-----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, ALn9SCcWQ2IpShJTXMfSDIOXvutwgsC8HSBUon5qkEOR7lhcN7iPlK7zH0qxZqFG lVXHZt+wc6OxSShwIS6JNA== 0000104777-96-000008.txt : 19960812 0000104777-96-000008.hdr.sgml : 19960812 ACCESSION NUMBER: 0000104777-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 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: 96607276 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 June 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: 623,419 common shares, no par value, outstanding at June 30, 1996. I - FINANCIAL INFORMATION Item 1. Financial Statements WARWICK VALLEY TELEPHONE COMPANY BALANCE SHEET June 30, December 31, 1996 1995 (Unaudited) (Audited) CURRENT ASSETS: Cash $ 347,459 $ 482,049 Telecommunications accounts receivable, 2,702,032 2,694,390 less accounts receivable allowance 1996-$66,689; 1995-$68,013 Other accounts receivable 52,310 965,600 Materials and supplies 2,000,646 1,516,358 Prepaid expenses 536,044 317,085 TOTAL CURRENT ASSETS 5,638,491 5,975,482 NON-CURRENT ASSETS Unamortized debt issuance expense 68,247 75,170 Other deferred charges 169,579 140,327 Investment in non-affiliated company 1,388,495 1,286,646 TOTAL NON-CURRENT ASSETS 1,626,321 1,502,143 TELEPHONE PLANT, AT COST: Land, buildings and equipment In service 33,367,800 32,131,186 Under construction 1,172,425 1,032,206 34,540,225 33,163,392 Less: Accumulated depreciation 12,201,730 11,222,994 TOTAL PLANT 22,338,495 21,940,398 TOTAL ASSETS $ 29,603,307 $ 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 June 30, December 31, STOCKHOLDERS' EQUITY AND LIABILITIES 1996 1995 (Unaudited) (Audited) CURRENT LIABILITIES: Current maturities of long-term debt $ 315,000 $ 370,000 Accounts payable 1,883,389 2,359,341 Notes payable 500,000 950,000 Advance billing and payments (26,710) 206,986 Customer deposits 165,042 173,717 Accrued taxes 226,845 108,409 Other accrued liabilities 519,917 551,788 TOTAL CURRENT LIABILITIES 3,583,483 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 277,927 303,427 Unamortized non-operating investment tax credit - net 9,090 9,090 Net non-current deferred operating income tax 2,419,475 2,250,073 Other deferred credits 246,786 390,989 TOTAL OTHER LIABILITIES & DEFERRED CREDITS 2,953,278 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:649,219 shares At 6/30/96 and 644,757 shares at 12/31/95 2,472,325 2,281,238 Retained earnings 13,869,421 12,738,174 16,841,746 15,519,412 Less: Treasury stock 25,800 shares at cost 775,200 775,200 TOTAL STOCKHOLDERS' EQUITY 16,066,546 14,744,212 TOTAL LIABILITIES $ 29,603,307 $ 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 SIX MONTHS ENDED JUNE 30, 1996 and 1995 (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Operating revenues: Local network service $ 868,989 $ 763,504 $1,776,083 $1,565,464 Network access and long distance network service 2,576,566 2,223,147 5,341,398 4,425,176 Miscellaneous 295,744 227,022 584,784 504,272 3,741,299 3,213,673 7,702,265 6,494,912 Less: Provisions for uncollectibles 7,800 7,200 15,600 14,400 Operating revenues 3,733,499 3,206,473 7,686,665 6,480,512 Operating expenses: Plant specific 541,623 415,911 1,161,897 978,100 Plant non-specific 675,036 658,262 1,345,260 1,315,499 Customer operations 708,052 703,048 1,401,865 1,371,495 Corporate operations 433,902 439,849 825,003 857,109 Operating expenses 2,358,613 2,217,070 4,734,025 4,522,203 Operating taxes: Federal income taxes 337,766 158,346 760,337 323,247 Operating other taxes 222,666 261,074 451,259 519,809 Operating taxes 560,432 419,420 1,211,596 843,056 Income from operations 814,454 569,983 1,741,044 1,115,253 Non-operating income & expense - net (Note 2) 85,103 118,278 255,899 245,737 Income before fixed charges 899,557 688,261 1,996,943 1,360,990 Interest & related items: Interest on funded debt 146,255 148,898 293,111 298,081 Other interest deductions (4,620) (844) 6,923 1,297 Amortization of debt issuance expense 21,576 21,977 25,037 12,427 Total interest & related items 163,211 170,031 325,071 311,805 Net income all sources 736,346 518,230 1,671,872 1,049,185 PREFERRED DIVIDENDS 6,250 6,250 12,500 12,500 INCOME APPLICABLE TO COMMON STOCK $ 730,096 $ 511,980 $1,659,372 $1,036,685 NET INCOME PER AVERAGE SHARE OF OUTSTANDING COMMON STOCK 1.18 0.83 2.66 1.69 CASH DIVIDENDS PAID PER SHARE 0.45 0.37 0.85 0.74 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 621,188 616,240 620,073 614,851 The accompanying notes to financial statements are an integral part of these statements. - 4 - WARWICK VALLEY TELEPHONE COMPANY STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited) 1996 1995 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 1,671,872 $ 1,049,185 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,087,150 1,023,334 Deferred income tax and investment tax credit (301) 257,956 Interest charged to construction (11,088) (24,841) CHANGE IN ASSETS AND LIABILITIES: (Increase) Decrease in accounts receivable 905,648 52,986 (Increase) Decrease in materials and supplies (484,288) (118,538) Refundable income tax 0 42,034 (Increase) Decrease in prepaid expenses (218,959) (268,356) (Increase) Decrease in deferred charges (29,252) 41,057 Increase (Decrease) in accounts payable (475,952) (191,896) Increase (Decrease) in customers' deposits (8,675) (77,906) Increase (Decrease) in accrued expenses (115,259) 111,891 Increase (Decrease) in other liabilities (31,871) (286,193) Net Cash provided by operating activities 2,289,025 1,610,713 CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (1,485,243) (1,123,224) Interest charged to construction 11,088 24,841 Change in unamortized debt issuance expense 6,923 (52,835) Change in other investment (101,849) (68,045) Net Cash used in investing activities (1,569,081) (1,219,263) CASH FLOW FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable (450,000) 50,000 Reduction of long term debt (55,000) (55,000) Dividends (540,621) (468,517) Sale of common stock 191,087 194,023 Net Cash used by financing activities (854,534) (279,494) Increase (Decrease) in cash and cash equivalents (134,590) 111,956 Cash and cash equivalents at beginning of year 482,049 422,037 Cash and cash equivalents at end of the $ 347,459 $ 533,993 period 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 June 30, 1996 and December 31, 1995, Its income for the three-month and six-month periods ended June 30, 1996 and 1995 and its cash flow for the six-month periods ended June 30, 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 and six-month periods ended June 30, 1996 and 1995 were as follows: Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Interest income $ 115 $ 135 $ 232 $ 256 Interest during construction 4,184 9,927 11,088 24,841 G/L disposition certain property 9,646 (2,598) 59,042 10,910 Special charges (21,207) (21,579) (22,652) (22,288) Other non-operating income 159,300 54,200 307,500 71,100 Equity in earnings of affiliated company (66,935) 78,193 (99,311) 160,918 $ 85,103 $118,278 $255,899 $245,737 - 6 - WARWICK VALLEY TELEPHONE COMPANY ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 - The Company's net income from all sources increased $622,687 (or 59.3%) to $1,671,872 for the six-month period ended June 30, 1996, as compared to the same period in 1995. Operating revenues increased by $1,206,153 (or 18.6%) after provision for uncollectibles, to $7,686,665 for the six-month period ended June 30, 1996 as compared to $6,480,512 for the corresponding period of 1995. The increase on operating revenues was caused mainly by increases in network access and toll revenues, which increased $916,222 (or 20.7%) in the aggregate during the period, as compared to the same six months of 1995. Operating expenses increased by $211,822 (or 4.7%) to $4,734,025 for the six-month period ended June 30, 1996 as compared to the same period in 1995. Increased costs of salaries and benefits (approximately $309,000) and depreciation ($51,000) were offset by decreases in costs for education ($14,000), pole rentals ($14,000), insurance ($29,000), stationery and printing ($9,000) and directory assistance ($8,000). Non-operating income and expenses increased by $10,162 from $245,737 in the six-month period ended June 30, 1995 to $255,899 in the same period of 1996. An increase of $236,400 in cellular income from the Company's share of the Orange-Poughkeepsie Cellular Partnership and a loss of $214,651 of the Company's recently started internet access subsidiary were the principal factors in the change. See Liquidity and Capital Resources below. RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 - The Company's net income from all sources increased $218,116 (or 42.1%) to $736,346 for the three-month period ended June 30, 1996, as compared to $518,230 for the same period in 1995. Operating revenues increased by $527,026 (or 16.4%) after provision for uncollectibles, to $3,733,499 for the three-month period ended June 30, 1996 as compared to $3,206,473 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 $141,543 (or 6.4%) to $2,358,613 for the three-month period ended June 30, 1996 as compared to the same period in 1995. Increased costs of salaries, benefits and depreciation were offset as noted in Results of Operations - Six Months Ended June 30, 1996. Non-operating income and expenses decreased by $33,175 from $118,278 in the three-month period ended June 30, 1995 to $85,103 in the same period of 1996, principally as a result of the factors listed agove under Results of Operations - Six Months Ended June 30, 1996. See Liquidity and Capital Resources below. LIQUIDITY AND CAPITAL RESOURCES - The Company's working capital increased to $2,055,008 at June 30, 1996 from $1,686,316 at June 30, 1995. Increases in materials and supplies and accounts receivable and a reduction in notes payable were partially offset by an increase in accounts payable. 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 $337,000 in WVMT since its operations began on April 1, 1989. -7- 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. 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 third 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 $929,000 in ONLINE since its inception, of which $450,000 has been invested in the first six 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 is unable to determine at this time when ONLINE will become profitable. 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. These proceedings will be affected by rulings of the Federal Communications Commission. 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 during 1997. The Company anticipates that local competition, as permitted by the Act, will occur first in major cities where concentrations of high usage customers are located. No such high usage 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. -8- 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 August 9, 1996 Herbert Gareiss, Jr., Vice President (Duly Authorized Officer) DATE August 9, 1996 Philip S. Demarest, Vice President Secretary and Treasurer (Principal Financial and Chief Accounting Officer) EX-27 2
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