-----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, IA/gYqJk/VPoAek9yHpXolzmAWHh3PsuT92cRBg2jKcLXvGNtx2OgYSw4002GJRX TyO8dY6LGEi1sG8WP9T9Hg== 0000950110-97-001291.txt : 19970815 0000950110-97-001291.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950110-97-001291 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97663417 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 FORM 10-Q 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, 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 (IRS Employer incorporation or organization) 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) 986-8080 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: 631,256 common shares, no par value, outstanding at June 30, 1997. PART I - FINANCIAL INFORMATION Item 1. Financial Statements WARWICK VALLEY TELEPHONE COMPANY BALANCE SHEET June 30, December 31, 1997 1996 (Unaudited) (Audited) CURRENT ASSETS: Cash $ 771,968 $ 728,520 Telecommunications accounts receivable, 2,713,744 3,290,714 less accounts receivable allowance 1997-$64,452; 1996-$65,569; Other accounts receivable 335,900 0 Materials and supplies 1,729,423 1,451,858 Prepaid expenses 596,982 306,532 TOTAL CURRENT ASSETS 6,148,017 5,777,624 NON-CURRENT ASSETS Unamortized debt issuance expense 55,044 61,378 Other deferred charges 226,404 227,699 Investment in non-affiliated company 1,665,816 1,354,390 TOTAL NON-CURRENT ASSETS 1,947,264 1,643,467 TELEPHONE PLANT, AT COST: Land, buildings and equipment In service 35,940,716 34,578,033 Under construction 1,135,744 1,444,982 37,076,460 36,023,015 Less: Accumulated depreciation 14,212,851 13,200,526 TOTAL PLANT 22,863,609 22,822,489 TOTAL ASSETS $ 30,958,890 $ 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 June 30, December 31, STOCKHOLDERS' EQUITY AND LIABILITIES 1997 1996 (Unaudited) (Audited) CURRENT LIABILITIES: Accounts payable 1,267,761 1,600,944 Notes payable 500,000 850,000 Advance billing and payments 349,711 188,865 Customer deposits 168,063 153,143 Accrued taxes 106,679 275,241 Other accrued liabilities 684,300 655,498 TOTAL CURRENT LIABILITIES 3,076,514 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 226,927 252,427 Net non-current deferred operating income tax 2,376,729 2,313,224 Other deferred credits 153,338 243,690 TOTAL OTHER LIABILITIES & DEFERRED CREDITS 2,756,994 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 6/30/97 and 648,571 shares at 12/31/96 2,948,439 2,439,663 Retained earnings 15,502,143 14,596,085 18,950,582 17,535,748 Less: Treasury stock, at cost, 26,800 shares 825,200 825,200 TOTAL STOCKHOLDERS' EQUITY 18,125,382 16,710,548 TOTAL LIABILITIES $ 30,958,890 $ 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 STATEMENT OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 amd 1996 (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 Operating revenues: Local network service $ 915,203 $ 868,989 $1,877,328 $1,776,083 Network access and long distance network service 2,669,238 2,576,566 5,361,808 5,341,398 Miscellaneous 268,115 295,744 586,403 584,784 3,852,556 3,741,299 7,825,539 7,702,265 Less: Provisions for uncollectibles 8,700 7,800 17,400 15,600 Operating revenues 3,843,856 3,733,499 7,808,139 7,686,665 Operating expenses: Plant specific 553,643 541,623 1,089,479 1,161,897 Plant non-specific 724,919 675,036 1,436,556 1,345,260 Customer operations 822,821 708,052 1,602,376 1,401,865 Corporate operations 428,120 433,902 846,074 825,003 Operating expenses 2,529,503 2,358,613 4,974,485 4,734,025 Operating taxes: Federal income taxes 331,038 337,766 702,091 760,337 Operating other taxes 280,579 222,666 606,360 451,259 Operating taxes 611,617 560,432 1,308,451 1,211,596 Income from operations 702,736 814,454 1,525,203 1,741,044 Non-operating income & expenses - net (Note 2) 305,194 85,103 480,555 255,899 Income before fixed charges 1,007,930 899,557 2,005,758 1,996,943 Interest & related items: Interest on funded debt 138,375 146,255 276,750 293,111 Other interest deductions 10,564 (4,620) 20,739 6,923 Amortization of debt issuance expense 3,166 21,576 6,334 25,037 Total interest & related items 152,105 163,211 303,823 325,071 Net income all sources 855,825 736,346 1,701,935 1,671,872 PREFERRED DIVIDENDS 6,250 6,250 12,500 12,500 INCOME APPLICABLE TO COMMON STOCK $ 849,575 $ 730,096 $1,689,435 $1,659,372 NET INCOME PER AVERAGE SHARE OF OUTSTANDING COMMON STOCK 1.36 1.18 2.71 2.68 CASH DIVIDENDS PAID PER SHARE 0.65 0.45 1.25 0.85 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 626,514 621,188 624,142 620,073 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, 1997 AND 1996 (Unaudited) 1997 1996 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 1,701,935 $ 1,671,872 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,152,362 1,087,150 Deferred income tax and investment tax credit (52,347) (301) Interest charged to construction (24,610) (11,088) CHANGE IN ASSETS AND LIABILITIES: (Increase) Decrease in accounts receivable 241,070 905,648 (Increase) Decrease in materials and supplies (277,565) (484,288) (Increase) Decrease in prepaid expenses (290,450) (218,959) (Increase) Decrease in deferred charges 1,295 (29,252) Increase (Decrease) in accounts payable (333,183) (475,952) Increase (Decrease) in customers' deposits 14,920 (8,675) Increase (Decrease) in accrued expenses (7,715) (115,259) Increase (Decrease) in other liabilities 28,802 (31,871) Net Cash provided by operating activities 2,154,514 2,289,025 CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (1,193,481) (1,485,243) Interest charged to construction 24,610 11,088 Change in unamortized debt issuance expense 6,334 6,923 Change in other investment (311,426) (101,849) Net cash used in investing activities (1,473,963) (1,569,081) CASH FLOW FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable (350,000) (450,000) Reduction of long term debt 0 (55,000) Dividends (795,879) (540,621) Sale of common stock 508,776 191,087 Net cash used by financing activities (637,103) (854,534) Increase (Decrease) in cash and cash equivalents 43,448 (134,590) Cash and cash equivalents at beginning of year 728,520 482,049 Cash and cash equivalents at end of the period $ 771,968 $ 347,459 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 June 30, 1997 and December 31,1996, its income for the three-month and six-month periods ended June 30, 1997 and 1996 and its cash flow for the six-month periods ended June 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 six-month periods ended June 30, 1997 and 1996 were as follows: Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 Interest income $112 $115 $243 $232 Interest during construction 11,407 4,184 24,610 11,088 G/L disposition certain property 8,950 9,646 24,661 59,042 Special charges (1,592) (21,207) (13,680) (22,652) Other non-operating income 173,005 159,300 305,491 307,500 Equity in earnings of affiliated companies 113,312 (66,935) 139,230 (99,311) $305,194 $85,103 $480,555 $255,899 - 6 - WARWICK VALLEY TELEPHONE COMPANY Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - Six Months Ended June 30, 1997 - The Company's net income from all sources increased $30,063 (or 1.8%) to $1,701,935 for the six-month period ended June 30, 1997, as compared to the same period in 1996. Operating revenues increased by $121,474 (or 1.6%) after provision for uncollectibles, to $7,808,139 for the six-month period ended June 30, 1997 as compared to $7,686,665 for the corresponding period of 1996. The increase in operating revenues was caused mainly by an increase in local network service revenues of $101,245 or (5.7%) during the period, as compared to the same six months of 1996. Operating expenses increased by $240,460 (or 5.1%) to $4,974,485 for the six-month period ended June 30, 1997 as compared to the same period in 1996. Increased costs of salaries and benefits (approximately $225,000) and depreciation ($84,000) were offset by decreases in costs for returned and repaired items ($24,000), toll study costs ($22,000), and tariff filing costs ($10,000). Net non-operating income and expenses increased by $224,656 from $255,899 in the six-month period ended June 30, 1996 to $480,555 in the same period of 1997. An improvement of $216,000 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 $214,651 during the 1996 period but achieved a profit of $1,333 during the 1997 period. See Liquidity and Capital Resources below. RESULTS OF OPERATIONS - Three Months Ended June 30, 1997 - The Company's net income from all sources increased $119,479 (or 1.6%) to $855,825 for the three-month period ended June 30, 1997, as compared to $736,346 for the same period in 1996. Operating revenues increased by $110,357 (or 3.0%) after provision for uncollectibles, to $3,843,856 for the three-month period ended June 30, 1997 as compared to $3,733,499 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 increased by $170,890 (or 7.2%) to $2,529,503 for the three-month period ended June 30, 1997 as compared to the same period in 1996. Increased costs of salaries and benefits ($77,000) and depreciation ($41,000) were largely responsible for the increase. Non-operating income and expenses increased by $220,091 from $85,103 in the three-month period ended June 30, 1996 to $305,194 in the same period of 1997, largely as a result of the Online increase referred to above under Results of Operations - Six Months Ended June 30, 1997. See Liquidity and Capital Resources below. LIQUIDITY AND CAPITAL RESOURCES - The Company's working capital increased to $3,071,503 at June 30, 1997 from $2,055,008 at June 30, 1996. An increase in cash and a reduction in accounts payable were the main factors contributing to this increase. 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. -7- LIQUIDITY AND CAPITAL RESOURCES (Cont'd) 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 $310,000 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 $121,000 during the first six months of 1997, compared to $116,000 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 $1,660,000 in Online since its inception, of which $300,000 was invested in the first six months of 1997. Online has reached break-even and should be profitable on a cash-flow basis in 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. 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 /s/ HERBERT GAREISS, JR. Date: August __, 1997 ------------------------------------ Herbert Gareiss, Jr., Vice President (Duly Authorized Officer) /s/ PHILIP S. DEMAREST Date: August __, 1997 ------------------------------------ Philip S. Demarest, Vice President Secretary and Treasurer (Principal Financial and Chief Accounting Officer) -9- EX-27 2 FDS --
UT 6-MOS DEC-31-1997 JUN-30-1997 PER-BOOK 22,863,609 1,665,816 6,148,017 281,448 0 30,958,890 2,948,439 0 15,502,143 18,950,582 0 500,000 7,000,000 500,000 0 0 0 0 0 0 4,508,308 30,958,890 7,808,139 702,091 606,360 4,974,485 1,525,203 480,555 2,005,758 303,823 1,701,935 12,500 1,689,435 783,379 276,750 2,154,514 2.71 0
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