-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jznn8QRcA2gBzyMdzZuE9zt+XPShQgbjtmXY6yOPD7aZavRJ9N3a6ZMCxHcb362b Jn8jM0XGPdhJlUPwyhcpbA== 0000104777-96-000004.txt : 19960513 0000104777-96-000004.hdr.sgml : 19960513 ACCESSION NUMBER: 0000104777-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARWICK VALLEY TELEPHONE CO CENTRAL INDEX KEY: 0000104777 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 141160510 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11174 FILM NUMBER: 96559269 BUSINESS ADDRESS: STREET 1: 47 49 MAIN ST CITY: WARWICK STATE: NY ZIP: 10990 BUSINESS PHONE: 9149861101 MAIL ADDRESS: STREET 1: 47 49 MAIN ST STREET 2: PO BOX 592 CITY: WARWICK STATE: NY ZIP: 10990 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from To Commission file number 0-11174 WARWICK VALLEY TELEPHONE COMPANY (Exact name of registrant as specified in its charter) New York 14-1160510 (State or other jurisdiction of incorporation (IRS Employer Identification or organization) No.) 47-49 Main Street, Warwick, New York 10990 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (914) 986-1101 Former name, former address and former fiscal year, if changed since last report. Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 618,957 common shares, no par value, outstanding at March 31, 1996. PART I - FINANCIAL INFORMATION ITEM1. FINANCIAL STATEMENTS WARWICK VALLEY TELEPHONE COMPANY BALANCE SHEET March 31, December 31, 1996 1995 (Unaudited) (Audited) CURRENT ASSETS: Cash $ 540,112 $ 482,049 Telecommunications accounts receivable, 2,559,652 2,694,390 less accounts receivable allowance 1996-$65,557; 1995 $68,013 Other accounts receivable 170,075 965,600 Materials and supplies 1,629,654 1,516,358 Prepaid expenses 542,514 317,085 TOTAL CURRENT ASSETS 5,442,007 5,975,482 NON-CURRENT ASSETS Unamortized debt issuance expense 71,708 75,170 Other deferred charges 148,977 140,327 Investment in non-affiliated company 1,225,195 1,286,646 TOTAL NON-CURRENT ASSETS 1,445,880 1,502,143 TELEPHONE PLANT, AT COST: Land, buildings and equipment In service 32,780,692 32,131,186 Under construction 985,961 1,032,206 33,766,653 33,163,392 Less: Accumulated depreciation 11,678,939 11,222,994 TOTAL PLANT 22,087,714 21,940,398 TOTAL ASSETS $ 28,975,601 $ 29,418,023 The accompanying notes to financial statements are an integral part of these statements. -2- ITEM 1. FINANCIAL STATEMENTS (Continued) WARWICK VALLEY TELEPHONE COMPANY BALANCE SHEET March 31, December 31, STOCKHOLDERS' EQUITY AND LIABILITIES 1996 1995 (Unaudited) (Audited) CURRENT LIABILITIES: Current maturities of long-term debt $ 342,500 $ 370,000 Accounts payable 2,030,093 2,359,341 Notes payable 0 950,000 Advance billing and payments 49,591 206,986 Customer deposits 173,289 173,717 Accrued taxes 407,829 108,409 Other accrued liabilities 593,092 551,788 TOTAL CURRENT LIABILITIES 3,596,394 4,720,241 LONG TERM DEBT: Funded debt 7,000,000 7,000,000 TOTAL LONG TERM DEBT 7,000,000 7,000,000 OTHER LIABILITIES & DEFERRED CREDITS: Unamortized operating investment tax credit - net 290,677 303,427 Unamortized non-operating investment tax credit - net 9,090 9,090 Net non-current deferred operating income tax 2,384,104 2,250,073 Other deferred credits 269,432 390,989 TOTAL OTHER LIABILITIES & DEFERRED CREDITS 2,953,303 2,953,579 STOCKHOLDERS' EQUITY Preferred stock - 5% cumulative, $100 par value; 7,500 shares authorized 5,000 shares issued and outstanding 500,000 500,000 Common stock, without par value; 720,000 shares authorized; Issued and outstanding: 644,757 shares at 3/31/96 and 644,757 shares at 12/31/95 2,281,241 2,281,238 Retained earnings 13,419,863 12,738,174 16,201,104 15,519,412 Less: Treasury stock 25,800 shares at cost 775,200 775,200 TOTAL STOCKHOLDERS' EQUITY 15,425,904 14,744,212 TOTAL LIABILITIES $ 28,975,601 $ 29,418,032 The accompanying notes to financial statements are an integral part of these statements. - -3- WARWICK VALLEY TELEPHONE COMPANY STATEMENT OF INCOME (UNAUDITED) Three Months Ended March 31, 1996 1995 Operating Revenues: Local network service $ 907,094 $ 801,960 Network access and long distance network service 2,764,832 2,202,029 Miscellaneous 289,040 277,250 3,960,966 3,281,239 Less: Provisions for uncollectibles 7,800 7,200 Operating revenues 3,953,166 3,274,039 Operating Expenses: Plant specific 620,274 562,189 Plant non-specific 670,224 657,237 Customer operating expense 693,813 668,447 Corporate operations 391,101 417,260 Operating expenses 2,375,412 2,305,133 Operating Taxes: Federal income taxes 422,571 164,901 Other operating taxes 228,593 258,735 Operating taxes 651,164 423,636 Income from Operations 926,590 545,270 Non-Operating Income & Expenses, Net (Note 2) 170,796 127,459 Income before fixed charges 1,097,386 672,729 Interest & Related Items: Interest on funded debt 146,856 149,183 Other interest deductions 11,543 (9,550) Amortization of debt issuance expense 3,461 2,141 Total interest & related items 161,860 141,774 Net income all sources 935,526 530,955 PREFERRED DIVIDENDS 6,250 6,250 INCOME APPLICABLE TO COMMON STOCK $ 929,276 $ 524,705 NET INCOME PER AVERAGE SHARE OF OUTSTANDING COMMON STOCK $ 1.50 $ 0.86 CASH DIVIDENDS PAID PER SHARE $ 0.40 $ 0.37 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 618,957 613,463 The accompanying note to financial statements are an integral part of these statements. -4- WARWICK VALLEY TELEPHONE COMPANY STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Unaudited) 1996 1995 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 935,526 $ 530,955 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 531,931 503,674 Deferred income tax and investment tax credit (276) 231,022 Interest charged to construction (6,904) (14,914) CHANGE IN ASSETS AND LIABILITIES: (Increase) Decrease in accounts receivable 930,263 280,480 (Increase) Decrease in materials and supplies (113,296) (189,479) Refundable income tax 0 42,034 (Increase) Decrease in prepaid expenses (225,429) (245,649) (Increase) Decrease in deferred charges (8,650) (5,774) Increase (Decrease) in accounts payable (329,248) (119,263) Increase (Decrease) in customers' deposits (428) 29,189 Increase (Decrease) in accrued expenses 142,026 (53,274) Increase (Decrease) in other liabilities 41,304 (172,838) Net Cash provided by operating activities 1,896,819 816,163 CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (679,240) (306,698) Interest charged to construction 6,904 14,914 Change in unamortized debt issuance expense 3,462 0 Change in other investment 61,451 (13,801) Net Cash used in investing activities (607,423) (305,585) CASH FLOW FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable (950,000) (200,000) Reduction of long term debt (27,500) (27,500) Dividends (253,833) (233,231) Net Cash used by financing activities (1,231,333) (460,731) Increase (Decrease) in cash and cash equivalents 58,063 49,847 Cash and cash equivalents at beginning of year 482,049 422,037 Cash and cash equivalents at end of the period $ 540,112 $ 471,884 The accompanying notes to financial statements are an integral part of these statements. -5- ITEM 1. FINANCIAL STATEMENTS (Continued) WARWICK VALLEY TELEPHONE COMPANY NOTES TO FINANCIAL STATEMENTS 1. In the opinion of the management of the Warwick Valley Telephone Company, the accompanying financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial position as of March 31, 1996 and December 31, 1995, its income for the three-month periods ended March 31, 1996 and 1995 and its cash flow for the three-month periods ended March 31, 1996 and 1995. These financial statements should be read in conjunction with the financial statements and the notes included in the Company's Annual Report on form 10-K for the year ended December 31, 1995. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year. 2. Non-operating income and expenses for the three-month periods ended March 31, 1996 and 1995 were as follows: Three Months Ended March 31, 1996 1995 Interest income $117 $121 Interest during construction 6,904 14,914 G/L disposition certain property 49,396 13,508 Special charges (1,445) (709) Other non-operating income 148,200 16,900 Equity in earnings of affiliated (32,376) 82,725 company $170,796 $127,459 -6- WARWICK VALLEY TELEPHONE COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1996 - The Company's net income from all sources increased $404,571 (or 76.2%)to $935,526 for the three-month period ended March 31, 1996, as compared to the same period in 1995. Operating revenues increased by $679,127 (or 20.7%) after provision for uncollectibles, to $3,953,166 for the three-month period ended March 31, 1996 as compared to $3,274,039 for the corresponding period of 1995. The increase in operating revenues was primarily the result of network access revenues, which increased $562,803 (or 25.6%), largely because of increased state and interstate access volumes during the 1996 period. Operating expenses increased by $70,279 (or 3.1%) to $2,375,412 for the three-month period ended March 31, 1996 as compared to the same period in 1995, due to a number of increases and decreases. Increased depreciation ($26,937) and a decrease in executive department payroll and benefits ($28,822), due to the retirement of an officer who was not replaced, were the most significant changes. Non-operating income and expenses increased by $43,337 from $127,459 in the three-month period ended March 31, 1995 to $170,796 in the same period of 1996, largely as a result of the increase in earnings from the Company's share of Orange-Poughkeepsie Cellular Partnership income from $16,900 in the 1995 period to $148,200 in the 1996 period. This increase was partially offset by the net loss ($100,653) of Hometown Online during the 1996 period. The net loss was the result of strong growth in customers since Online's inception in July, 1995 causing revenues to lag behind costs during the startup period. (See Liquidity and Capital Resources). LIQUIDITY AND CAPITAL RESOURCES - The Company's working capital increased to $1,845,613 at March 31, 1996 from $1,567,029 at March 31, 1995. An increase in accounts receivable and a reduction in notes payable were partially offset by increases in current maturities of long term debt and accrued taxes. The Company issued 4,471 shares of its common stock on April 1, 1996 to employees participating in its retirement savings plans at a price of $42.84 per share, realizing $191,537.64. The sale price was discounted 15% from the price at which the stock was valued by an independent appraisal firm just prior to the transaction. Additional sales to employees are anticipated in 1997 and subsequent years. The Company holds a 7.5% limited partnership interest in the cellular mobile telephone partnership which is licensed to operate as the wire-line licensee in both Orange and Dutchess Counties, New York. Since the inception of the partnership, the Company has made capital contributions of $249,750. No further capital contributions are currently scheduled. A wholly-owned subsidiary of the Company, Warwick Valley Mobile Telephone Company (WVMT), resells cellular telephone service to the Company's subscribers as well as to others. WVMT also sells and installs cellular telephone sets. The Company has invested approximately $334,000 in WVMT since its operations began on April 1, 1989. A second wholly-owned subsidiary, Warwick Valley Long Distance Company, Inc. (WVLD), began business in December 1993 in New Jersey and in May 1994 in New York. WVLD resells toll service to customers of Warwick Valley Telephone. WVLD achieved positive retained earnings prior to the end of 1994. -7- An additional wholly-owned subsidiary, Warwick Valley Networks, Inc. (WVN), was established during 1994. WVN is a partner in the New York State Independent Network (NYSINET), which was created by the independent telephone companies of New York to build and operate its own data connections network. NYSINET will make it unnecessary for its member companies to rely on outside companies for these services and may also offer services to companies who are not members, creating a potential source of additional revenue. The NYSINET network is expected to begin operations during the second quarter of 1996. Another wholly-owned subsidiary, Hometown Online, Inc. (ONLINE) was organized during 1995. ONLINE is the corporate entity through which WVTC provides personal computer users connectivity to the Internet as well as local and regional information services. Service is offered within WVTC's service area as well as in nearby areas of New York, New Jersey and Pennsylvania. ONLINE began service in July 1995. WVTC has invested approximately $547,000 in ONLINE since its inception, of which $68,000 was invested in the first quarter of 1996. The Telecommunications Act of 1996 (the Act'), which recently became law, creates a nationwide structure in which competition is allowed and encouraged between local exchange carriers and other entities. Because the states are responsible for implementing many of the Act's provisions, the impact on WVTC will be dependent primarily on proceedings currently underway in New York and New Jersey. The markets most likely to be affected first are the regional toll areas in both states. The competition in these areas is expected to have the effect of reducing Warwick's revenues. The extent of such reductions cannot yet be determined, but is expected to be small in New York, where carrier access is the main revenue source. Currently the Company's revenues from toll and access in the intrastate New Jersey market approximate $2,300,000. The effects of competition will be felt both in market share retained by the Company and the level of its toll rates required in order to remain competitive. It is expected that regional toll competition in both states will be implemented before the end of 1996. The Company anticipates that local competition, as permitted by the Act, will occur first in major cities. It is impossible, at this time, to determine the extent, or the timing, of the advent of competition in the Company's service area, which is defined as rural under provisions of the Act. ITEMS 1 (Legal Proceedings), 2 (Changes in Securities), and 3 (Defaults Upon Senior Securities) are inapplicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - At the Company's 1996 Annual Meeting of Common Shareholders held on April 26, 1996, Earl V. Barry, Philip S. Demarest and Corinna S. Lewis were elected as directors for three-year terms. The terms of Wisner H. Buckbee, Howard Conklin, Jr., Joseph E. DeLuca, Fred M. Knipp, Victor J. Marotta and Henry L. Nielsen, Jr. continued after the meeting. Matters voted on at the meeting and the results of each vote are as follows: Broker For Against Abstain Non-Votes 1. Set the number of directors at 370,610 300 38 96,526 nine until the next annual meeting -8- WARWICK VALLEY TELEPHONE COMPANY Broker For Against Withheld Non-Votes 2. Election of directors - Earl V. Barry 369,293 0 1,655 96,526 Philip S. Demarest 369,293 0 1,655 96,526 Corinna S. Lewis 366,627 2,666 1,655 96,526 Broker For Against Abstain Non-Votes 3. Ratify the appointment of 369,380 60 1,508 96,526 Bush and Germain as the independent public accountants of the Company ITEM 5. OTHER INFORMATION At its reorganizational meeting on April 26, 1996, the Board of Directors elected the following persons to the positions set forth opposite their names: Howard Conklin, Jr. - Chairman of the Board Henry L. Nielsen, Jr. - Vice Chairman of the Board Fred M. Knipp - President Philip S. Demarest - Vice President, Secretary and Treasurer Herbert Gareiss, Jr. - Vice President, Assistant Secretary and Assistant Treasurer ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits - Not applicable b) Reports on Form 8-K - Not applicable -9- 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. Warwick Valley Telephone Company Registrant Date May 13, 1996 Herbert Gareiss, Jr., Vice President (Duly Authorized Officer) Date May 13, 1996 Philip S. Demarest, Vice President Secretary and Treasurer (Principal Financial and Chief Accounting Officer) -10- EX-27 2
UT 3-MOS DEC-31-1995 MAR-31-1996 PER-BOOK 22,087,714 1,225,195 5,442,007 220,685 0 28,975,601 2,281,241 0 13,419,863 15,701,104 0 500,000 7,000,000 0 0 0 342,500 0 0 0 5,431,997 28,975,601 3,953,166 422,571 228,593 2,375,412 926,590 170,796 1,097,386 161,860 935,526 6,250 929,276 247,583 146,856 1,896,819 1.50 0
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