-----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, QHKuH973jSluQUE7xmSh9cbL+t6rH0uaRobZvR4kRvehsxsdBaiIDlVebazOFp+t ygr5mODeiyo1x7EAf6XtbQ== 0000104777-97-000004.txt : 19970515 0000104777-97-000004.hdr.sgml : 19970515 ACCESSION NUMBER: 0000104777-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97604966 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, 1997 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 March 31, 1997. PART I - FINANCIAL INFORMATION Item 1. Financial Statements WARWICK VALLEY TELEPHONE COMPANY BALANCE SHEET March 31, December 31, 1997 1996 (Unaudited) (Audited) CURRENT ASSETS: Cash $ 860,403 $ 728,520 Telecommunications accounts receivable, 2,546,889 3,290,714 less receivable allowance 1997-$68,619; 1996-$65,569; Other accounts receivable 231,570 0 Materials and supplies 1,755,159 1,451,858 Prepaid expenses 651,157 306,532 TOTAL CURRENT ASSETS 6,045,178 5,777,624 NON-CURRENT ASSETS Unamortized debt issuance expense 58,211 61,378 Other deferred charges 214,008 227,699 Investment in non-affiliated company 1,492,811 1,354,390 TOTAL NON-CURRENT ASSETS 1,765,030 1,643,467 TELEPHONE PLANT, AT COST: Land, buildings and equipment In service 35,266,517 34,578,033 Under construction 1,404,215 1,444,982 36,670,732 36,023,015 Less: Accumulated depreciation 13,792,283 13,200,526 TOTAL PLANT 22,878,449 22,822,489 TOTAL ASSETS $ 30,688,657 $ 30,243,580 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 1997 1996 (Unaudited) (Audited) CURRENT LIABILITIES: Accounts payable 1,741,477 1,600,944 Notes payable 600,000 850,000 Advance billing and payments 53,421 188,865 Customer deposits 160,211 153,143 Accrued taxes 425,920 275,241 Other accrued liabilities 746,273 655,498 TOTAL CURRENT LIABILITIES 3,727,302 3,723,691 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 239,677 252,427 Net non-current deferred operating income tax 2,379,827 2,313,224 Other deferred credits 164,505 243,690 TOTAL OTHER LIABILITIES & DEFERRED CREDITS 2,784,009 2,809,341 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 3/31/97 and 648,571 shares at 12/31/96 2,439,663 2,439,663 Retained earnings 15,062,883 14,596,085 18,002,546 17,535,748 Less: Treasury stock, at cost, 26,800 and 26,800 shares 825,200 825,200 TOTAL STOCKHOLDERS' EQUITY 17,177,346 16,710,548 TOTAL LIABILITIES $ 30,688,657 $ 30,243,580 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, 1997 1996 Operating Revenues: Local network service $ 962,125 $ 907,094 Network access and long distance network service 2,692,570 2,764,832 Miscellaneous 318,288 289,040 3,972,983 3,960,966 Less: Provisions for uncollectibles 8,700 7,800 Operating revenues 3,964,283 3,953,166 Operating Expenses: Plant specific 535,836 620,274 Plant non-specific 711,637 670,224 Customer operating expense 779,555 693,813 Corporate operations 417,954 391,101 Operating expenses 2,444,982 2,375,412 Operating Taxes: Federal income taxes 371,053 422,571 Other operating taxes 325,781 228,593 Operating taxes 696,834 651,164 Income from Operations 822,467 926,590 Non-Operating Income & Expenses,Net (Note 2) 175,361 170,796 Income before fixed charges 997,828 1,097,386 Interest & Related Items: Interest on funded debt 138,375 146,856 Other interest deductions 10,176 11,543 Amortization of debt issuance expense 3,167 3,461 Total interest & related items 151,718 161,860 Net income all sources 846,110 935,526 PREFERRED DIVIDENDS 6,250 6,250 INCOME APPLICABLE TO COMMON STOCK $ 839,860 $ 929,276 NET INCOME PER AVERAGE SHARE OF OUTSTANDING COMMON STOCK $ 1.35 $ 1.50 CASH DIVIDENDS PAID PER SHARE $ 0.40 $ 0.40 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 621,771 618,957 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, 1997 AND 1996 (Unaudited) 1997 1996 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 846,110 $ 935,526 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 581,483 531,931 Deferred income tax and investment tax credit (25,332) (276) Interest charged to construction (13,203) (6,904) CHANGE IN ASSETS AND LIABILITIES: (Increase) Decrease in accounts receivable 512,255 930,263 (Increase) Decrease in materials and supplies (303,301) (113,296) (Increase) Decrease in prepaid expenses (344,625) (225,429) (Increase) Decrease in deferred charges 13,691 (8,650) Increase (Decrease) in accounts payable 140,533 (329,248) Increase (Decrease) in customers' deposits 7,068 (428) Increase (Decrease) in accrued expenses 15,236 142,026 Increase (Decrease) in other liabilities 90,775 41,304 Net Cash provided by operating activities 1,520,690 1,896,819 CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (637,443) (679,240) Interest charged to construction 13,203 6,904 Change in unamortized debt issuance expense 3,167 3,462 Change in other investment (138,421) 61,451 Net Cash used in investing activities (759,494) (607,423) CASH FLOW FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable (250,000) (950,000) Reduction of long term debt 0 (27,500) Dividends (379,313) (253,833) Net Cash used by financing activities (629,313) (1,231,333) Increase (Decrease) in cash and cash equivalents 131,883 58,063 Cash and cash equivalents at beginning of year 728,520 482,049 Cash and cash equivalents at end of the period $ 860,403 $ 540,112 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, 1997 and December 31, 1996, its income for the three-month periods ended March 31, 1997 and 1996 and its cash flow for the three-month periods ended March 31, 1997 and 1996. 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, 1996. 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, 1997 and 1996 were as follows: Three Months Ended March 31, 1997 1996 Interest income $ 131 $ 117 Interest during construction 13,203 6,904 G/L disposition certain property 15,711 49,396 Special charges (12,088) (1,445) Other non-operating income 132,486 148,200 Equity in earnings of affiliated company 25,918 (32,376) $175,361 $170,796 - 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, 1997 - The Company's net income from all sources decreased $89,416 (or 9.56%) to $846,110 for the three-month period ended March 31, 1997, as compared to the same period in 1996. Operating revenues increased by $11,117 (or 0.3%) after provision for uncollectibles, to $3,964,283 for the three-month period ended March 31, 1997 as compared to $3,953,166 for the corresponding period of 1996. The change in operating revenues was primarily the result of a reduction in network access and long distance revenues, which decreased $72,262 (or 2.6%), largely because several winter storms took place during the 1996 period generating heavy state and interstate volumes. This was offset by increases of $55,031 (or 6.1%)in local network service and $29,248 (or 10.1%) in miscellaneous revenues. Operating expenses increased by $69,570 (or 2.9%) to $2,444,982 for the three- month period ended March 31, 1997 as compared to the same period in 1996. Increased depreciation ($42,837) and payroll and benefits ($100,915), were offset by reductions in returned and repaired items ($16,847), Labor other than company ($5,459), travel and business related expenses ($10,862), and cost studies ($13,017). Non-operating income and expenses increased by $4,565 from $170,796 in the three-month period ended March 31, 1996 to $175,361 in the same period of 1997 largely as a result of improved earnings in the Company's Cellular and Online subsidiaries offset by reduced earnings in the sale of business communications equipment. (See Liquidity and Capital Resources). LIQUIDITY AND CAPITAL RESOURCES - The Company's working capital increased to $2,317,876 at March 31, 1997 from $1,845,613 at March 31, 1996. An increase in cash and a reduction in current maturities of long term debt and accounts payable were partially offset by an increase in notes payable. The Company issued 8,694 shares of its common stock on April 1, 1997 to employees participating in its retirement savings plans at a price of $53.64 per share, realizing $466,346.16. 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 1998 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 $308,000 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. 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 connections to member companies in late 1996 and is expected to be in full operation before the end of 1997. 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 $1,500,000 in ONLINE since its inception, of which $140,000 was invested in the first quarter of 1997. ONLINE is very close to break-even and is likely to be profitable on a cash-flow basis during 1997. The Telecommunications Act of 1996 (the Act), 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 affected first have been the regional toll areas in both states where competitive service has begun in 1997. 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 previously was the main revenue source. 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. 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 1997 Annual Meeting of Common Shareholders held on April 25, 1997, Howard Conklin, Jr., Victor J. Marotta and Henry L. Nielsen, Jr. were elected as directors for three-year terms. The terms of Earl V. Barry, Wisner H. Buckbee, Joseph E. DeLuca, Philip S. Demarest, Fred M. Knipp, and Corinna S. Lewis 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 398,455 0 9,121 97,166 at nine until the next annual meeting Broker For Against Abstain Non-Votes 2. Election of directors - Howard Conklin, Jr. 405,572 0 2,004 97,166 Victor J. Marotta 395,851 9,721 2,004 97,166 Henry L. Nielsen, Jr. 404,372 1,200 2,004 97,166 3. Approval of Amendment to the Certificate of Incorporation increasing the number of authorized common shares from 720,000 to 2,160,000 to allow a 3-for-1 stock split. Broker For Against Abstain Non-Votes 405,841 0 1,735 97,166 Broker For Against Abstain Non-Votes 4. Ratify the appointment of 398,492 0 9,084 97,166 Bush and Germain as the independent public account- ants of the Company ITEM 5. Other Information At its reorganizational meeting on April 25, 1997, 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 Barbara Barber - Assistant Secretary Robert A. Sieczek - Assistant Treasurer ITEM 6. Exhibits and Reports on Form 8-K a) Exhibits - Not applicable b) Reports on Form 8-K - Not applicable 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 3-MOS DEC-31-1996 MAR-31-1997 PER-BOOK 22,878,449 1,492,811 6,045,178 272,219 0 30,688,657 2,439,663 0 15,062,883 17,502,546 0 500,000 7,000,000 600,000 0 0 0 0 0 0 5,086,111 30,688,657 3,964,283 371,053 325,781 2,444,982 822,467 175,361 997,828 151,718 846,110 6,250 839,860 373,063 138,375 2,271,634 1.35 0
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