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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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(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, 2003



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 0-13716



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NORTH PITTSBURGH SYSTEMS, INC.

(Exact name of registrant as specified in its charter)



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|Pennsylvania                                                   |  | 25-1485389                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



4008 Gibsonia Road,
Gibsonia, Pennsylvania 15044-9311

(Address of principal executive offices)

(Zip Code)



724.443.9600

(Registrants telephone number, including area code)



No Change

(Former name, former address and former fiscal year, if changed since last report)



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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, and (2) has been subject to such filing requirements
for the past 90 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  x    NO ̈



The number of shares of the registrants Common Stock (par value $.15625 per share) outstanding as of October 30, 2003 was 15,005,000.



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##### Table of Contents

TABLE OF CONTENTS



|PART I     |  | Financial Information                                                                                      |  |   
|---------- |  | ---------------------------------------------------------------------------------------------------------- |  | --
|           |  |                                                                                                           
|Item 1.    |  | Financial Statements                                                                                       |  |   
|           |  |                                                                                                           
|           |  | Independent Auditors Review Report                                                                        |  | 1 
|           |  |                                                                                                           
|           |  | Condensed Consolidated Statements of IncomeFor the three and nine months ended September 30, 2003 and 2002 |  | 2 
|           |  |                                                                                                           
|           |  | Condensed Consolidated Balance SheetsSeptember 30, 2003 and December 31, 2002                              |  | 3 
|           |  |                                                                                                           
|           |  | Condensed Consolidated Statements of Cash FlowsFor the nine months ended September 30, 2003 and 2002       |  | 5 
|           |  |                                                                                                           
|           |  | Notes to Condensed Consolidated Financial Statements                                                       |  | 6 
|           |  |                                                                                                           
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                      |  | 9 
|           |  |                                                                                                           
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                 |  | 20
|           |  |                                                                                                           
|Item 4.    |  | Controls and Procedures                                                                                    |  | 20
|           |  |                                                                                                           
|PART II    |  | Other Information                                                                                          |  |   
|           |  |                                                                                                           
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                           |  | 21
|           | 
|SIGNATURES |  | 23                                                                                                        



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PART I



FINANCIAL INFORMATION



Independent Auditors Review Report



The Board of
Directors

North Pittsburgh Systems, Inc:



We have reviewed the accompanying condensed consolidated balance sheet of North Pittsburgh Systems, Inc. and subsidiaries as of September 30, 2003, the
related condensed consolidated statements of income for the three and nine-month periods ended September 30, 2003 and 2002 and the related condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2003 and 2002.
These condensed consolidated financial statements are the responsibility of the Companys management.



We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.



KPMG LLP



Pittsburgh, Pennsylvania

October 24, 2003



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##### Table of Contents

PART I



FINANCIAL INFORMATION



Item 1. Financial Statements



NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES



Condensed Consolidated Statements of Income (Unaudited)

(Amounts in Thousands  Except Per Share Data)



|                                                |  | For the Three Months Ended Sept. 30 |        |   | For the Nine Months Ended Sept. 30 |  
|----------------------------------------------- |  | ----------------------------------- | ------ | - | ---------------------------------- | -
|                                                |  | 2003                                |        |   | 2002                               |  
|Operating revenues:                             |  |                                     |        |   |                                    |  
|Local network services                          |  | $                                   | 6,450  |   |                                    | $
|Long distance and access services               |  |                                     | 16,433 |   |                                    |  
|Directory advertising, billing & other services |  |                                     | 362    |   |                                    |  
|Telecommunication equipment sales               |  |                                     | 611    |   |                                    |  
|Other operating revenues                        |  |                                     | 2,446  |   |                                    |  
|                                                |  |                                     |        |   |                                    |  
|Total operating revenues                        |  |                                     | 26,302 |   |                                    |  
|                                                |  |                                     |        |  
|Operating expenses:                             |  |                                     |        |   |                                    |  
|Network and other operating expenses            |  |                                     | 13,634 |   |                                    |  
|Depreciation and amortization                   |  |                                     | 4,829  |   |                                    |  
|State and local taxes                           |  |                                     | 897    |   |                                    |  
|Telecommunication equipment expenses            |  |                                     | 417    |   |                                    |  
|                                                |  |                                     |        |   |                                    |  
|Total operating expenses                        |  |                                     | 19,777 |   |                                    |  
|                                                |  |                                     |        |   |                                    |  
|Net operating income                            |  |                                     | 6,525  |   |                                    |  
|                                                |  |                                     |        |  
|Other expense (income), net:                    |  |                                     |        |   |                                    |  
|Interest expense                                |  |                                     | 528    |   |                                    |  
|Interest income                                 |  |                                     | (42    | ) |                                    |  
|Sundry income, net                              |  |                                     | (540   | ) |                                    |  
|                                                |  |                                     |        |   |                                    |  
|                                                |  |                                     | (54    | ) |                                    |  
|                                                |  |                                     |        |   |                                    |  
|Income before income taxes                      |  |                                     | 6,579  |   |                                    |  
|                                                |  |                                     |        |  
|Income taxes                                    |  |                                     | 2,709  |   |                                    |  
|                                                |  |                                     |        |   |                                    |  
|Net income                                      |  | $                                   | 3,870  |   |                                    | $
|                                                |  |                                     |        |   |                                    |  
|Weighted average common shares outstanding      |  |                                     | 15,005 |   |                                    |  
|                                                |  |                                     |        |   |                                    |  
|Basic and diluted earnings per share            |  | $                                   | .26    |   |                                    | $
|                                                |  |                                     |        |   |                                    |  
|Dividends per share                             |  | $                                   | .17    |   |                                    | $
|                                                |  |                                     |        |   |                                    |  



See accompanying notes
to unaudited condensed consolidated financial statements.



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##### Table of Contents

NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES



Consolidated Balance Sheets



(Amounts in Thousands)



|                                                                                |  | (Unaudited)Sept. 302003 |         | Dec. 31 2002
|------------------------------------------------------------------------------- |  | ----------------------- | ------- | ------------
|ASSETS                                                                          |  |                         |         |             
|Current Assets:                                                                 |  |                         |         |             
|Cash and temporary investments                                                  |  | $                       | 25,494  |             
|Marketable securities available for sale                                        |  |                         | 423     |             
|Accounts receivable:                                                            |  |                         |         |             
|Customer, net of allowance for doubtful accounts of $628 and $470, respectively |  |                         | 6,046   |             
|Access service settlements and other                                            |  |                         | 7,501   |             
|Prepaid expenses                                                                |  |                         | 1,073   |             
|Inventories                                                                     |  |                         | 1,649   |             
|Prepaid taxes other than income taxes                                           |  |                         | 248     |             
|Prepaid federal and state income taxes                                          |  |                         | 549     |             
|Deferred income taxes                                                           |  |                         | 1,493   |             
|                                                                                |  |                         |         |             
|Total current assets                                                            |  |                         | 44,476  |             
|                                                                                |  |                         |         |             
|Property, plant and equipment:                                                  |  |                         |         |             
|Land                                                                            |  |                         | 475     |             
|Buildings                                                                       |  |                         | 13,733  |             
|Equipment                                                                       |  |                         | 188,053 |             
|Assets held under capital lease                                                 |  |                         | 10,363  |             
|                                                                                |  |                         |         |             
|                                                                                |  |                         | 212,624 |             
|                                                                                |  |                        
|Less accumulated depreciation and amortization                                  |  |                         | 127,704 |             
|                                                                                |  |                         |         |             
|                                                                                |  |                         | 84,920  |             
|                                                                                |  |                        
|Construction in progress                                                        |  |                         | 3,152   |             
|                                                                                |  |                         |         |             
|Total property, plant and equipment, net                                        |  |                         | 88,072  |             
|                                                                                |  |                        
|Investments                                                                     |  |                         | 13,745  |             
|Intangible asset                                                                |  |                         | 831     |             
|Other assets                                                                    |  |                         | 1,266   |             
|                                                                                |  |                         |         |             
|                                                                                |  | $                       | 148,390 |             
|                                                                                |  |                         |         |             



(Continued)



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NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES



Consolidated Balance Sheets



(Amounts in Thousands)



|                                                                             |  | (Unaudited)Sept. 302003 |         |   | Dec. 31 2002 |  
|---------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ------------ | -
|LIABILITIES AND SHAREHOLDERS EQUITY                                         |  |                         |         |   |              |  
|Current liabilities:                                                         |  |                         |         |   |              |  
|Current portion of long-term debt                                            |  | $                       | 3,085   |   |              | $
|Obligation under capital lease                                               |  |                         | 1,053   |   |              |  
|Accounts payable                                                             |  |                         | 7,331   |   |              |  
|Dividend payable                                                             |  |                         | 2,551   |   |              |  
|Other accrued liabilities                                                    |  |                         | 2,873   |   |              |  
|Federal and state income taxes                                               |  |                         |        |   |              |  
|                                                                             |  |                         |         |   |              |  
|Total current liabilities                                                    |  |                         | 16,893  |   |              |  
|                                                                             |  |                         |         |   |              |  
|Long-term debt                                                               |  |                         | 25,453  |   |              |  
|Obligation under capital lease                                               |  |                         | 5,814   |   |              |  
|Deferred income taxes                                                        |  |                         | 10,316  |   |              |  
|Accrued pension and postretirement benefits                                  |  |                         | 13,578  |   |              |  
|Other liabilities                                                            |  |                         | 622     |   |              |  
|                                                                             |  |                         |         |   |              |  
|Total liabilities                                                            |  |                         | 72,676  |   |              |  
|                                                                             |  |                         |         |   |              |  
|Shareholders equity:                                                        |  |                         |         |   |              |  
|Capital stock: authorized 50,000 shares:                                     |  |                         |         |   |              |  
|Common stock, par value $.15625; issued 15,040 and outstanding 15,005 shares |  |                         | 2,350   |   |              |  
|Preferred stock, par value $1.00; none issued                                |  |                         |        |   |              |  
|Capital in excess of par value                                               |  |                         | 2,215   |   |              |  
|Retained earnings                                                            |  |                         | 74,417  |   |              |  
|Less cost of treasury stock (35 shares)                                      |  |                         | (508    | ) |              |  
|Accumulated other comprehensive loss                                         |  |                         | (2,760  | ) |              |  
|                                                                             |  |                         |         |   |              |  
|Total shareholders equity                                                   |  |                         | 75,714  |   |              |  
|                                                                             |  |                         |         |   |              |  
|                                                                             |  | $                       | 148,390 |   |              | $
|                                                                             |  |                         |         |   |              |  



See accompanying notes
to unaudited condensed consolidated financial statements.



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NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES



Condensed Consolidated Statements of Cash Flows (Unaudited)

(Amounts in Thousands)



|                                                                           |  | For the Nine MonthsEnded Sept. 30 |        
|-------------------------------------------------------------------------- |  | --------------------------------- | -------
|                                                                           |  | 2003                              |        
|Cash from operating activities:                                            |  |                                   |        
|Net income                                                                 |  | $                                 | 9,813  
|Adjustments to reconcile net income to net cash from operating activities: |  |                                   |        
|Depreciation and amortization                                              |  |                                   | 14,243 
|Equity income of affiliated companies                                      |  |                                   | (2,284 
|Changes in assets and liabilities:                                         |  |                                   |        
|Accounts receivable                                                        |  |                                   | (544   
|Inventories                                                                |  |                                   | 511    
|Deferred financing costs, prepaid expenses and other assets                |  |                                   | (390   
|Prepaid taxes                                                              |  |                                   | (248   
|Accounts payable                                                           |  |                                   | 116    
|Other accrued liabilities                                                  |  |                                   | (1,138 
|Accrued pension and postretirement benefits                                |  |                                   | 518    
|Federal and state income taxes                                             |  |                                   | (2,309 
|Deferred income taxes                                                      |  |                                   | 1,680  
|Other, net                                                                 |  |                                   | 58     
|                                                                           |  |                                   |        
|Total adjustments                                                          |  |                                   | 10,213 
|                                                                           |  |                                   |        
|Net cash from operating activities                                         |  |                                   | 20,026 
|                                                                           |  |                                   |        
|Cash used for investing activities:                                        |  |                                   |        
|Expenditures for property and equipment                                    |  |                                   | (8,134 
|Purchase of marketable securities available for sale                       |  |                                   |       
|Proceeds from sale of marketable securities available for sale             |  |                                   |       
|Investments in affiliated entities                                         |  |                                   | (937   
|Distributions from affiliated entities                                     |  |                                   | 3,002  
|                                                                           |  |                                   |        
|Net cash used for investing activities                                     |  |                                   | (6,069 
|                                                                           |  |                                   |        
|Cash used for financing activities:                                        |  |                                   |        
|Cash dividends                                                             |  |                                   | (7,653 
|Payments of capital lease obligation                                       |  |                                   | (740   
|Retirement of debt                                                         |  |                                   | (2,314 
|                                                                           |  |                                   |        
|Net cash used for financing activities                                     |  |                                   | (10,707
|                                                                           |  |                                   |        
|Net increase in cash and temporary investments                             |  |                                   | 3,250  
|                                                                           |  |                                  
|Cash and temporary investments at beginning of period                      |  |                                   | 22,244 
|                                                                           |  |                                   |        
|Cash and temporary investments at end of period                            |  | $                                 | 25,494 
|                                                                           |  |                                   |        
|Interest paid                                                              |  | $                                 | 1,623  
|                                                                           |  |                                   |        
|Income taxes paid                                                          |  | $                                 | 7,523  
|                                                                           |  |                                   |        



See accompanying notes
to unaudited condensed consolidated financial statements.



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NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES



Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in Thousands Except
Exercise Price in Note 5)



(1) Basis of
Presentation and Consolidation



The condensed consolidated
financial statements included herein have been prepared by North Pittsburgh Systems, Inc. (hereafter referred to as the Registrant, the Company, we, us or our), without audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Consolidated herein are the financial results of the Companys wholly-owned subsidiaries, North Pittsburgh Telephone Company (North Pittsburgh), Penn Telecom, Inc. (Penn Telecom) and Pinnatech, Inc. (Pinnatech). Certain information
and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Nevertheless, the Company believes that
its disclosures herein are adequate to make the information presented not misleading and, in the opinion of management, all adjustments necessary to present fairly the results of operations for the interim periods have been reflected. These
condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Companys latest Annual Report to the Securities and Exchange Commission on Form 10-K.



Certain amounts in the Companys 2002 condensed consolidated financial
statements have been reclassified to conform with the presentation of its 2003 condensed consolidated financial statements. In addition, as of December 31, 2002, we have reclassed certain intraLATA settlement amounts due other telecommunication
providers from a contra revenue to an operating expense to conform with current accounting and industry presentation. The reclassification increased both operating revenues and operating expenses by $578 for the three-month period and $1,819 for the
nine-month period ended September 30, 2002 from that reported in the Companys Quarterly Report on Form 10-Q for the period ended September 30, 2002.



(2) Comprehensive Income



Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, establishes requirements for disclosure of
comprehensive income. The objective of SFAS No. 130 is to report all changes in equity that result from transactions and economic events other than transactions with owners. Comprehensive income is the total of net income and all other non-owner
changes in equity. The reconciliation of net income to comprehensive income is as follows:



|                                                                                                   |  | For the Three Months Ended Sept. 30 |       |      | For the Nine Months Ended Sept. 30
|-------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ----- | ---- | ----------------------------------
|                                                                                                   |  | 2003                                |       | 2002 |                                   
|Net income                                                                                         |  | $                                   | 3,870 |      | $                                 
|Unrealized gain (loss) on marketable securities including reclassification adjustments, net of tax |  |                                     | 6     |      |                                   
|Minimum pension liability adjustment, net of tax                                                   |  |                                     |      |      |                                   
|                                                                                                   |  |                                     |       |      |                                   
|Comprehensive income                                                                               |  | $                                   | 3,876 |      | $                                 
|                                                                                                   |  |                                     |       |      |                                   



(3)
Transactions with Related Parties



In 1998, we entered
into an agreement to outsource certain data processing functions to a third party processor (Processor), which is a member of the Armstrong Group of Companies (the Armstrong Group). We are related to the Armstrong Group by a common shareholder and
director. Payments to the Processor under this agreement were $2,894 and $2,763 for the nine-month periods ended September 30, 2003 and 2002, respectively. Also, we paid $135 and $468 in each of those same periods to the law firm of a member of the
Board of Directors for various legal services. As of September 30, 2003, we had amounts outstanding of $164 and $47 to the Processor and law firm, respectively.



In addition, in the ordinary course of business, we both provide and receive telecommunication transport services from
Boulevard Communications, LLP (Boulevard), a competitive access provider jointly owned by us and a company in the Armstrong Group. Total revenues recognized from providing services to Boulevard were approximately $19 and $21 and total expenses
incurred from receiving services from Boulevard were approximately $225 and $164, for the nine-month periods ended September 30, 2003 and 2002, respectively. We also provide in the ordinary course of business telecommunication and transport services
to other member companies of the Armstrong Group, with total revenues recognized of approximately $133 and $214, for those same periods, respectively. The amounts outstanding from and/or due to Boulevard and the companies in the Armstrong Group were
negligible as of September 30, 2003.



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(4) Workforce Reduction



During the second quarter of 2003, the Company instituted a workforce
reduction program at its North Pittsburgh subsidiary. This program consisted of both layoffs and early retirement incentives and reduced the North Pittsburgh workforce by 37 people, or 15%. The Company recorded severance charges of $1,076 and $66
during the second and third quarters of 2003, respectively. No severance accrual remained as of September 30, 2003, as all amounts had been paid prior to that date.



Because of the workforce reduction program, the Company also recorded curtailment charges and completed a re-measurement of
its obligations under its pension and postretirement healthcare plans. Curtailment charges totaling $1,583 were recorded in the second quarter of 2003. Both the $1,142 in severance charges and $1,583 in curtailment charges were recorded in the
Network and other operating expenses line item on the Companys Condensed Consolidated Statement of Income.



As a result of the re-measurement of the Companys pension plan, the Company also recorded adjustments to shareholders equity (via the
Accumulated other comprehensive loss line item) and intangible asset. Accounting rules provide that if, at any plan measurement date, the fair value of plan assets is less than the plans accumulated benefit obligation (ABO), the
sponsor must establish a liability at least equal to the amount by which the ABO exceeds the fair value of assets. The liability must be offset by the recognition of an intangible asset and/or charge against shareholders equity. Due to the
retirement of 16 people as a result of the workforce reduction program and a change in the discount rate used for plan measurement purposes from 6.5% as of December 31, 2002 to 6.0% as of May 31, 2003, the date of the re-measurement, an additional
after tax amount of $1,374 was charged as a reduction to shareholders equity. As a result, the total after tax minimum pension liability amounted to $2,767 as of September 30, 2003 as compared to $1,393 as of December 31, 2002. In addition,
the intangible asset balance decreased from $1,039 as of December 31, 2002 to $831 as of September 30, 2003 due to a decrease in unrecognized prior service costs from the curtailment.



(5) Shareholder Rights Plan



On September 25, 2003, the Board of Directors of the Company (the Board) adopted a Shareholder Rights Plan and declared a
dividend of one right for each share of common stock outstanding on October 6, 2003 and to become outstanding thereafter. Each right entitles the holder of the right to buy one one-hundredth of a share of Class A Junior Participating Preferred Stock
for $60 per share if the right becomes exercisable. The rights become exercisable only if a person or group acquires 15% or more of the common stock of the Company then outstanding or commences a tender or exchange offer that, if consummated, would
result in the person or group acquiring 15% or more of the Companys common stock then outstanding. If a person or group acquires 15% of the Companys outstanding common stock, right holders (other than the shareholders(s) who acquired 15%
of the Companys common stock) become entitled to purchase an amount of common stock of the Company (or Common Stock Equivalents as defined in the Shareholder Rights Plan, or, in certain circumstances, common stock of the acquirer) having a
value equal to two times the exercise price of $60. The rights currently trade with the Companys common stock. The rights may be redeemed by the Board, for one cent per right, at any time before a person or entity acquires 15% or more of the
common stock of the Company then outstanding. The rights expire in October 2013.



The Companys articles of incorporation authorize up to 10 million shares of preferred stock, of which 151 thousand shares have been reserved for possible issuance under the Shareholder Rights Plan. As of
September 30, 2003, no preferred shares had been issued.



(6) Recent Accounting Pronouncements



In June of 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations. The Company adopted this pronouncement on January 1, 2003. SFAS No. 143
requires that we record the fair value of an asset retirement obligation as a liability in the period in which we incur a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction,
development, and/or normal use of the assets. We would also record a corresponding asset that is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the
end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The adoption of SFAS No. 143 did not have a material effect on our consolidated financial statements.



In June of 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 eliminates Emerging Issues Task Force, or EITF, Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including
Certain Costs Incurred in a Restructuring). Under SFAS No. 146, liabilities for costs associated with an exit or disposal activity are recognized when the liabilities are incurred, as



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opposed to being recognized at the date of the entitys commitment to an exit plan under EITF No. 94-3. Furthermore,
SFAS No. 146 establishes that fair value is the objective for initial measurement of the liabilities. This Statement is effective for exit or disposal activities that are initiated after December 31, 2002.



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PART I



Item 2. Managements Discussion and Analysis of Financial Condition

and Results of Operations

(Amounts in Thousands Except Per Share Data and Operating Statistics)



Cautionary Language Concerning Forward-Looking Statements



In addition to historical information, this Quarterly Report on Form 10-Q contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 (Section 27A) and Section 21E of the Securities Exchange Act of 1934 (Section 21E) regarding events, financial trends and critical accounting policies that may affect our future operating
results, financial position and cash flows. We intend that such forward-looking statements be subject to the safe harbors within Section 27A and Section 21E as provided by the Private Securities Litigation Act of 1995.



Forward-looking statements are generally accompanied by words such as
believes, anticipates, expects, estimates, intends or similar words or expressions. Such statements are based on our assumptions and estimates and are subject to risks and uncertainties.
You should understand that various factors, including (but not limited to) those items discussed below and elsewhere in this document, could cause our actual results to differ materially from the results expressed in or implied by these
forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which are current only as of the date of this filing. We disclaim any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.



While the below list of risks and uncertainties is not exhaustive, some factors, in addition to those contained throughout this document, that could affect future operating results, financial position and cash flows
and could cause actual results to differ materially from those expressed in the forward-looking statements are:



| |  | a change in economic conditions in the markets in which we operate;
| | - | -------------------------------------------------------------------



| |  | government and regulatory policies at both the federal and state levels;
| | - | ------------------------------------------------------------------------



| |  | unanticipated higher capital spending for, or delays in, the deployment of new technologies;
| | - | --------------------------------------------------------------------------------------------



| |  | the pricing and availability of equipment, materials and inventories;
| | - | ---------------------------------------------------------------------



| |  | changes in the competitive environment in which we operate, including the intensity of competitive activity, pricing pressures and new and/or alternative product offerings;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our ability to continue to successfully penetrate our edge-out markets.
| | - | -----------------------------------------------------------------------



Overview



The Registrant, organized May 31, 1985, is a holding company and has no operating function. Its predecessor, North Pittsburgh, a telephone public utility
incorporated in 1906, became a wholly-owned subsidiary of the Registrant on May 31, 1985. Penn Telecom became a wholly-owned subsidiary of the Registrant on January 30, 1988. Prior to this date, Penn Telecom was a wholly-owned subsidiary of North
Pittsburgh. Penn Telecom is certificated as a Competitive Access Provider (CAP), a Competitive Local Exchange Carrier (CLEC) and an Interexchange Carrier (IXC) and has entered into these businesses. Pinnatech, a wholly-owned subsidiary of the
Registrant, formed in 1995, principally provides Internet and broadband related services. The Registrant, North Pittsburgh, Penn Telecom and Pinnatech operate under the provisions of the Pennsylvania Business Corporation Law.



North Pittsburgh Telephone Company



North Pittsburgh, our Incumbent Local Exchange Carrier (ILEC), was founded
in 1906 and operates in an approximate 285 square mile territory in Western Pennsylvania, which includes portions of Allegheny, Armstrong, Butler and Westmoreland Counties. North Pittsburgh provides service to approximately 75,500 business and
residential access lines in its territory. Over the past decade, North Pittsburghs territory has experienced very robust population growth due to the continued expansion of suburban communities into the southern portions of the North
Pittsburgh serving area, with the southernmost point of North Pittsburghs territory only 12 miles from the City of Pittsburgh. According to a recent census, the population in North Pittsburghs service territory grew 14.3% from 1990 to
2000.



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North Pittsburgh operates a 100% digital switching network, comprised of nine central offices and 93
carrier serving areas (CSAs). The core of the network consists of two main host switches, a Nortel DMS 500 and a Nortel DMS 100. The CSA architecture was implemented over the past seven years as part of North Pittsburghs extensive network
modernization plan. The current CSA architecture, in which nearly all loop lengths are kept to 12,000 feet or less, has allowed North Pittsburgh to be able to provide digital subscriber line (DSL) service for over 99% of its access lines. In
addition, fiber has been deployed extensively throughout the network, resulting in a 100% Synchronous Optical Network (SONET) that supports all of the inter-office and host-remote links as well as the majority of business parks within the North
Pittsburgh serving area. We believe that North Pittsburghs network is built for the future, in which the ability to satisfy the growing customer demand for broadband and multi-megabit services will be a key critical success factor.



Penn Telecom



Penn Telecom furnishes telecommunication and broadband services south of
North Pittsburghs territory to customers in Pittsburgh and its surrounding suburbs as well as north of North Pittsburghs territory in the City of Butler and its surrounding areas. Verizon is the ILEC in the Pittsburgh area while Sprint
is the ILEC in Butler and its surrounding areas. Penn Telecoms CLEC operation follows a true edge-out strategy, in which it has leveraged North Pittsburghs network, human capital skills and reputation in the surrounding
markets.



Penn Telecom operates an extensive SONET network with
over 300 route miles of fiber optic facilities in the metro market. Penn Telecom has physical collocation in 27 Verizon central offices and one Sprint central office and primarily serves its customers using unbundled network element (UNE) loops.
Twenty-seven of these collocations are connected to Penn Telecoms SONET network using a combination of leased and owned fiber optic facilities. Penn Telecom has also deployed a next-generation switching system to support its rapidly growing
Integrated Services Digital Network (ISDN) primary rate interface (PRI) service, achieving significant cost reductions over traditional switching systems. In the Pittsburgh market, a carrier hotel operated by Penn Telecom serves as the hub for the
fiber optic network. In addition, Penn Telecom also offers space in the carrier hotel to internet service providers (ISPs), IXCs, other CLECs and other customers who need a carrier-class location to house voice and data equipment as well as gain
access to a number of networks, including Penn Telecoms. In the City of Butler, Penn Telecom has overbuilt a portion of the Sprint distribution plant in the central business district and continues to expand these facilities as it increases its
penetration of the Butler area business market.



Penn
Telecoms sales strategy has been to focus on small to mid-sized business customers (defined as 5 to 500 lines), educational institutions and up-scale apartment/townhouse communities (also referred to as multiple dwelling units, or MDUs),
offering local and long distance voice services as well as DSL. Due to its extensive facilities based network containing fiber, Penn Telecom is also able to compete against Verizon and other CAPs to offer transport facilities via high capacity
special access circuits (from DS-1s up to OC-48s) to IXCs, ISPs and even other CLECs. As of September 30, 2003, Penn Telecom served 24,512 dial tone access lines and 20,091 access line equivalents1, for a grand total of 44,603 equivalent access lines2served.



In
addition to the CLEC operations, Penn Telecom also provides long distance services and maintains an enterprise equipment business providing traditional key and private branch exchange (PBX) systems to business customers. Prior to its CLEC
operations, the majority of Penn Telecoms long distance customers resided in North Pittsburghs market. However, with the growth of its CLEC customer base and the effective bundling of toll with local dial tone services, Penn Telecom has
been able to greatly expand this service offering.



Pinnatech



Pinnatech, an ISP doing business
under the Nauticom name, furnishes Internet access and broadband services in Western Pennsylvania. Pinnatech serves the majority of its DSL and other broadband customers over the North Pittsburgh and Penn Telecom networks. In addition, Pinnatech
also provides virtual hosting services, web page design and e-commerce enabling technologies to customers.

---

|1 | Access line equivalents represent a conversion of data circuits to an access line basis and are presented for comparability purposes. Equivalents are calculated by
converting data circuits (basic rate interface (BRI), PRI, DSL, DS-1 and DS-3) and SONET-based (optical) services (OC-3) to the equivalent of an access line. While the revenues generated by access line equivalents have a directional relationship
with these counts, growth rates cannot be compared on an equivalent basis.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 | Equivalent access lines include dial tone access lines and access line equivalents.
|- | -----------------------------------------------------------------------------------



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For a more complete understanding of our business, industry, principal services rendered, properties and
other interests, we suggest you read our Annual Report on Form 10-K for the fiscal year ended December 31, 2002. There have been no significant changes in the mode of conducting business or the properties owned by the Company or its subsidiaries
since the filing of that Form 10-K report. Current updates to the regulatory environment under which our subsidiaries operate can be found below in the Regulatory Matters section of this Managements Discussion and Analysis of
Financial Condition and Results of Operations.



Results of Operations



The following discussion should be read in conjunction
with our condensed consolidated financial statements, and the notes thereto, included in this quarterly report and with our audited financial statements, and the notes thereto, included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.



Results of Operations
for the Nine Months Ended September 30, 2003 and 2002



Net
income for the nine-month period ended September 30, 2003 was $9,813, or $.65 per share, compared to net income of $8,890, or $.59 per share, for the comparable prior year period. These fluctuations were attributable to the following factors:



Operating Revenues



Total operating revenues increased $8,232, or 11.9%, in the nine-month
period ended September 30, 2003 over the comparable period in 2002. This increase was primarily the result of increases in local network services revenues of $2,210 (13.4%), long distance and access services revenues of $4,399 (10.0%) and other
operating revenues of $1,859 (32.0%), offset partially by decreases in directory advertising, billing and other services revenues of $126 (11.4%) and telecommunication equipment sales of $110 (6.2%).



Increases in local network services revenues of $2,210, or 13.4%, were mostly
attributable to growth in Penn Telecoms access lines and PRIs. Penn Telecoms local dial tone and vertical features revenues increased by $845 due to continued successful penetration south of North Pittsburghs territory in the City
of Pittsburgh and surrounding areas as well as north of North Pittsburghs territory in the City of Butler and its surrounding areas. Penn Telecoms access lines installed increased from 14,825 as of September 30, 2002 to 24,512 as of
September 30, 2003. In addition, revenues at Penn Telecom for PRI circuits grew approximately $567 as circuits increased from 273 as of September 30, 2002 to 473 as of September 30, 2003. In association with the growth in terminating traffic
generated by the above mentioned increase in access lines and PRIs, local reciprocal compensation revenues increased $162 from the prior year period. Also, at North Pittsburgh, vertical features revenues increased $158 as a result of more intensive
promotional campaigns in the current year period and local dial tone revenues increased $319 due to a revenue neutral rate re-balancing in April of 2003, which increased local residential rates and decreased intrastate access rates. Absent the rate
re-balancing, North Pittsburghs local dial tone revenues would have decreased by approximately $80 as access lines have decreased 2%.



The increase in long distance and access services revenues of $4,399, or 10.0%, was attributable to increases in access revenues, high capacity circuits
sold (special access revenues) and toll revenues. The $3,630 increase in access revenues was mostly due to an increase in minutes of use (MOUs) generated by the growth in Penn Telecoms access lines and switched circuits. North
Pittsburghs interstate access revenues also increased as a result of changes in the National Exchange Carrier Association (NECA) average schedule settlement formula. In addition, access revenues for the nine-month period ended September 30,
2003 were favorably impacted by $427 in final inter-carrier settlement adjustments covering a two-year period. Special access revenues increased $266, mostly as a result of increases at Penn Telecom in the number of DS-1 and DS-3 circuits sold.
Overall toll revenues increased $503, reversing the trend of the last several years of period over period decreases. Penn Telecoms toll revenues (combination of metro area, intraLATA and interLATA toll) increased approximately $1,129 due to
the overall growth in CLEC customers and the successful bundling of toll and local calling packages, with approximately 75% of CLEC dial tone customers subscribing to Penn Telecoms toll plans. North Pittsburgh has experienced a decrease in its
intraLATA toll revenues over the last several years, mostly as a result of a decrease in market share and loss of MOUs to such competition as wireless and alternative communication technologies such as e-mail. In addition, the average billed rate
for existing customers declined due to increased subscriptions to lower cost calling plans, which were developed over the past several years to meet the competitive environment. However, North Pittsburghs decrease of approximately $626, or
9.7%, from the prior year nine-month period has moderated from decreases of 12.7% and 16.3%, respectively, for full year 2002 and 2001 toll revenues, mostly as a result of greater price stabilization in the market. Although this positive trend may
last for the next several quarters, the introduction of aggressively priced flat rate toll packages from voice over internet protocol (VOIP) providers may eventually cause the percentage decrease to once again accelerate.



We believe that the current growth rate in long distance and access services
revenues of 10% will most likely not be sustainable in the fourth quarter of 2003 and full year 2004. Penn



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Telecom is currently investigating a revision made by Verizon in the percent local use (PLU) factor used to settle traffic between the companies. According
to the Verizon traffic study, the PLU factor change would result in an approximate $250 per month decrease in intrastate access revenues recognized by Penn Telecom. Penn Telecom has the right to audit the Verizon traffic study and conduct a traffic
study of its own. However, due to the fact that our analysis had not been completed by the filing date of this document, we cannot be certain of the ultimate outcome and effect on access revenues in the fourth quarter of 2003 and beyond. As the PLU
factor change was effective September 1, 2003, we have made the assumption for financial reporting purposes that the Verizon traffic study is materially accurate and, as such, have incorporated the $250 September revenue decrease in the third
quarter and year-to-date 2003 results reported in this Quarterly Report on Form 10-Q.



The increase in other operating revenues of $1,859, or 32.0%, was primarily due to two factors, one of which was the growth in DSL revenues of approximately $1,102 as combined DSL lines (both wholesale and retail)
increased from 6,689 as of September 30, 2002 to 9,333 as of September 30, 2003. As for the second factor, the prior year period included approximately $694 in charges associated with the bankruptcies of carriers, most notably WorldCom and Global
Crossings. These charges were recorded by the Company as reductions in revenue.



The decrease in directory advertising, billing and other services revenues of $126 was mostly attributable to a decrease in directory advertising revenues, due to greater competition in a relatively soft advertising
market. The decrease in telecommunication equipment sales of $110 was due to lower post-sale support revenues.



Operating Expenses and Net Operating Income



Total operating expenses increased $9,155, or 17.4%, in the nine-month period ended September 30, 2003 over the comparable period in 2002. The change was
primarily the result of increases in network and other operating expenses of $7,770 (21.9%), depreciation and amortization expenses of $953 (7.2%) and state and local taxes of $480 (19.6%), offset partially by a minor decrease in telecommunications
equipment expenses of $48 (4.0%).



The increase in network and
other operating expenses of $7,770, or 21.9%, was due to several factors, one of which was a $2,456 increase in operational expenses at Penn Telecom. This increase was mostly due to the underlying growth in Penn Telecoms CLEC variable costs
associated with the overall growth in access line equivalents and revenue. UNE costs in the nine-month period ended September 30, 2003 for non-facilities based access lines, broadband circuit costs and DSL costs increased approximately $1,208 from
the comparable prior year period to support the overall growth in the network, access lines, high capacity circuits and DSL lines in service. In addition, personnel and sales expenses grew approximately $1,162 in order to support the revenue and
organizational growth.



At North Pittsburgh, network and other
operating expenses for the nine-month period ended September 30, 2003 increased $4,646 from the prior year comparable period. The largest contributing factor to the increase was $2,725 in charges recorded in association with a workforce reduction
program. The charges consisted of $1,142 in severance and early retirement incentives and $1,583 in non-cash curtailment charges associated with the acceleration of pension and postretirement healthcare obligations. $2,659 of the workforce reduction
program expenses were recorded in the second quarter of 2003, with the remaining $66 recorded in the third quarter of 2003.



In addition to the workforce reduction charges, there was an approximate $1,250 increase in labor and benefit expenses, mostly as a result of increases in
benefit costs due to higher pension and healthcare expenses. NPTC also experienced decreases in the amount of capitalized labor due to lower construction levels. Increases in corporate insurance premiums and Universal Service Fund (USF)
contributions further contributed to the increase in network and other operating expenses.



At Pinnatech, network and other operating expenses for the nine-month period ended September 30, 2003 increased $594 from the prior year comparable period. The increase was mostly attributable to the rise in network
infrastructure expense and costs to provide DSL related to Pinnatechs DSL and higher capacity broadband circuit growth.



The increase in consolidated depreciation and amortization expenses of $953, or 7.2%, was the result of an increase in the depreciable asset base (gross
property, plant and equipment) of 5.0% over the September 30, 2002 balance. Furthermore, a higher ratio of the new additions reflected data centric equipment, which have shorter useful lives than the Companys average depreciable base.



The increase in state and local taxes of $480, or 19.6%, was
attributable to increases in a variety of taxes, including the public utility realty tax assessment (PURTA) tax, gross receipts tax (which grows as intrastate revenues increase), capital stock tax, and payroll related taxes.



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Overall, the increase in total operating revenues of $8,232, coupled with the increase in total
operating expenses of $9,155, resulted in a $923, or 5.5%, decrease in net operating income for the nine-month period ended September 30, 2003 over the comparable prior year period.



Other Items



Interest expense decreased for the nine-month period ended September 30, 2003 by $1,078 due to the prepayment of Rural Telephone Bank (RTB) notes in
December of 2002 and the continued scheduled pay-down of North Pittsburghs remaining Federal Financing Bank (FFB) notes. Interest income decreased $279 due to lower temporary investment balances, as a result of the above-mentioned debt
prepayment, as well as the general decrease in short-term money market rates for temporary investments. The $1,682 change in Sundry Income, Net was due to two main factors, a $312 increase in equity income for the current period from our investments
in three wireless partnerships and $1,220 of costs expended by the Company in the prior year comparable period exploring strategic alternatives and business arrangements. In addition, the prior year comparable period included an investment loss of
$140 associated with the other-than-temporary decline in value of several equity securities.



Results of Operations for the Three Months Ended September 30, 2003 and 2002



Fluctuations in revenue and expenses for the three-month period ended September 30, 2003, as compared to the same quarterly period in 2002, were generally
attributable to the same reasons discussed in the nine-month comparisons above with the exceptions of the following:



Network and other operating expenses increased $1,555, or 12.9%, for the three-month period ended September 30, 2003 as compared to the same quarterly
period in 2002 versus a nine-month year-to-date increase of 21.9%, as previously described. The lower rate of increase for the current year quarterly period as compared to the year-to-date period was due to the fact that the majority of the
workforce reduction charges ($2,659 of the $2,725 total) occurred in the second quarter of 2003.



Sundry Income, Net decreased $166 for the three-month period ended September 30, 2003 as compared to the same quarterly period in 2002 versus a nine-month
year-to-date increase of $1,682, as previously described. The fluctuation was attributable to several factors, the largest of which was the fact that the all of the $1,220 of costs expended by the Company in the prior year-to-date comparable period
exploring strategic alternatives and business arrangements were incurred in the first two quarters of 2002. In addition, the entire investment loss of $140 associated with the other-than-temporary decline in value of several equity securities was
recorded in the second quarter of 2002. As such, the third quarter of 2002 was not negatively impacted by either of those above-mentioned charges. Furthermore, equity income recorded from our investments in three wireless partnerships for the third
quarter of 2003 was $182 less than the prior year comparable quarter as the 2002 third quarter contained an approximate $102 multi-period positive true-up. Also, 2003 third quarter results for the Rural Service Area (RSA) 6(I) partnership decreased
due to conversion costs incurred with the transition of the majority partnership interest from Alltel Communications to Verizon Wireless, increases in network investments and much higher customer growth in the current quarter, which leads to
temporary decreases in income due to higher up-front customer acquisition costs, such as equipment subsidies and commissions.



Liquidity and Capital Resources



|                                              |  | September 30,2003 |        | December 31,2002
|--------------------------------------------- |  | ----------------- | ------ | ----------------
|Cash and temporary investments                |  | $                 | 25,494 |                 
|Working capital                               |  | $                 | 27,583 |                 
|Long-term debt (including current maturities) |  | $                 | 28,538 |                 



Cash and temporary
investments were $25,494 at September 30, 2003 as compared to $22,244 at December 31, 2002. The increase was a result of cash flows from operations of $20,026 exceeding investment and financing requirements. The Companys capital additions,
which were 100% internally financed, totaled $8,134 for the nine-month period ended September 30, 2003, a 3.6% decrease from the prior year-to-date figure. The decrease was mostly a result of less demand in the North Pittsburgh territory and the
fact that the recent network upgrades made by North Pittsburgh (from 1997 through 2001) have resulted in a subsequent lower level of capital expenditures. The Companys cash flow has also been positively impacted by an increase of $2,065 in net
proceeds received from its wireless partnerships. The Company expended $10,707 during the nine-month period ended September 30, 2003 for financing activities, which included cash dividends and the scheduled repayments of debt and capital lease
obligations. The $710 decrease in cash expenditures for financing activities from the comparable prior year period was mostly due to the retirement of $16,349 of RTB notes in December of 2002, which has decreased current year scheduled debt
repayments.



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Cash flows from operations were $20,026 for the nine-month period ended September 30, 2003, an $81
decrease from the prior year comparable period. Although net income and non-cash charges (depreciation) increased $923 and $953, respectively, these factors were offset primarily by contributions made to the North Pittsburgh retirement plan totaling
$2,991 during the current year versus $625 in the prior year. The $2,991 of contributions to the North Pittsburgh retirement plan consisted of the required minimum contribution of $991 made during the first quarter of 2003 and an elective additional
tax-deductible contribution of $2,000 made during the second quarter of 2003.



Temporary excess funds were invested in short-term cash equivalents with maturity dates scheduled to coincide with tax payment due dates, debt principal payments, dividend payment dates and other predictable cash
needs. We expect to continue the investment of such excess funds through the remainder of 2003 and throughout 2004, which should enable us to satisfactorily meet all short-term obligations.



Working capital levels at September 30, 2003 increased $5,846 from December
31, 2002, mostly due to operating cash flows continuing to be sufficient to reduce both short-term and long-term liabilities and a net cash flow of $2,065 from affiliated entitles.



The decrease in long-term debt was a result of the scheduled $2,314 of principal repayments in the nine-month period ended
September 30, 2003. As mentioned above, we funded 100% of our 2003 year-to-date expenditures for property and equipment from operations cash flows and cash reserves. Therefore, no additional advances were requested from our available debt
facilities. In 1996, North Pittsburgh was granted approval for a loan from the FFB guaranteed by the Rural Utilities Service (RUS) in the maximum principal amount of $75,000. The total amount outstanding at September 30, 2003 to the FFB under this
loan was $28,538, with all advances having a maturity date of December 31, 2012. The unadvanced amount of this facility as of September 30, 2003 was $34,764. North Pittsburgh can make draws against this facility through June 30, 2012 for qualified
capital expenditure projects, as defined in the loan agreement, to furnish and improve telephone service in rural areas. As of September 30, 2003, North Pittsburgh had approximately $2,447 of qualified capital expenditures that were eligible to be
drawn against this facility.



The notes payable to the FFB are
secured by a supplemental Mortgage Agreement executed by North Pittsburgh, which provides that substantially all of the assets of North Pittsburgh, which approximate a net book value of $105,000, are subject to a lien or a security interest. Such
agreement contains restrictions regarding dividends and other distributions by North Pittsburgh. Under these restrictions, unless certain working capital levels, net worth levels, and interest expense ratios are maintained, North Pittsburgh is not
permitted to pay dividends on its capital stock (other than in shares of capital stock), or to make any other distributions to its shareholder or purchase, redeem or retire any of its capital stock or make any investment in affiliated companies. As
a result of these restrictions, approximately $7,082 of North Pittsburghs retained earnings were available for dividends to the Registrant as of September 30, 2003. Taking into consideration the North Pittsburgh restrictions, consolidated
retained earnings of approximately $36,995 were available for dividends and other distributions to our shareholders as of September 30, 2003.



North Pittsburgh also has available through June of 2004 a $10,000 line of credit with the Rural Telephone Finance Cooperative at a rate of prime plus
11/2%. No borrowings have taken place against the line of credit.



A summary of our contractual obligations and commitments as of September 30,
2003 is as follows:



|                  |  | Debt Principal |        | Capital Lease*
|----------------- |  | -------------- | ------ | --------------
|Remainder of 2003 |  | $              | 771    |               
|2004              |  |                | 3,085  |               
|2005              |  |                | 3,085  |               
|2006              |  |                | 3,085  |               
|2007              |  |                | 3,085  |               
|Thereafter        |  |                | 15,427 |               

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|* | Represents total minimum lease commitments (interest and executory costs are included).
|- | ---------------------------------------------------------------------------------------



Consolidated capital expenditure commitments for the purchase and installation of new equipment at September 30, 2003
amounted to approximately $817, with such amount being part of the 2003 construction program, which is projected to be in the range of $11,000 to $12,000. The Company had made expenditures of $8,134 in association with this construction program
through September 30, 2003. We currently expect a construction program for 2004 in the range of $12,000 to $13,000.



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We expect cash flows provided by operating activities and cash reserves over the next twelve months to be
sufficient to service long-term debt and capital lease obligations, to pay dividends and to finance all non-RUS qualified projects. We expect to continue to have the necessary cash flows from operations and cash reserves to internally finance 100%
of our projected capital expenditures. However, due to the low cost financing available through the RUS for qualified North Pittsburgh capital expenditures, we may request advancements from the RUS facility in the future.



Critical Accounting Policies



Certain accounting policies are very important to the portrayal of our
financial condition and results of operations and require managements most subjective or complex judgments. These policies are as follows:



Revenue Recognition



Revenues are recognized when local network, long distance, and access services are provided. Local service and intrastate long distance and access service
revenues are subject to the jurisdiction of the Pennsylvania Public Utility Commission (PA PUC). North Pittsburgh participates in interstate pooling arrangements with other telephone companies. Such pools are funded by access service charges
regulated by the Federal Communications Commission (FCC). Revenue earned through pooling is initially recorded based on estimates. North Pittsburgh has settled substantially all access service arrangements through 2000 and expects to settle
substantially all access service arrangements through 2002 during the fourth quarter of 2003. Revenues from equipment sales are recorded after equipment has been installed and accepted by the customer.



Impairment of Long-Lived Assets



Based upon the provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, we review assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. A determination of impairment (if any) is made
based on estimates of future undiscounted cash flows. We determined, based on our reviews, that there had been no impairment to the carrying value of such assets in 2002 or for the nine-month period ended September 30, 2003.



Valuation of Accounts Receivable



We review accounts receivable to determine which are doubtful of collection.
In making the determination of the appropriate allowance for doubtful accounts, we consider our accounts receivable aging schedules, history of write-offs, relationships with our customers and the overall credit worthiness of our customers.



Income Taxes



In assessing the realizability of deferred tax assets, we consider whether
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.



Pension and Other Postretirement Benefits



We calculate the costs of providing retiree benefits under the provisions of
SFAS No. 87 and SFAS No. 106. The key assumptions used in making these calculations are the discount rate used to value the future obligation, expected return on plan assets and health care cost trend rates. We select discount rates commensurate
with current market interest rates on high-quality, fixed-rate debt securities. The expected return on assets is based on our current view of the long-term returns on assets held by the plan, which is influenced by historical averages. The medical
cost trend rate is based on our actual medical claims and future projections of medical cost trends.



The judgments used in applying the above policies are based on our evaluation of the relevant facts and circumstances as of the date of the financial
statements. Actual results may differ from those estimates.



Regulatory
Matters



Both North Pittsburgh and Penn Telecom are
subject to regulatory oversight by the PA PUC for intrastate services and the FCC for interstate services. The PA PUC and the FCC have broad powers of supervision and regulation over public utilities with respect to service and facilities, rates and
charges, securities, the encumbering or disposition of public utility properties, accounting and various other matters.



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In 1996, Congress passed the Telecommunications Act of 1996 (the 1996 Act), which has the goal of opening
the telecommunications industry to further competition for all services. The 1996 Act prohibits state legislative or regulatory restrictions or barriers to entry regarding the provision of local telephone service. It also requires most ILECs to
interconnect with the networks of other telecommunications carriers, unbundle their services into network elements, offer their telecommunications services at wholesale rates to allow the resale of such services and other telecommunications carriers
to locate equipment on their premises. Local exchange telephone carriers are also required to compensate each other for the transport and termination of calls.



The FCC has issued a number of Rulemakings that continue to implement the requirements of the 1996 Act. The general intent of the 1996 Act was to open
up the local exchange market to competition, including permitting the resale of services at wholesale rates and providing number portability, dialing parity, interconnection to any requesting carrier and access to network elements.



However, North Pittsburghs wireline operations are considered Rural
under the 1996 Act and are exempt from certain of the foregoing obligations unless, in response to a bona fide request for interconnection, the PA PUC removes that exemption. North Pittsburgh, along with a number of other rural companies in
Pennsylvania, was granted a temporary suspension until July 10, 2002 of certain interconnection requirements in the 1996 Act applicable to ILECs as they relate to non-facilities based competition. In that proceeding, however, facilities based
competition was permitted in the North Pittsburgh service area. North Pittsburgh, along with a number of other rural companies in Pennsylvania, filed a Petition with the PA PUC on June 7, 2002 requesting an additional three (3) year extension of the
suspension to July 10, 2005.



On January 15, 2003, the PA PUC
denied the request for the extension of the suspension. In response to the PA PUC denial, North Pittsburgh and other rural companies on January 30, 2003 filed a Petition for Clarification and Modification of the denial order. The Petition asked for
clarification and modification of portions of the order in regard to the potential future issues dealing with burden of proof when reviewing whether to remove a rural exemption. In addition, on February 14, 2003, North Pittsburgh and other rural
companies also filed a Petition for Review in the Commonwealth Court of Pennsylvania, which requests that the court reverse the PA PUC decision as the order was not supported by the evidence, was contrary to law and was arbitrary and capricious. The
PA PUC acted on the Petition for Clarification and Modification on March 21, 2003 granting it in part and confirming that the burden of proof in a proceeding challenging a rural exemption rests with the competitor. The PA PUC also clarified that
total economic burden in such a proceeding includes consideration of the economic burden typically associated with competitive entry. As a result of the PA PUC Clarification Order, North Pittsburgh and the other rural companies filed, on May 1,
2003, a request with the Commonwealth Court to discontinue the appeal of the denial order. While North Pittsburgh no longer retains its previous suspension of certain interconnection obligations, it still retains its rural exemption under the 1996
Act as mentioned above.



In March of 2003, North Pittsburgh
received a request from a CLEC to negotiate an interconnection agreement. It appears that North Pittsburgh will be able to accommodate the request for interconnection and retain its rural exemption under the 1996 Act. Accompanying the request for
interconnection by the CLEC was a request for Local Number Portability (LNP). North Pittsburgh was originally scheduled to be LNP capable in September of 2003. However, due to third party delays in scheduling training, testing and access to the LNP
database, referred to as the Number Portability Administration Center Services Management Systems (NPAC/SMS), North Pittsburgh is now scheduled to be LNP capable sometime in the fourth quarter of 2003. As a result of this first request for
interconnection and the introduction of LNP, North Pittsburgh expects to experience some loss of customers and the associated revenues to this and possibly other competitors.



In addition, North Pittsburgh and Penn Telecom have received requests from Cellular Mobile Radio Service (CMRS) providers
requesting wireline to wireless LNP, beginning November 24, 2003. On November 10, 2003, the FCC released an Order wherein it requires local exchange carriers (LECs) that provide service in the top 100 metropolitan statistical areas to provide
wireline to wireless LNP on November 24, 2003. The Company, along with most LECs, is reviewing whether the Order should be challenged. If the ultimate outcome of the FCC Order (and/or subsequent challenges) is that wireline to wireless LNP is
applicable to North Pittsburgh and Penn Telecom, then the ability for an end user to transfer his or her wireline number to a wireless phone may cause both North Pittsburgh and Penn Telecom to experience some loss of customers and the associated
revenues as it will be easier for a customer to migrate from wireline service to a wireless service.



The provision of interstate toll and access services by North Pittsburgh and Penn Telecom is subject to the regulatory scrutiny of the FCC. Terms,
conditions and rates for interstate toll and access services are filed in interstate tariffs for review and approval by the FCC. However, since August 1, 2001, the FCC has no longer required non-dominant interstate toll providers, including Penn
Telecom, to file tariffs for their interstate toll services. Penn Telecom now informs its toll customers of the rates, terms and conditions through written notice.



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In October of 2001, the FCC adopted an Order referred to as the Multi Association Group, or MAG Order,
that modified the interstate access charge rules and universal service support system for rate-of-return (ROR) ILECs. North Pittsburgh is subject to this Order. According to the FCC, the new rules, which went into effect January 1, 2002, are
intended to accomplish the following three (3) goals: 1) align the interstate access rate structure more closely with the manner in which costs for access are incurred; 2) replace implicit support for universal service with explicit support that is
portable to all eligible telecommunications carriers on a competitively neutral basis; and 3) provide certainty and stability for small and mid-sized local telephone companies serving rural and high-cost areas by permitting these carriers to
continue to set interstate access rates based on a ROR of 11.25%, thereby encouraging investment in rural America.



The MAG Order had the following effects: 1) increased flat rate charges referred to as Subscriber Line Charges (SLCs) that are billed to residential and
business customers; and 2) decreased per minute of use switched access charges billed to interexchange toll providers that originate and terminate traffic on a ILECs network.



The MAG Order also created a new universal service support mechanism, Interstate Common Line Support (ICLS). The ICLS
replaces the Carrier Common Line (CCL) charge, which was previously billed to interexchange toll providers. The ICLS was phased in beginning July of 2002 and the CCL was eliminated as of July of 2003. The initial effect of the implementation of the
MAG Order on North Pittsburgh was revenue neutral.



At the same
time the MAG Order was adopted, the FCC also issued a Further Notice of Proposed Rulemaking seeking comment on an incentive regulation plan for ILECs which are now under ROR regulation in the interstate jurisdiction. Because the outcome of this
proceeding is not yet known, we are not able to predict the effect that it may have on our operations and revenues.



In February of 2002, the FCC issued a Notice of Proposed Rulemaking (NPRM) regarding the possible classification of wireline broadband Internet access as
an information service rather than a telecommunications service. Should the FCC adopt this proposed rule, it may cause network based broadband offerings such as DSL services to be more lightly regulated by the FCC. However, in the NPRM, the FCC also
asked whether it should extend USF requirements to not only facilities based wireline Broadband Internet Service Providers (BISPs) but also wireless, cable TV and satellite BISPs.



Should the FCC extend a USF contribution requirement to all BISPs, North Pittsburgh, Penn Telecom and Pinnatech would be
affected. Because the outcome of this proceeding is unknown at this time, we are unable to determine the effect such action may have on our operations and revenues.



In February of 2002, the FCC also issued a Further Notice of Proposed Rulemaking regarding the possible reformation of the
system for assessing and recovering USF funds. In that proceeding, the FCC has asked for comment on whether it should assess carrier contributions based on the number and capacity of connections that contributing carriers provide to customers,
rather than on the current method, which is based on the interstate revenues they earn.



Should the FCC reform the current system for assessing and recovering USF funds, North Pittsburgh, Penn Telecom and Pinnatech would be affected by the change. Because the outcome of this proceeding is unknown at this
time, we are unable to determine the effect such action may have on our operations and revenues.



On February 20, 2003, the FCC released its decision regarding the Triennial Review of the 1996 Act. The decision dealt with several issues that may affect
North Pittsburgh and Penn Telecom. Generally, it appears that the decision eliminates unbundling requirements for ILECs in regard to broadband services provided over fiber facilities but continues unbundled access to mass market narrowband loops. In
addition, ILECs are not required to unbundle packet switching services. Also, the FCC found that the high frequency portion of the loop, also referred to as line sharing, is no longer required to be provided as an UNE and will therefore be phased
out over three years. The FCC also found that ILECs will no longer have to offer the local switching UNE for business customers served by high-capacity loops. The States have 90 days to rebut this finding. For mass market customers served by
narrowband loops, the FCC set out specific criteria that States shall apply to determine if switching should no longer be available as an UNE. Upon a State ruling eliminating switching as an UNE for mass market customers, the FCC set forth a
three-year period for carriers to transition off Unbundled Network Element Platform (UNE-P), which is a service that bundles UNE switching with other UNEs such as UNE loop to provide the entire local service platform. The FCC order explaining the
decision was released August 21, 2003. The PA PUC, on October 3, 2003, entered an order which initiated two proceedings that will eventually implement the requirements set forth in the FCCs Triennial Review Order in a manner specific to
Pennsylvania. North Pittsburgh believes that the proceedings do not apply so long as it has its rural exemption. Until the proceedings are completed and a final order is issued, we are unable to gauge the eventual effect that these decisions will
have on North Pittsburgh or Penn Telecom. In that North Pittsburgh is not required to offer UNEs to competitors, there should be no immediate effect on North Pittsburgh due to the decision. In regard to Penn Telecom, because it does not currently
utilize line sharing, the line sharing portion of the decision will have no effect on Penn Telecoms operations or revenues for its existing customer base.



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However, Penn Telecom began to utilize UNE-P in the third quarter of 2003 in the following three
capacities: 1) to convert approximately 470 existing customers from resell to UNE-P, thereby decreasing the monthly recurring line charge Penn Telecom must pay to the ILEC and increasing revenue by allowing Penn Telecom to earn access fees; 2) to
provision a portion of new non-facilities based customers, which now allows Penn Telecom to decrease its current provisioning process by approximately twenty days as well as more efficiently manage the eventual porting of customers to UNE loop; and
3) to expand geographically outside its existing 28 collocations without significant capital risk as collocation investments can be deferred until a critical mass of customers is obtained. As of September 30, 2003, Penn Telecom had approximately
1,161, or 4.7%, of its dial tone access lines served utilizing UNE-P. Should the PA PUC, as a result of the pending proceedings, change the current UNE-P environment, either in terms of restricting availability or revising pricing
formulas/methodologies to allow for price increases, the margin improvement, provision efficiencies and low risk geographical expansion which Penn Telecom is expecting may not be realized.



Effective January 22, 2001, under PA PUC regulations referred to as Chapter
30, North Pittsburgh moved from ROR regulation in the intrastate jurisdiction to an alternative form of regulation, which is a price cap plan. Under North Pittsburghs price cap plan, rates for non-competitive intrastate services are allowed to
increase based on an index that measures economy-wide price increases less a productivity offset. There is no limitation on earnings under this plan. The terms of the plan also allow North Pittsburgh to rebalance rates once each year to allow North
Pittsburgh to gradually realign its intrastate rate structure on a more rational cost and market basis in order to meet future competition. In addition, as competition develops in the future, North Pittsburgh may file with the PA PUC to declare
certain services competitive and thereby be freed from all rate regulation for those services. In return for approval of the alternative form of regulation, North Pittsburgh has committed to continue to upgrade its network in the future to ensure
that all its customers will have access to broadband services. On April 30, 2003, North Pittsburgh filed its annual Price Stability Mechanism (PSM) compliance filing under its approved price cap plan. While the application of the PSM formula in the
plan normally would have required North Pittsburgh to reduce some rates for non-competitive services resulting in an annual revenue decrease of approximately $160, North Pittsburg has proposed that this rate reduction be delayed for 24 months until
North Pittsburgh recovers those intrastate uncollectible revenues that were experienced in 2002 due to the Global Crossing and WorldCom bankruptcies. Exogenous event claims, such as this proposal to recoup intrastate uncollectible losses not
generally reflected in the Gross Domestic Product-Price Index, are permitted under the North Pittsburgh PSM. Various parties have, however, opposed the recovery of those losses. North Pittsburgh expects the PA PUC, which must act on the claim, to
rule on the filing sometime in the first quarter of 2004.



The
Chapter 30 legislation, which enables North Pittsburgh to operate under an alternative price-cap form of regulation, is scheduled to sunset on December 31, 2003. Competing versions of new proposed legislation reauthorizing and revising the Chapter
30 regulations have been introduced in both the Pennsylvania House and Senate. Legislative action reauthorizing Chapter 30, with some revisions, is expected by the end of 2003. Because the outcome of this legislative initiative is unknown at this
time, we are unable to determine the effect that the new legislation reauthorizing Chapter 30 will have on our operations and revenues.



If the legislature fails to act on the new legislation by December 31, 2003, it is our understanding that North Pittsburgh will remain under its current
Chapter 30 plan until such time as the PA PUC orders changes in the plan and/or the legislature acts to authorize new Chapter 30 legislation.



The provision of intrastate toll and access services is subject to regulatory scrutiny by the PA PUC. Terms, conditions and rates for intrastate toll and
access services are filed in intrastate tariffs for PA PUC review and approval.



On September 30, 1999, the PA PUC issued an Order, referred to as the Global Order, dealing with a variety of issues impacting LECs in Pennsylvania. Specifically, the Order allowed North Pittsburgh to rebalance and
lower access charges in order to assist North Pittsburgh in meeting competition in its serving area. The reduction in access charges was offset in part by reimbursements from a PA Universal Service Fund (PA USF) that is funded by all
telecommunications providers (excluding wireless) in the State. Because the rebalancing and reduction of access charges were offset by reimbursement from the fund, North Pittsburgh has not experienced any significant impact on operations or revenues
as a result of the Global Order. The PA PUC, in the Global Order, indicated that it would commence another proceeding on or after January 2, 2001 to examine further changes to the PA USF and possible additional access charge reform. By Secretarial
Letter dated February 1, 2002, the PA PUC granted a coalition of rural telephone companies, including North Pittsburgh, a ninety (90) day extension until April 15, 2002 in which to submit a proposal to the PA PUC outlining proposed changes in access
charges and the fund along with a timeline for these changes. The rural coalition submitted its proposal on April 15, 2002. Other parties also submitted proposals, including the local exchange carrier division of Sprint.



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Upon review of the initial proposals filed in the access charge reform proceeding, the rural coalition
and Sprint, through negotiation, combined and then on December 16, 2002 filed a Joint Access Proposal in Response to the Access Charge Investigation. The Joint Access Proposal was supported in filed statements by the PA Office of Consumer Advocate,
the PA Office of Small Business Advocate and the PA PUC Office of Trial Staff. Under the Joint Access Proposal, the PA USF would generally continue through 2005 with only minor changes. The proposed plan allows for all the local exchange companies
in Pennsylvania, with the exception of Verizon and Verizon North, to continue gradual revenue neutral rate rebalancings. As proposed, companies would be allowed to reduce access charges and offset the reductions through increases in local rates. In
an Order entered July 15, 2003, the PA PUC approved the Joint Access Proposal. Under that Order, North Pittsburgh will file in the fourth quarter of 2003 to reduce intrastate access charges billed to IXCs by approximately $65 on a monthly basis and
raise end user rates for local dial tone services by approximately 5% to recover the same amount. North Pittsburgh, under the Order, will have the option to make additional revenue neutral rate rebalancings in future years as permitted by the July
15, 2003 Order and its Chapter 30 plan.



The 1996 Act, FCC and
PA PUC regulatory proceedings and the thrust toward a fully competitive marketplace have created some uncertainty in respect to the levels of North Pittsburghs revenue in the future. However, its unique location in a growing
commercial/residential suburban traffic corridor to the north of the City of Pittsburgh, its state-of-the-art switching, transmission and transport facilities and its extensive fiber network place North Pittsburgh in a solid position to meet
competition and minimize loss of revenues. In addition, North Pittsburgh continues to make its network flexible and responsive to the needs of its customers to meet competitive threats. At the same time, Penn Telecom continues its CLEC edge-out
strategy in the Pittsburgh metropolitan area and the City of Butler and its surrounding areas, while taking advantage of the opportunities afforded by the 1996 Act and the introduction of competition into the toll, local wireline and broadband
markets.



Recent Accounting Pronouncements



In June of 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. The Company adopted this pronouncement on January 1, 2003. SFAS No. 143 requires that we record the fair value of an asset retirement obligation as a liability in the period in which we incur a legal obligation
associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the assets. We would also record a corresponding asset that is depreciated over the life of the asset.
Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The adoption
of SFAS No. 143 did not have a material effect on our consolidated financial statements.



In June of 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 eliminates Emerging Issues Task Force, or EITF, Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). Under SFAS No. 146, liabilities for costs associated with an exit or disposal activity are
recognized when the liabilities are incurred, as opposed to being recognized at the date of the entitys commitment to an exit plan under EITF No. 94-3. Furthermore, SFAS No. 146 establishes that fair value is the objective for initial
measurement of the liabilities. This Statement is effective for exit or disposal activities that are initiated after December 31, 2002.



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PART I



Item 3. Quantitative And Qualitative Disclosures About Market Risk



There have been no material changes in reported market risks faced by the Company since the end of the preceding fiscal year on December 31, 2002.



Item 4. Controls and Procedures



Under the
supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial and Accounting Officer, the Company evaluated the effectiveness of the design and operation of its
disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, and, based on their evaluation, the Chief Executive Officer and Chief Financial and Accounting Officer concluded that these disclosure
controls and procedures are effective. There were no significant changes in the Companys internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.



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PART II



OTHER INFORMATION



Item 6. Exhibits and Reports on Form 8-K



| | (a) | Exhibit Index for Quarterly Reports on Form 10-Q
| | --- | ------------------------------------------------



|ExhibitNumber |  | Subject                                                                     |  | Applicability                                                                                                                                       
|------------- |  | --------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(2)           |  | Plan of acquisition, reorganization, arrangement, liquidation or succession |  | Not Applicable                                                                                                                                      
|              |  |                                                                            
|(3) (i)       |  | Articles of Incorporation                                                   |  | Attached Hereto                                                                                                                                     
|              |  |                                                                            
|(3) (ii)      |  | Amended and Restated By-Laws                                                |  | Attached Hereto                                                                                                                                     
|              |  |                                                                            
|(4)           |  | Instruments defining the rights of security holders including indentures    |  |                                                                                                                                                     
|              |  |                                                                            
|              |  | (a) Agreement of Reorganization and Plan of Merger                          |  | Provided in Registration of Securities of Certain Successor Issuers on Form 8-B filed on June 25, 1985 and Incorporated Herein by Reference         
|              |  |                                                                            
|              |  | (b) Rights Agreement dated as of September 25, 2003                         |  | Provided as Exhibit 1 to the Registration of Certain Classes of Securities on Form 8-A filed on October 3, 2003 and Incorporated Herein by Reference
|              |  |                                                                            
|(10)          |  | Material Contracts                                                          |  | Provided in Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 and Incorporated Herein by Reference.                                
|              |  |                                                                            
|(11)          |  | Statement of computation of earnings per share                              |  | Attached Hereto                                                                                                                                     
|              |  |                                                                            
|(15)          |  | Letter re unaudited interim financial information                           |  | Not Applicable                                                                                                                                      
|              |  |                                                                            
|(18)          |  | Letter re change in accounting principles                                   |  | Not Applicable                                                                                                                                      
|              |  |                                                                            
|(19)          |  | Report furnished to security holders                                        |  | Not Applicable                                                                                                                                      
|              |  |                                                                            
|(22)          |  | Published report regarding matters submitted to a vote of security holders  |  | Not Applicable                                                                                                                                      
|              |  |                                                                            
|(23)          |  | Consents of experts and counsel                                             |  | Not Applicable                                                                                                                                      
|              |  |                                                                            
|(24)          |  | Power of attorney                                                           |  | Not Applicable                                                                                                                                      



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|ExhibitNumber |   |  | Subject                                                                                                                                                                                        |  | Applicability  
|------------- | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------
|(31.1         | ) |  | Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                               |  | Attached Hereto
|              |   | 
|(31.2         | ) |  | Certification of Vice President, Treasurer and Chief Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                |  | Attached Hereto
|              |   | 
|(32.1         | ) |  | Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                |  | Attached Hereto
|              |   | 
|(32.2         | ) |  | Certification of Vice President, Treasurer and Chief Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |  | Attached Hereto



| | (b) | Reports on Form 8-K
| | --- | -------------------



During the quarter ended September 30, 2003, we furnished one Report on Form 8-K, dated July 30, 2003, reporting under Item 12, Results of Operations and
Financial Condition, the Companys press release announcing earnings for the second quarter of 2003.



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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 thereunto duly authorized.



NORTH PITTSBURGH SYSTEMS, INC. (Registrant)




|                       |  |  | 
|---------------------- |  |  | 
|Date November 14, 2003 |  |  | 
|                       |  |  | 



|                       |  |  | 
|---------------------- |  |  | 
|Date November 14, 2003 |  |  | 
|                       |  |  | 



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