-----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, QmyFMxwW++W733/AlLx8+iPddLllvL5z5+BILdpF54Y3dRv2Sq/E4f2tb301sEtA nB+xjZVZbDpvNSRz8dCP5w== 0000104777-96-000010.txt : 19961115 0000104777-96-000010.hdr.sgml : 19961115 ACCESSION NUMBER: 0000104777-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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: 96661298 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 September 30, 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 or organization) (IRS Employer Identification 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: 621,771 common shares, no par value, outstanding at September 30, 1996. PART I - FINANCIAL INFORMATION Item 1. Financial Statements WARWICK VALLEY TELEPHONE COMPANY BALANCE SHEET September 30, December 31, 1996 1995 (Unaudited) (Audited) CURRENT ASSETS: Cash $ 598,337 $ 482,049 Telecommunications accounts receivable, 2,597,637 2,694,390 less receivable allowance 1996-$65,569; 1995-$68,013 Other accounts receivable (91,435) 965,600 Materials and supplies 1,793,759 1,516,358 Prepaid expenses 629,347 317,085 TOTAL CURRENT ASSETS 5,527,645 5,975,482 NON-CURRENT ASSETS Unamortized debt issuance expense 64,785 75,170 Other deferred charges 184,389 140,327 Investment in non-affiliated company 1,564,904 1,286,646 TOTAL NON-CURRENT ASSETS 1,814,078 1,502,143 TELEPHONE PLANT, AT COST: Land, buildings and equipment in service 34,020,245 32,131,186 Under construction 1,273,917 1,032,206 35,294,162 33,163,392 Less: Accumulated depreciation 12,681,383 11,222,994 TOTAL PLANT 22,612,779 21,940,398 TOTAL ASSETS $ 29,954,502 $ 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 September 30, December 31, STOCKHOLDERS' EQUITY AND LIABILITIES 1996 1995 (Unaudited) (Audited) CURRENT LIABILITIES: Current maturities of long-term debt $ 27,500 $ 370,000 Accounts payable 1,301,206 2,359,341 Notes payable 1,300,000 950,000 Advance billing and payments (106,842) 206,986 Customer deposits 164,849 173,717 Accrued taxes 192,812 108,409 Other accrued liabilities 673,346 551,788 TOTAL CURRENT LIABILITIES 3,552,871 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 265,177 303,427 Unamortized non-operating investment tax credit - net 9,090 9,090 Net non-current deferred operating income tax 2,454,847 2,250,073 Other deferred credits 224,407 390,989 TOTAL OTHER LIABILITIES & DEFERRED CREDITS 2,953,521 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: 648,571 shares at 9/30/96 and 644,757 shares at 12/31/95 2,439,666 2,281,238 Retained earnings 14,333,644 12,738,174 17,273,310 15,519,412 Less: Treasury stock, at cost, 26,800 and 25,800 shares 825,200 775,200 TOTAL STOCKHOLDERS' EQUITY 16,448,110 14,744,212 TOTAL LIABILITIES $ 29,954,502 $ 29,418,032 The accompanying notes to financial statements are an integral part of these statements. -3- Item 1. Financial Statements (Continued) WARWICK VALLEY TELEPHONE COMPANY STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Operating revenues: Local network service $ 868,851 $ 816,580 $2,644,934 $2,382,044 Network access and long distance network service 2,642,329 2,391,255 7,983,728 6,816,431 Miscellaneous 256,707 280,127 841,490 784,399 3,767,887 3,487,962 11,470,152 9,982,874 Less: Provisions for uncollectibles 7,800 7,200 23,400 21,600 Operating revenues 3,760,087 3,480,762 11,446,752 9,961,274 Operating expenses: Plant specific 552,073 560,428 1,713,970 1,538,528 Plant non-specific 698,712 644,160 2,043,972 1,959,659 Customer operations 778,697 698,141 2,180,562 2,069,636 Corporate operations 419,085 442,276 1,244,088 1,299,385 Operating expenses 2,448,567 2,345,005 7,182,592 6,867,208 Operating taxes: Federal income taxes 314,376 225,665 1,074,713 548,912 Operating other taxes 252,207 272,572 703,466 792,381 Operating taxes 566,583 498,237 1,778,179 1,341,293 Income from operations 744,937 637,520 2,485,981 1,752,773 Non-operating income & expenses - net (Note 2) 200,010 176,526 455,909 422,263 Income before fixed charges 944,947 814,046 2,941,890 2,175,036 Interest & related items: Interest on funded debt 143,595 148,218 436,705 446,299 Other interest deductions 16,034 13,458 41,071 14,755 Amortization of debt issuance expense 3,461 3,461 10,385 15,888 Total interest & related items 163,090 165,137 488,161 476,942 Net income all sources 781,857 648,909 2,453,729 1,698,094 PREFERRED DIVIDENDS 6,250 6,250 18,750 18,750 INCOME APPLICABLE TO COMMON STOCK $ 775,607 $ 642,659 $2,434,979 $1,679,344 NET INCOME PER AVERAGE SHARE OF OUTSTANDING COMMON STOCK 1.25 1.04 3.91 2.73 CASH DIVIDENDS PAID PER SHARE 0.50 0.37 1.35 1.11 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 622,914 619,016 621,020 616,240 The accompanying notes to financial statements are an integral part of these statements. - 4 - WARWICK VALLEY TELEPHONE COMPANY STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Unaudited) 1996 1995 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 2,453,729 $ 1,698,094 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,613,654 1,533,758 Deferred income tax and investment tax credit (58) (15,617) Interest charged to construction (16,449) (29,897) CHANGE IN ASSETS AND LIABILITIES: (Increase) Decrease in accounts receivable 1,153,788 (274,034) (Increase) Decrease in materials and supplies (277,401) (142,450) Refundable income tax 0 42,034 (Increase) Decrease in prepaid expenses (312,262) (148,979) (Increase) Decrease in deferred charges (44,062) 32,222 Increase (Decrease) in accounts payable (1,058,135) (10,978) Increase (Decrease) in customers' deposits (8,868) (70,530) Increase (Decrease) in accrued expenses (229,424) 148,078 Increase (Decrease) in other liabilities 121,558 141,744 Net Cash provided by operating activities 3,396,070 2,903,445 CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (2,286,029) (1,730,323) Interest charged to construction 16,449 29,897 Change in unamortized debt issuance expense 10,385 (52,834) Change in other investment (278,258) (146,194) Net Cash used in investing activities (2,537,453) (1,899,454) CASH FLOW FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable 350,000 (350,000) Reduction of long term debt (342,500) (92,500) Dividends (858,257) (722,374) Purchase of treasury stock (50,000) 0 Sale of common stock 158,428 194,023 Net Cash used by financing activities (742,329) (970,851) Increase (Decrease) in cash and cash equivalents 116,288 33,140 Cash and cash equivalents at beginning of year 482,049 422,037 Cash and cash equivalents at end of the period $ 598,337 $ 455,177 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 finance statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial position as of September 30, 1996 and December 31, 1995, its income for the three-month and nine-month periods ended September 30, 1996 and 1995 and its cash flow for the nine-month periods ended September 30, 1996 and 1995. These financial statements should be read in conjunction with the financial statements and the note 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 for a full year. 2. Non-operating income and expenses for the three-month and nine-month periods ended September 30, 1996 and 1995 were as follows: Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Interest income $117 $129 $348 $385 Interest during construction 5,361 5,056 16,449 29,897 G/L disposition certain property (3,825) 4,938 55,217 15,848 Special charges (2,022) (2,524) (24,673) (24,812) Other non-operating income 176,400 78,150 483,900 149,250 Equity in earnings of affiliated companies 23,979 90,777 (75,332) 251,695 $200,010 $176,526 $455,909 $422,263 - 6 - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - Nine Months Ended September 30, 1996 - The Company's net income from all sources increased $755,635 (or 44.5%) to $2,453,729 for the nine-month period ended September 30, 1996, as compared to the same period in 1995. Operating revenues increased by $1,485,478 (or 14.9%) after provision for uncollectibles, to $11,446,752 for the nine-month period ended September 30, 1996 as compared to $9,961,274 for the corresponding period of 1995. The increase in operating revenues was caused mainly by increases in network access and toll revenues, which increased $1,167,297 (or 17.1%) in the aggregate during the period, as compared to the same nine months of 1995. Operating expenses increased by $315,384 (or 4.6%) to $7,182,592 for the nine-month period ended September 30, 1996 as compared to the same period in 1995. Increased costs included salaries and benefits (approximately $85,000), depreciation ($85,000), directory expenses ($47,000), computer costs ($26,000), toll studies ($22,000), legal fees ($21,000) and tariff filings ($19,000). Non-operating income and expenses increased by $33,646 from $422,263 in the nine-month period ended September 30, 1995 to $455,909 in the same period of 1996. An increase of $334,650 in cellular income from the Company's share of the Orange-Poughkeepsie Cellular Partnership and a loss of $267,533 in the Company's internet access subsidiary were the principal factors in the change. See Liquidity and Capital Resources below. Results of Operations - Three Months Ended September 30, 1996 - The Company's net income from all sources increased $132,948 (or 20.5%) to $781,857 for the three-month period ended September 30, 1996, as compared to $648,909 for the same period in 1995. Operating revenues increased by $279,325 (or 8.0%) after provision for uncollectibles, to $3,760,087 for the three-month period ended September 30, 1996 as compared to $3,489,762 for the corresponding period of 1995. The increase in operating revenues was caused mainly by increases in access and toll revenues over the 1995 period. Operating expenses increased by $103,562 (or 4.4%) to $2,448,567 for the three-month period ended September 30, 1996 as compared to the same period in 1995. Increases in costs of salaries, benefits, depreciation, directory expenses, computer costs and legal fees were the primary causes. Non-operating income and expenses increased by $23,484 from $176,526 in the three-month period ended September 30, 1996 to $200,010 in the same period of 1996, principally as a result of the factors listed above under Results of Operations - Nine Months Ended September 30,1996. See Liquidity and Capital Resources below. Liquidity and Capital Resources - The Company's working capital increased to $1,974,774 at September 30, 1996 from $1,586,637 at September 30, 1995. Increases in materials and supplies and prepaid expenses and reductions in accounts payable and advance billing and payments were partially offset by an increase in notes payable and a decrease in receivables. 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 $325,000 in WVMT since its operations began on April 1, 1989. WVMT has been marginally profitable since 1995. Liquidity and Capital Resources (Cont'd) 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 has been profitable since prior to the end of 1994. 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 began operations during the third quarter of 1996. A small number of the member companies have begun using the network while others including the Company will be connecting to it in the coming months. The connection to the NYSINET Network is not expected to have a material impact on the Company's profitability. 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 $1,200,000 in ONLINE since its inception, of which $730,000 was invested in the first nine months of 1996. These investments primarily reflect costs of installing network hub equipment outside the Company's service area and costs of promotion as expansion occurs into new areas. Management expects the current level of investments to be reduced significantly, resulting in ONLINE reaching a current positive cash flow before the end of 1996. The Telecommunications Act of 1996 (the Act), which recently became law, created 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. These proceedings will be affected by ruling of the Federal Communications Commission. The markets most likely to be affected first are the regional toll markets where competition in both states will be implemented during 1997. The competition is 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, but potentially larger in New Jersey where the Company retains toll revenue. 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. The Company anticipates that local competition, as permitted by the Act, will occur first in major cities where concentrations exist in the Company's service area. 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. 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 Herbert Gareiss, Jr., Vice President (Duly Authorized Officer) Date Philip S. Demarest, Vice President Secretary and Treasurer (Principal Financial and Chief Accounting Officer) EX-27 2
UT 9-MOS DEC-31-1995 SEP-30-1996 PER-BOOK 22,612,779 1,564,904 5,527,645 249,174 0 29,954,502 2,439,666 0 14,333,644 0 0 500,000 6,972,500 1,300,000 0 0 27,500 0 0 0 4,353,692 29,954,502 11,446,752 1,074,713 703,466 7,182,592 2,485,981 455,909 2,941,890 488,161 2,453,729 18,750 2,434,979 839,507 436,705 3,396,070 3.91 0
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