-----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, U8aWtv0rvo+A/VHJ3C6Vwy+kqgOjNujtAPie3yWmflQS03Hb7hWTFGpIMwvCoiCK h0ZEXdxPmStyBXS6HYhUQw== 0000104777-97-000008.txt : 19971117 0000104777-97-000008.hdr.sgml : 19971117 ACCESSION NUMBER: 0000104777-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-11174 FILM NUMBER: 97719034 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, 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: 600,272 common shares, no par value, outstanding at September 30, 1997. PART I - FINANCIAL INFORMATION Item 1. Financial Statements WARWICK VALLEY TELEPHONE COMPANY BALANCE SHEET September 30, December 31, 1997 1996 (Unaudited) (Audited) CURRENT ASSETS: Cash $ 633,889 $ 728,520 Telecommunications accounts receivable, 2,705,999 3,290,714 less accounts receivable allowance 1997-$62,504; 1996-$65,569; Other accounts receivable 316,836 0 Materials and supplies 1,896,116 1,451,858 Prepaid expenses 723,232 306,532 TOTAL CURRENT ASSETS 6,276,072 5,777,624 NON-CURRENT ASSETS Unamortized debt issuance expense 51,877 61,378 Other deferred charges 180,056 227,699 Investment in non-affiliated company 1,843,480 1,354,390 TOTAL NON-CURRENT ASSETS 2,075,413 1,643,467 TELEPHONE PLANT, AT COST: Land, buildings and equipment In service 36,177,684 34,578,033 Under construction 1,413,288 1,444,982 37,590,972 36,023,015 Less: Accumulated depreciation 14,837,537 13,200,526 TOTAL PLANT 22,753,435 22,822,489 TOTAL ASSETS $ 31,104,920 $ 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 September 30, December 31, STOCKHOLDERS' EQUITY AND LIABILITIES 1997 1996 (Unaudited) (Audited) CURRENT LIABILITIES: Accounts payable 1,201,931 1,600,944 Notes payable 1,900,000 850,000 Advance billing and payments 254,335 188,865 Customer deposits 173,489 153,143 Accrued taxes 288,043 275,241 Other accrued liabilities 728,987 655,498 TOTAL CURRENT LIABILITIES 4,546,785 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 214,177 252,427 Net non-current deferred operating income tax 2,372,857 2,313,224 Other deferred credits 142,007 243,690 TOTAL OTHER LIABILITIES & DEFERRED CREDITS 2,729,041 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: 658,056 shares at 9/30/97 and 648,571 shares at 12/31/96 2,948,439 2,439,663 Retained earnings 16,160,945 14,596,085 19,609,384 17,535,748 Less: Treasury stock, at cost, 57,784 shares at 9/30/97 and 26,800 shares at 12/31/96 2,780,290 825,200 TOTAL STOCKHOLDERS' EQUITY 16,829,094 16,710,548 TOTAL LIABILITIES $ 31,104,920 $ 30,243,580 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, 1997 AND 1996 (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Operating revenues: Local network service $ 964,337 $ 868,851 $ 2,841,665 $ 2,644,934 Network access and long distance network service 2,823,929 2,642,329 8,185,737 7,983,728 Miscellaneous 334,940 256,707 921,343 841,490 4,123,206 3,767,887 11,948,745 11,470,152 Less: Provisions for uncollectibles 8,700 7,800 26,100 23,400 Operating revenues 4,114,506 3,760,087 11,922,645 11,446,752 Operating expenses: Plant specific 509,299 552,073 1,598,778 1,713,970 Plant non-specific 728,658 698,712 2,165,214 2,043,972 Customer operations 747,563 778,697 2,349,939 2,180,562 Corporate operations 405,945 419,085 1,252,019 1,244,088 Operating expenses 2,391,465 2,448,567 7,365,950 7,182,592 Operating taxes: Federal income taxes 459,928 314,376 1,162,019 1,074,713 Operating other taxes 288,673 252,207 895,033 703,466 Operating taxes 748,601 566,583 2,057,052 1,778,179 Income from operations 974,440 744,937 2,499,643 2,485,981 Non-operating income & expenses - net (Note 2) 310,194 200,010 790,749 455,909 Income before fixed charges 1,284,634 944,947 3,290,392 2,941,890 Interest & related items: Interest on funded debt 138,375 143,595 415,125 436,705 Other interest deductions 9,826 16,034 30,564 41,071 Amortization of debt issuance expense 3,166 3,461 9,501 10,385 Total interest & related items 151,367 163,090 455,190 488,161 Net income all sources 1,133,267 781,857 2,835,202 2,453,729 PREFERRED DIVIDENDS 6,250 6,250 18,750 18,750 INCOME APPLICABLE TO COMMON STOCK $ 1,127,017 $ 775,607 $ 2,816,452 $2,434,979 NET INCOME PER AVERAGE SHARE OF OUTSTANDING COMMON STOCK 1.80 1.25 4.51 3.91 CASH DIVIDENDS PAID PER SHARE 0.78 0.50 2.03 1.35 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 626,092 622,914 624,792 621,020 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, 1997 AND 1996 (Unaudited) 1997 1996 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 2,835,202 $ 2,453,729 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,736,195 1,613,654 Deferred income tax and investment tax credit (80,300) (58) Interest charged to construction (37,270) (16,449) CHANGE IN ASSETS AND LIABILITIES: (Increase) Decrease in accounts receivable 267,879 1,153,788 (Increase) Decrease in materials and supplies (444,258) (277,401) (Increase) Decrease in prepaid expenses (416,700) (312,262) (Increase) Decrease in deferred charges 47,643 (44,062) Increase (Decrease) in accounts payable (399,013) (1,058,135) Increase (Decrease) in customers' deposits 20,346 (8,868) Increase (Decrease) in accrued expenses 78,273 (229,424) Increase (Decrease) in other liabilities 73,489 121,558 Net Cash provided by operating activities 3,681,486 3,396,070 CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (1,667,143) (2,286,029) Interest charged to construction 37,270 16,449 Change in unamortized debt issuance expense 9,501 10,385 Change in other investment (489,090) (278,258) Net cash used in investing activities (2,109,462) (2,537,453) CASH FLOW FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable 1,050,000 350,000 Reduction of long term debt 0 (342,500) Dividends (1,270,341) (858,257) Purchase of treasury stock (1,955,090) (50,000) Sale of common stock 508,776 158,428 Net Cash used by financing activities (1,666,655) (742,329) Increase (Decrease) in cash and cash equivalents (94,631) 116,288 Cash and cash equivalents at beginning of year 728,520 482,049 Cash and cash equivalents at end of the period $ 633,889 $ 598,337 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 financialstatements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial position as of September 30, 1997 and December 31, 1996, its income for the three-month and nine-month periods ended September 30, 1997 and 1996 and its cash flow for the nine-month periods ended September 30, 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 and nine-month periods ended September 30, 1997 and 1996 were as follows: Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Interest income $ 116 $ 117 $ 359 $ 348 Interest during construction 12,660 5,361 37,270 16,449 G/L disposition certain property (15,856) (3,825) 8,805 55,217 Special charges (1,895) (2,022) (15,575) (24,673) Other non-operating income 174,616 176,400 480,107 483,900 Equity in earnings of affiliated companies 140,553 23,979 279,783 (75,332) $310,194 $200,010 $790,749 $455,909 - 6 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 - The Company's net income from all sources increased $381,473 (or 15.5%) to $2,835,202 for the nine-month period ended September 30, 1997, as compared to the same period in 1996. Operating revenues increased by $475,893 (or 4.2%) after provision for uncollectibles, to $11,922,645 for the nine-month period ended September 30, 1997 as compared to $11,446,752 for the corresponding period of 1996. The increase in operating revenues was caused mainly by increases in local network service revenues of $196,731 (or 7.4%) and network access and long distance revenue of $202,009 (or 2.5%) during the period, as compared to the same nine months of 1996. Operating expenses increased by $183,358 (or 2.6%) to $7,365,950 for the nine-month period ended September 30, 1997 as compared to the same period in 1996. Increased costs of salaries and benefits (approximately $175,000) and depreciation ($123,000) were offset by decreases in costs for returned and repaired items ($18,000), toll study ($25,000), and tariff filing ($12,000). Net non-operating income and expenses increased by $334,840 from $455,909 in the nine-month period ended September 30, 1996 to $790,749 in the same period of 1997. An improvement of $328,000 in net income of Hometown Online, Inc.(Online), the Company's subsidiary which provides personal computer users connectivity to the Internet, was the principal factor in the change. Online experienced a loss of $267,533 during the 1996 period but achieved a profit of $60,904 during the 1997 period. See Liquidity and Capital Resources below. RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 - The Company's net income from all sources increased $351,410 (or 44.9%) to $1,133,267 for the three-month period ended September 30, 1997, as compared to $781,857 for the same period in 1996. Operating revenues increased by $354,419 (or 9.4%) after provision for uncollectibles, to $4,114,506 for the three-month period ended September 30, 1997 as compared to $3,760,087 for the corresponding period of 1996. The increase in operating revenues was caused mainly by increases in access and toll revenues over the 1996 period. Operating expenses decreased by $57,102 (or 2.3%) to $2,391,465 for the three-month period ended September 30, 1997 as compared to the same period in 1996, primarily because of decreased costs for salaries and benefits ($49,000). Non-operating income and expenses increased by $110,184 or (55.0%) from 200,010 in the three-month period ended September 30, 1996 to $310,194 in the same period of 1997, largely as a result of the Online increase referred to above under Results of Operations - Nine Months Ended September 30, 1997. See Liquidity and Capital Resources below. LIQUIDITY AND CAPITAL RESOURCES - The Company's working capital decreased to $1,729,287 at September 30, 1997 from $1,974,774 at September 30, 1996. An increase in notes payable and an offsetting increase in accounts receivable were the main factors contributing to this decrease. During September 1997, the Company purchased 30,984 shares of its common stock from three shareholders for the treasury. No additional purchases are planned at this time. The three-for-one stock split approved by the shareholders at the 1997 Annual Meeting has received all necessary regulatory approvals and will occur during November, 1997. LIQUIDITY AND CAPITAL RESOURCES(Cont'd) 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 $290,000 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 and has been profitable since then, earning approximately $185,000 during the first nine months of 1997, compared to $180,000 for the corresponding 1996 period. 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. Hometown Online, Inc. (Online), referred to above, 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 $1,300,000 in Online since its inception. Online has been profitable since mid 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 began 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 in New Jersey will be felt both in market share retained by the Company and the level of its toll rates required in order to remain competitive. Early results indicate that market share losses have been moderate, although it is too soon to predict the long term impact. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable PART II - OTHER INFORMATION ITEMS 1. (Legal Proceedings), 2 (Changes in Securities), 3 (Defaults Upon Senior Securities), 4 (Submission of Matters to a Vote of Security Holders), 5 (Other Information), and 6 (Exhibits and Reports on Form 8-K) are inapplicable. SIGNATURES Pursuant to the requirements of the Securitites 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 TELEHONE COMPANY Registrant /s/ FRED M. KNIPP Date: November 10, 1997 Fred M. Knipp (President) (Duly authorized officer) /s/PHILIP S. DEMAREST Date: November 10, 1997 Philip S. Demarest(Vice President) Secretary and Treasurer (Principal Financial and Chief Accounting Officer) EX-27 2
UT 9-MOS DEC-31-1996 SEP-30-1997 PER-BOOK 22,753,435 1,843,480 6,276,072 231,933 0 31,104,920 2,948,439 0 16,160,945 19,109,384 0 500,000 7,000,000 1,900,000 0 0 0 0 0 0 2,595,536 31,104,920 11,922,645 1,162,019 895,033 7,365,950 2,499,643 790,749 3,290,392 455,190 2,835,202 18,750 2,816,452 1,251,591 415,125 3,681,486 4.51 0
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