (79 | ) | |||||||||
| Net income |
— | — | — | — | 15,420 | — | 15,420 | |||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | 2,079 | 2,079 | |||||||||||
| Balances at September 30, 2004 |
12,430,417 | $ | 13 | — | 146,417 | (104,207 | ) | 22,358 | $ | 64,581 | ||||||||
See accompanying notes to consolidated condensed financial statements.
4
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
For the Nine Month Periods Ended September 30, 2004 and 2003
(In thousands)
(unaudited)
| 2004 |
2003 |
||||||
| Net cash provided by operating activities |
$ | 24,787 | 22,593 | ||||
| Cash flows from investing activities: |
|||||||
| Construction of telecommunication networks |
(4,059 | ) | (2,542 | ) | |||
| Decrease in construction deposits |
— | 307 | |||||
| Grant funding received for capital expenditures |
223 | — | |||||
| Proceeds from sale of assets |
37 | 17 | |||||
| Net cash used in investing activities |
(3,799 | ) | (2,218 | ) | |||
| Cash flows from financing activities: |
|||||||
| Repayments of long-term debt |
(14,381 | ) | (12,540 | ) | |||
| Preferred dividends paid |
(52 | ) | — | ||||
| Proceeds from exercise of options |
689 | 664 | |||||
| Net cash used in financing activities |
(13,744 | ) | (11,876 | ) | |||
| Effect of foreign exchange rate changes on cash |
740 | 624 | |||||