EX-13 2 l87344aex13.txt EXHIBIT 13 1 Exhibit 13 TABLE OF CONTENTS Highlights 1 President's Summary 2 Message from the Chairman 5 Management's Discussion 6 Consolidated Balance Sheet 8 Consolidated Statement Of Income 9 Consolidated Statement of Stockholders' Equity 10 Consolidated Statement of Cash Flows 11 Notes to Financial Statements 12 Report of Independent Certified Public Accountants 22 Concerning the Company's Common Stock 23 Board of Directors and Officers 24 Performance Highlights 25 (WVT Logo) 12 2 HIGHLIGHTS
2000 1999 Total Revenues $26,691,398 $23,185,929 Net Income $ 7,017,499 $ 5,581,616 Earnings per Share $ 3.88 $ 3.06 Book Value $ 14.29 $ 12.23 Cash Dividend per Common Share $ 1.56 $ 1.34 Access Lines in Service 30,601 28,935 Cellular Subscribers 478 719 Online Subscribers 24,379 21,535 WVLD Subscribers 11,253 9,642
WHERE THE DOLLAR COMES FROM WHERE THE DOLLAR GOES LONG DISTANCE ACCESS - - WAGES & BENEFITS (graph (graph LOCAL SERVICE - goes goes - COST OF GOODS SOLD - OTHER OPERATING EXPENSES WV LONG DISTANCE - here) here) - TAXES CELLULAR - - DEPRECIATION WARWICK ONLINE - - DIVIDENDS - RETAINED EARNINGS OTHER REVENUES -
13 3 PRESIDENT'S SUMMARY PHOTO Just as 2000 was a transitional year from the old millennium to the new, so was it a transitional year for Warwick Valley Telephone Company. The year began with my installation as its 6th President and ended with the name change from Warwick Valley Telephone Company to WVT Communications, a name that GOES realistically states who we are and what we do. In between these two milestones the year was packed with many exciting events. It was also a very successful year financially. CORE BUSINESSES HERE Significantly, our traditional core businesses (local telephone service, Warwick Valley Long Distances (WVLD) and Network Access Services) continued to prosper in 2000. The access line base grew from 29,000 to 31,000, a 6.9% growth rate. WVLD, the most popular choice for long distance service among WVT customers, gained 1,600 customers growing from 9,700 to 11,300. Revenues from Network Access Services increased by $1,000,000 over 1999, a 15% growth rate. Warwick Online, our Internet subsidiary, realized a significant 15% growth, adding 2,800 dial-up customers and 500 DSL (Digital Subscriber Line) customers, while increasing net income 41% to $1.3 million. DSL (a broadband service that provides 10 to 20 times more capacity than 56k dial-up modem service) was deployed throughout our regulated service territory and selected areas in Middltown, NY during 2000. This deployment will enable WVT to retain bandwidth-hungry dial-up customers and to gain new ones who might otherwise choose the competition. RECENTLY ESTABLISHED VENTURES In 1999 Warwick Valley Telephone Company launched two new ventures, the Middletown, NY CLEC (Competitive Local Exchange Carrier) and the directory "takeback". To date, both efforts have proven to be successful. WVT's CLEC operation in Middletown, NY increased revenue from $682,000 to $2.4 million. The CLEC contributed $1.9 million in net revenues. Late in 2000, favorable rulings by state regulators allowed us to begin more aggressive customer acquisition, and we ended the year with 800 access lines, an increase of almost 600. Revenue from the provision of port connections to Internet Service Providers continues to be an important aspect of the Middletown CLEC. Our 2001 Strategic Plan calls for continued expansion of the Middletown operations and the launch of CLEC operations in the Vernon, NJ area. The decision to publish the WVT directory in-house has proven to be a good one. Under company control, the quality of the directory is much higher. Directory advertising sales produced $1 million in gross revenues and contributed $500,000 in net revenues. The directory management team introduced electronic Yellow Pages during the 2000-2001 sales campaign. Projections are that the 2001 directory will produce even better results. OPERATING RESULTS Strong company growth requires that we must also grow our resources. In 2000 operating expenditures increased by 11% and 2 employees were added to bring the total to 135. Financial results remained strong in 2000. Revenues increased by 15.1% and earnings increased 26.8% over 1999. Shareholder dividends increased 15.2% annually to $1.56 per share. 14 4 (WVT LOGO) STRATEGIC INVESTMENTS WVT COMMUNICATIONS SERVICE AREA During 2000 the WVT management team recommended and the Board of Directors (MAP approved investments in two strategic partnerships, one with a broadband provider GOES and the other a provider of PCS wireless telephone service. Both of these ventures, I HERE) believe, will enable the company to provide a full array of services and develop new revenue streams to insure continued financial success in the face of competition. (HUDSON VALLEY DATANET LOGO) The first of these investments was a 9% ownership position in Hudson Valley DataNet, FIBER OPTIC NETWORK AREA L.L.C., (HVDN). This new company provides broadband services over fiber optic cable to secondary and tertiary markets in the lower (MAP Hudson Valley. Partnership with HVDN makes it possible for WVT to obtain reasonably priced bandwidth with self-healing fault GOES capability for our use and for resale to other customers in our markets. The HVDN HERE) fiber facility became operational in February 2001. (TELISPIRE PCS LOGO) WVT also became a founding investor in ZefCom, L.L.C., a consortium of independent telephone companies that will resell Sprint PCS nationally under the private label "Telispire PCS." WVT Communications will also be able to resell locally under its own brand name. WVT Communications holds a 19.5% interest in ZefCom. 15 5 BOARD CHANGES Regretfully, Mr. Howard Conklin, Jr. announced his decision to relinquish his position as Chairman of the Board in December. Mr. Conklin, who gave the company over 12 years of dedicated service as chairman, will remain a director. Thank you, Mr. Conklin. Mr. Wisner Buckbee, who has served 8 years as a director, was elected to replace Mr. Conklin. WHERE WE GO FROM HERE In 2000 the WVT Communications management team developed a Strategic Plan and five specific action plans, which is our road map for the future. Our aim is to upgrade our infrastructure so that it will support competitive state-of-the-art services that include video over copper plant. This will enable WVT Communications to control the "last mile" of facilities to our customers. The company will be uniquely positioned to offer a bundle of voice, data, video and wireless products with the convenience of a single bill. This mix of products, coupled with our reputation for quality customer service and the efforts of our capable workforce, is a surefire formula which will enable WVT Communications to continue to be the premier communications services provider in its chosen markets. It's also a formula that will provide future rewards for the customers, employees and shareholders of WVT Communications. BOOK VALUE ONLINE SUBCRIBERS /s/ M. Lynn Pike (graph (graph M. Lynn Pike President and C.E.O. goes goes here) here) INCOME PER SHARE ACCESS LINES DIVIDENDS PER SHARE (graph (graph (graph goes goes goes here) here) here)
16 6 FROM THE CHAIRMAN OF THE BOARD President Pike and his management team have made the Year 2000 again a year of profitable growth and expansion. They continue to identify areas in our industry that we can use for future profitability to benefit shareholders. Your Board of Directors works closely with management to provide the necessary capital resources that are needed for growth and to supply the services that our customers demand. With our well trained employees, capable management and ongoing shareholder support, your Board expects a very bright future as we approach our 100th year of operation at WVT Communications. /s/ Wisner H. Buckbee Wisner H. Buckbee Chairman 17 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS - 2000 VS. 1999 The Company's net income from all sources increased $1,435,883 (or 25.7%) to $7,017,499 for the twelve-month period ended December 31, 2000, as compared to the same period in 1999. Operating revenues increased $3,505,469 (or 15.1%) to $26,691,398 for the year ended December 31, 2000, as compared to $23,185,929 for 1999, primarily as a result of an increase of $1,368,927 (or 407.5%) for reciprocal compensation for the Company's Competitive Local Exchange Carrier (CLEC) in Middletown and a $1,329,443 (or 28.7%) increase in Online revenues. Reciprocal compensation began in June of 1999. In August of 2000 the reciprocal compensation rate was increased by the New York State Public Service Commission with payments retroactive to November of 1999. The increase in Online revenues is due to customer growth and the Company continually offering customers new services. Network Access Service revenues increased $529,154 (or 6.1%) primarily due to the sale of dedicated trunks. Local service revenues increased $422,061 (or 11.9%) as a result of a continuous increase in access lines and increased use of newly marketed services. Operating expenses increased $1,711,324 (or 11.0%) to $17,333,719 for the year ended December 31, 2000, as compared to $15,622,395 for the previous year. An increase in wages and benefits of $725,281 (or 11.2%) and an increase in both telecommunication and internet facilities of $651,650 (or 46.8%) were the main factors in the increase. Nonoperating income increased to $2,296,910 in 2000 from $1,706,638 in 1999. This increase resulted from an increase in income of Bell Atlantic Orange County/Poughkeepsie Limited Partnership, a cellular partnership in which the Company has a 7.5% interest, which earned $3,255,217 in 2000 compared to $1,937,538 in 1999. RESULTS OF OPERATIONS - 1999 VS. 1998 The Company's net income from all sources increased $1,539,119 (or 38.1%) to $5,581,616 for the twelve-month period ended December 31, 1999, as compared to the same period in 1998. Operating revenues increased $1,823,829 (or 8.5%) to $23,185,929 for the year ended December 31, 1999, as compared to $21,362,100 for 1998, primarily as a result of a $1,486,844 (or 47.2%) increase in online revenues. This increase was primarily due to customers interest in and use of the internet. Local service revenues increased $578,332 (or 19.5%), primarily as a result of an increase in the number of access lines and increased use of newly marketed services. This was offset by a decrease of $786,734 (or 6.9%) in network access service revenues due to a more competitive market. Operating expenses increased $1,212,963 (or 8.4%) to $15,622,395 for the year ended December 31, 1999, as compared to $14,409,432 for the previous year. An increase in wages and benefits of $770,267 (or 10.9%), an increase in internet facilities of $209,343 (or 25.0%) and an increase in depreciation expense of $412,453 (or 14.2%) were the main factors in the increase. Nonoperating income increased to $1,706,637 in 1999 from $770,135 in 1998. This increase resulted from an increase in income of Bell Atlantic Orange County/Poughkeepsie Limited Partnership, a cellular partnership in which the Company has a 7.5% interest, which earned $1,937,538 in 1999 compared to $1,085,499 in 1998 and the gain on partnership assets amounting to $401,305 during 1999. 18 8 LIQUIDITY AND CAPITAL RESOURCES The Company ended 2000 with working capital of ($1,527,719) as compared to ($932,806) at December 31, 1999. This difference was largely due to the refinancing of the Company's $3,000,000 Series I bond due May 1, 2000 to a notes payable with the Bank of New York. The Company`s capital expenditures for 2000 were $5,068,161 compared to $6,449,273 in 1999 and were primarily financed by internally generated funds. Bell Atlantic Orange County/Poughkeepsie Limited Partnership is licensed to operate as the wire-line licensee in both Orange and Dutchess Counties, New York. The Company received distributions from the Partnership amounting to $2,625,000 for 2000 and $1,791,305 for 1999. It is expected that these distributions from the Partnership will continue in the near future. On July 28, 2000 the Company purchased an 8.9% ownership interest in Hudson Valley DataNet ("HVDN"), L.L.C., for $1,000,000. HVDN is a competitive telecommunications company that will offer high-speed bandwidth throughout the region. The Company purchased a 19.5% interest in Zefcom, L.L.C., a licensed reseller of wireless services, during 2000. In addition to the initial capital contribution of $1,000,000, the Company has a commitment to contribute another $500,000 to Zefcom, L.L.C. in the form of a promissory note payable on demand. SEGMENTED OPERATIONS In 1998 the Company began business segment reporting to reflect the predominance of its two major operating segments, telephone operations and internet service provider. The Company currently reports its operating results in two segments: Warwick Valley Telephone and Warwick Online. Each of the Company's segment results is reviewed below. The telephone operations revenue increase of $2,422,012 (or 12.4%) for the year ended December 31, 2000 as compared to $964,496 (or 5.2%) for 1999 was due to reciprocal compensation for the Company's CLEC in Middletown, New York and an increase in customer growth. Internet revenues increased $1,329,443 (or 28.7%) for the year ended December 31, 2000 as compared to $1,486,844 (or 47.2%) for 1999 largely due to a continuous increase in customer growth and new services. The telephone operations expenses increased $1,952,526 (or 12.3%) for the year ended December 31, 2000 as compared to $669,684 (or 4.4%) for 1999 due to normal increases in expenses. Internet expenses increased $957,605 (or 25.6%) for the year ended December 31, 2000 as compared to $1,189,571 (or 46.7%) for 1999 largely due to an increase in wages and benefits. Comparative financial information regarding the operation of the Company's two business segments for the period from 1998 through 2000 can be found in Note 16 of the consolidated financial statements. 19 9 CONSOLIDATED BALANCE SHEET
ASSETS 2000 1999 ------ ----------- ----------- CURRENT ASSETS: Cash $ 738,495 $ 865,521 Accounts receivable -net of reserve for uncollectibles 4,090,401 4,015,673 Materials and supplies 1,665,679 983,222 Prepaid expenses 487,805 401,090 ----------- ----------- 6,982,380 6,265,506 ----------- ----------- NONCURRENT ASSETS: Unamortized debt issuance expense 15,630 23,374 Other deferred charges 93,613 224,845 Investments (Note 4) 5,488,603 2,858,301 ----------- ----------- 5,597,846 3,106,520 ----------- ----------- PROPERTY, PLANT & EQUIPMENT: (Notes 1, 2 and 5) Plant in service 49,338,440 45,049,356 Plant under construction 2,454,882 1,718,296 ----------- ----------- 51,793,322 46,767,652 Less: Depreciation reserve (Notes 1 and 3) 22,360,624 19,163,148 ----------- ----------- 29,432,698 27,604,504 ----------- ----------- TOTAL ASSETS $42,012,924 $36,976,530 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Current maturities of long term debt $ 0 $ 3,000,000 Notes payable (Note 6) 4,950,000 900,000 Accounts payable 2,799,229 2,716,428 Advance billing and payments 193,862 0 Customer deposits 130,990 129,660 Accrued taxes 26,432 22,168 Accrued interest 28,563 73,067 Other accrued liabilities 381,023 356,990 ----------- ----------- 8,510,099 7,198,313 ----------- ----------- LONG-TERM LIABILITIES & DEFERRED CREDITS: (Notes 1, 5 ,7 and 8) Long-term debt 4,000,000 4,000,000 Accumulated deferred federal income taxes 2,207,871 2,079,063 Unamortized investment tax credits 81,047 118,247 Other deferred credits 47,218 65,040 Post retirement benefit obligations 772,756 786,159 ----------- ----------- 7,108,892 7,048,509 ----------- ----------- STOCKHOLDERS' EQUITY: (Notes 5, 11, 12 and 13) Preferred stock - 5% cumulative; $100 par value; Authorized 7,500 shares; Issued and outstanding 5,000 shares 500,000 500,000 Common stock - no par value; Authorized shares: 2,160,000 Issued 1,993,593 shares for 2000 and 1,991,462 shares for 1999 3,450,465 3,367,607 Retained earnings 25,828,268 21,642,391 ----------- ----------- 29,778,733 25,509,998 Less: Treasury stock at cost, 190,497 shares for 2000 and 173,352 for 1999 3,384,800 2,780,290 ----------- ----------- 26,393,933 22,729,708 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $42,012,924 $36,976,530 =========== ===========
Please see the accompanying notes, which are an integral part of the financial statements. 20 10 CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998 ------------ ------------ ------------ OPERATING REVENUES: Local network service $ 3,968,037 $ 3,545,976 $ 2,967,644 Network access and long distance network service 9,153,643 8,624,489 9,458,776 Other services and sales (Note 1) 13,569,718 11,015,464 8,935,680 ------------ ------------ ------------ 26,691,398 23,185,929 21,362,100 Less: Provision for uncollectibles (40,274) (35,712) (44,309) ------------ ------------ ------------ Total operating revenues 26,651,124 23,150,217 21,317,791 ------------ ------------ ------------ OPERATING EXPENSES: Plant specific 3,195,789 2,670,835 2,347,814 Plant non-specific: Depreciation 3,239,967 3,311,411 2,898,958 Other 1,506,607 1,330,865 1,237,270 Customer operations 4,279,191 4,122,826 3,759,920 Corporate operations 3,051,221 2,414,961 2,181,653 Cost of services and sales 2,060,944 1,771,497 1,983,817 ------------ ------------ ------------ Total operating expenses 17,333,719 15,622,395 14,409,432 ------------ ------------ ------------ OPERATING TAXES: Federal income taxes (Note 7) 2,304,094 1,572,021 1,588,333 Property, revenue and payroll 1,672,715 1,456,530 1,412,839 ------------ ------------ ------------ Total operating taxes 3,976,809 3,028,551 3,001,172 ------------ ------------ ------------ Operating income 5,340,596 4,499,271 3,907,187 NONOPERATING INCOME (EXPENSES)-NET: (Note 10) 2,296,910 1,706,638 770,135 ------------ ------------ ------------ Income available for fixed charges 7,637,506 6,205,909 4,677,322 ------------ ------------ ------------ FIXED CHARGES: Interest on funded debt 372,500 553,500 553,500 Other interest charges 239,763 58,125 68,657 Amortization 7,744 12,668 12,668 ------------ ------------ ------------ Total fixed charges 620,007 624,293 634,825 ------------ ------------ ------------ NET INCOME 7,017,499 5,581,616 4,042,497 PREFERRED DIVIDENDS 25,000 25,000 25,000 ------------ ------------ ------------ INCOME APPLICABLE TO COMMON STOCK $ 6,992,499 $ 5,556,616 $ 4,017,497 ============ ============ ============ NET INCOME PER AVERAGE SHARE OF OUTSTANDING COMMON STOCK (NOTE 11) $ 3.88 $ 3.06 $ 2.21 ============ ============ ============ AVERAGE SHARES OF COMMON STOCK OUTSTANDING (Note 11) 1,811,653 1,817,531 1,813,792 ============ ============ ============
Please see the accompanying notes, which are an integral part of the financial statements. 21 11 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
TREASURY PREFERRED COMMON RETAINED STOCK STOCK STOCK EARNINGS TOTAL ------------ ------------ ------------ ------------ ------------ Balance, December 31, 1997 ($ 2,780,290) $ 500,000 $ 2,948,438 $ 16,534,991 $ 17,203,139 Net income for the year -- -- -- 4,042,497 4,042,497 Dividends: Common ($1.12 per share) -- -- -- (2,031,140) (2,031,140) Preferred ($5.00 per share) -- -- -- (25,000) (25,000) Sale of Common Stock -- -- 382,423 -- 382,423 ------------ ------------ ------------ ------------ ------------ Balance, December 31, 1998 ($ 2,780,290) $ 500,000 $ 3,330,861 $ 18,521,348 $ 19,571,919 Net income for the year -- -- -- 5,581,615 5,581,615 Dividends: Common ($.1.34 per share) -- -- -- (2,435,571) (2,435,571) Preferred ($5.00 per share) -- -- -- (25,000) (25,000) Sale of Common Stock -- -- 36,746 -- 36,746 ------------ ------------ ------------ ------------ ------------ Balance, December 31, 1999 ($ 2,780,290) $ 500,000 $ 3,367,607 $ 21,642,391 $ 22,729,709 Net income for the year -- -- -- 7,017,499 7,017,499 Dividends: Common ($1.56 per share) -- -- -- (2,806,623) (2,806,623) Preferred ($5.00 per share) -- -- -- (25,000) (25,000) Sale of Common Stock -- -- 82,858 -- 82,858 Purchase of Treasury Stock (604,510) -- -- -- (604,510) ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2000 ($ 3,384,800) $ 500,000 $ 3,450,465 $ 25,828,268 $ 26,393,933 ============ ============ ============ ============ ============
Please see the accompanying notes, which are an integral part of the financial statements. 22 12 CONSOLIDATED STATEMENT OF CASH FLOWS
2000 1999 1998 ----------- ----------- ----------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 7,017,499 $ 5,581,616 $ 4,042,497 Adjustments to reconcile net income to net cash Provided by operating activities: Depreciation and amortization 3,247,711 3,324,078 2,911,626 Deferred income tax and investment tax credit 73,786 (264,352) (80,967) Interest charged to construction (84,746) (143,480) (44,292) Income from partnership (3,255,217) (2,338,843) (1,085,499) Change in assets and liabilities: (Increase) Decrease in accounts receivable (74,728) (306,226) 255,913 (Increase) Decrease in materials and supplies (682,457) 615,221 (464,806) (Increase) Decrease in prepaid expenses (86,715) (47,492) (15,181) (Increase) Decrease in deferred charges 131,232 (44,239) 36,969 Increase (Decrease) in accounts payable 82,801 95,571 869,119 Increase (Decrease) in customers' deposits 1,330 (3,773) (35,032) Increase (Decrease) in advance billing and payment 193,862 (100,146) (63,736) Increase (Decrease) in accrued expenses (40,240) (66,033) (41,424) Increase (Decrease) in post retirement benefit obligations (13,403) 401,522 30,737 Increase (Decrease) in other liabilities 24,033 14,561 5,919 ----------- ----------- ----------- Net cash provided by operating activities 6,534,748 6,717,985 6,321,843 ----------- ----------- ----------- CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (5,068,161) (6,449,273) (3,828,418) Interest charged to construction 84,746 143,480 44,292 Distribution from partnership 2,625,000 1,791,305 450,000 Changes in other investments (2,000,084) (8,016) (2,668) ----------- ----------- ----------- Net cash used in investing activities (4,358,499) (4,522,504) (3,336,794) ----------- ----------- ----------- CASH FLOW FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable 4,050,000 500,000 (1,200,000) Repayment of long-term debt (3,000,000) -- -- Dividends (2,831,623) (2,460,573) (2,056,140) Sale of common stock 82,858 36,746 382,423 Purchase of treasury stock (604,510) -- -- ----------- ----------- ----------- Net cash provided by (used in) financing activities (2,303,275) (1,923,827) (2,873,717) ----------- ----------- ----------- Increase (Decrease) in cash and cash equivalents (127,026) 271,654 111,332 Cash and cash equivalents at beginning of year 865,521 593,867 482,535 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 738,495 $ 865,521 $ 593,867 =========== =========== ===========
Please see the accompanying notes, which are an integral part of the financial statements. 23 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Company provides communications services to customers in the Towns of Warwick, Goshen, and Wallkill, New York and the Townships of Vernon and West Milford, New Jersey. Its services include providing local, toll and cellular telephone service to residential and business customers, access and billing and collection services to interexchange carriers, the sale and leasing of telecommunications equipment, paging and internet access. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. CONSOLIDATION The consolidated financial information includes the accounts of Warwick Valley Telephone Company and its wholly-owned subsidiaries (the "Company") after elimination of all significant intercompany transactions. Certain prior year amounts have been reclassified to conform with the 2000 financial statement presentation. DEPRECIATION Depreciation is based on the cost of depreciable plant in service and is calculated on the straight-line method using estimated service lives of the various classes of telephone plant. Depreciation as a percent of average depreciable telephone plant was 6.86%, 7.80%, and 7.51%, for the years 2000, 1999 and 1998, respectively. CAPITALIZATION OF CERTAIN COSTS AND EXPENSES The Company has consistently followed the practice of capitalizing certain costs related to construction, including payroll and payroll related costs and significant costs of capital incurred during construction. The income which results from capitalizing interest during construction is not currently realized but, under the regulatory rate-making process, is recovered by revenues generated from higher depreciation expense over the life of related plant. ADVERTISING COSTS Advertising costs are expensed as incurred. FEDERAL INCOME TAXES The Company records deferred taxes that arise from temporary differences resulting from differences between the financial statement and tax basis of assets and liabilities. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The Company's deferred taxes result principally from differences in depreciation methods for financial reporting and tax reporting. Investment tax credits have been normalized and are being amortized to income over the average life of the related telephone plant and other equipment. RESERVE FOR UNCOLLECTIBLES The Company uses the reserve method to record uncollectible accounts. The reserve for uncollectibles was $65,155 as of December 31, 2000 and 1999, respectively. 24 14 CASH FLOW STATEMENT Cash and cash equivalents consists principally of demand deposits and are in accounts which are insured by the Federal Deposit Insurance Corporation (F.D.I.C.) up to $100,000 at each financial institution. As of December 31, 2000 the amount of cash in excess of these F.D.I.C. insured limits was approximately $468,000 . The following is a list of interest and federal income tax payments for each of the three years in the period ending December 31:
2000 1999 1998 ---------- ---------- ---------- Interest $ 656,767 $ 612,643 $ 623,902 Federal income taxes $3,360,000 $2,787,991 $2,064,867
MATERIAL AND SUPPLIES New material and reusable materials are carried at average original cost, except that specific costs are used in the case of large individual items. As of December 31, 2000 and 1999 the Material and Supplies inventory consisted of the following:
2000 1999 ---------- ---------- Inventory for outside plant $ 488,113 $ 215,710 Inventory for inside plant 678,186 567,325 Inventory for online plant 95,195 0 Inventory of equipment held for sale or lease 404,185 200,187 ---------- ---------- $1,665,679 $ 983,222 ========== ==========
RETIREMENT AND/OR DISPOSITION OF PROPERTY When depreciable property is retired, the amount at which it is carried plus the cost of removal is charged to the depreciation reserve and any salvage is credited thereto. Expenditures for maintenance and repairs are charged against income; renewals and betterments are capitalized. OTHER SERVICES AND SALES REVENUES Other services and sales revenues consisted of the following for each of the three years in the period ended December 31:
2000 1999 1998 ----------- ----------- ----------- Directory advertising revenue $ 1,060,398 $ 972,738 $ 941,714 Rent revenue 343,180 296,498 208,179 Billing and collection revenue 966,288 1,096,779 1,154,150 Long distance services and sales 2,016,057 1,884,557 1,932,111 Internet services and sales 5,969,307 4,639,864 3,153,020 Other 3,214,488 2,125,028 1,546,506 ----------- ----------- ----------- $13,569,718 $11,015,464 $ 8,935,680 =========== =========== ===========
2. PROPERTY, PLANT AND EQUIPMENT Plant in service, at cost, consisted of the following at December 31:
2000 1999 ----------- ----------- Land, buildings, furniture and office equipment $ 4,512,991 $ 4,249,179 Vehicles and work equipment 1,661,980 1,265,185 Central office equipment 20,521,852 19,391,013 Customer premise equipment 1,526,923 1,318,299 Outside plant equipment 17,222,690 15,909,015 Internet equipment 3,892,004 2,916,664 ----------- ----------- 49,338,440 $45,049,355 =========== ===========
25 15 3. DEPRECIATION RESERVE Depreciation reserve consisted of the following at December 31:
2000 1999 ----------- ----------- Buildings, furniture and office equipment $ 2,304,022 $ 2,267,264 Vehicles and work equipment 895,616 798,865 Central office equipment 11,041,581 9,386,103 Customer premise equipment 899,008 728,467 Outside plant equipment 4,991,031 4,525,404 Internet equipment 2,229,366 1,457,045 ----------- ----------- $22,360,624 $19,163,148 =========== ===========
4. INVESTMENTS Investments consisted of the following at December 31:
2000 1999 ---------- ---------- Investment in cellular partnership $3,461,099 $2,829,923 Investment in Hudson Valley DataNet 1,000,000 0 Investment in wireless company 1,000,000 0 Other investments 27,504 $ 28,378 ---------- ---------- $5,488,603 $2,858,301 ========== ==========
The cellular partnership investment represents the Company's 7.5% interest as a limited partner in the Orange-Poughkeepsie Limited Partnership, a cellular telephone operation which is recorded on the equity method. Income from this investment amounted to $3,255,218 and $2,338,843 for the years ended December 31, 2000 and 1999, respectively. Distributions received from the partnership amounted to $2,625,000 and $1,791,305 for 2000 and 1999, respectively. The following is a summary of financial position and results of operations of the Orange-Poughkeepsie Limited Partnership as of and for the years ending December 31, 2000 and 1999:
2000 1999 ----------- ----------- Current assets $25,748,075 $17,055,000 Property, plant and equipment, net 24,752,768 23,406,000 Total assets 50,507,623 40,469,000 Current liabilities 2,153,473 1,810,000 Partners capital 48,354,150 38,659,000 Revenues 57,677,561 35,512,000 Net income 44,695,100 26,417,000
The Company has an 8.9% ownership interest in Hudson Valley DataNet ("HVDN"), L.L.C., a competitive telecommunications company that will offer high-speed bandwidth throughout the region. The wireless investment represents the Company's 19.5% interest in Zefcom, L.L.C., a licensed reseller of wireless services. In addition to the initial capital contribution of $1,000,000, the Company has a commitment to contribute another $500,000 to Zefcom, L.L.C. in the form of a promissory note payable on demand. Both of these companies are in the beginning stages of operations and both are recorded on the cost method. Other investments are also recorded at cost. 26 16 5. LONG-TERM DEBT Long-term debt consisted of the following at December 31:
2000 1999 FIRST MORTGAGE BONDS AMOUNT AMOUNT -------------------- ---------- ---------- 9.05% Series "I" (due 05/01/2000) $ 0 $3,000,000 7.05% Series "J" (due 12/01/2003) 4,000,000 4,000,000 ---------- ---------- 4,000,000 7,000,000 Less: Current maturities of long-term debt 0 3,000,000 Total Long-term debt $4,000,000 $4,000,000 ========== ==========
Telephone properties have been pledged as collateral on the first mortgage bonds. Under provisions of the bond indentures, as amended, the payment of dividends or a distribution of assets to stockholders to the extent of 75% of the Company's net income earned during the calendar year will be allowed, providing "net operating income" exceeds interest expense 1.5 times. Maturities for the five years subsequent to 2000 for long-term debt outstanding as of December 31, 2000, are as follows: 2001 --- 2004 --- 2002 --- 2005 --- 2003 $ 4,000,000 The first mortgage bonds, Series "J" bond, may not be redeemed prior to the maturity date. 6. NOTES PAYABLE The Company has an unsecured line of credit in the amount of $2,500,000 with the Warwick Savings Bank, which expires in June 2001. Any borrowings under this line of credit are on a demand basis and are without restrictions, at a variable lending rate. The total unused line of credit available at December 31, 2000 was $550,000. The balances outstanding as of December 31, 2000 and 1999 were $1,950,000 and $900,000 respectively, bearing interest at rates of 8.75% and 8.0%, respectively. The Company has an outstanding line of credit in the amount of $3,000,000 with the Bank of New York, which expires on March 31, 2001. This is an unsecured note that is renewable solely at the Bank's option. Interest is paid monthly calculated on the unpaid balance using either the Bank's Alternate Base Rate or the LIBOR based rate. The interest rate on the outstanding balance of $3,000,000 as of December 31, 2000 was 8.44%. 7. FEDERAL INCOME TAXES The following tabulation is a reconciliation of the federal income tax expense as reported in these financial statements with the tax expense computed by applying the statutory federal income tax rate of 34% to pre-tax income.
2000 1999 1998 ----------- ----------- ----------- Operating federal income taxes: Current portion $ 2,231,650 $ 1,837,842 $ 1,670,896 ----------- ----------- ----------- Deferrals, net of reversals: Depreciation 162,178 25,367 (17,736) Cost of removal 2,655 (5,946) (2,813) Other (55,189) (245,042) (19,034) Investment tax credit, net of amortization (37,200) (40,200) (42,980) ----------- ----------- ----------- 72,444 (265,821) (82,563) ----------- ----------- ----------- Operating F.I.T. expense $ 2,304,094 $ 1,572,021 $ 1,588,333 ----------- ----------- ----------- Nonoperating federal income taxes $ 1,125,991 $ 796,354 $ 368,316 ----------- ----------- ----------- Total F.I.T. expense, as reported 3,430,085 2,368,375 1,956,649 Reversals of deferred taxes 58,411 167,374 67,485 Other 63,683 167,248 15,576 ----------- ----------- ----------- FEDERAL INCOME TAX AT STATUTORY RATE $ 3,552,179 $ 2,702,997 $ 2,039,710 =========== =========== ===========
27 17 The following components comprise the net deferred tax liability reported as of December 31:
2000 1999 ---------- ---------- Deferred tax liabilities $2,583,096 $2,418,263 Deferred tax assets 375,225 339,199 ---------- ---------- Net deferred tax liability $2,207,871 $2,079,064 ========== ==========
The deferred tax liability consists principally of temporary differences due to differences in depreciation methods for financial reporting and tax reporting. The deferred tax asset consists principally of temporary differences due to the reporting of pension and deferred compensation obligations. 8. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS The Company has two defined benefit pension plans covering all management and non-management employees who are at least 21 years of age and have completed one year of service. Benefits are based on years of service and the average of the employee's three highest consecutive years' base compensation. The Company's policy is to fund the minimum required contribution disregarding any credit balance arising from excess amounts contributed in the past. The Company sponsors a non-contributory, defined benefit postretirement medical benefit plan that covers all employees that retire directly from active service on or after age 55 with at least 10 years of service or after age 65 with at least 5 years of service. The projected unit credit actuarial method was used in determining the cost of future benefits. The Company's funding policy is to contribute the maximum allowed under current Internal Revenue Service regulations. Due to regulatory requirements the Company is allowed to expense the amount actually funded, with any difference between the funding amount and the SFAS 106 expense amount being deferred as a regulatory asset or liability. Assets of the plan are invested in common stocks and a money market fund. The components of the pension and postretirement expense (credit) were as follows for the years ended December 31:
PENSION BENEFITS POSTRETIREMENT BENEFITS 2000 1999 1998 2000 1999 1998 ------------------------------------ ------------------------------------ Service cost $ 252,952 $ 267,535 $ 238,977 $ 62,963 $ 71,446 $ 42,117 Interest cost on benefit Obligation 679,920 642,092 601,153 136,697 129,247 58,618 Amortization of transition Obligation 53,263 53,263 53,263 51,496 51,496 51,496 Amortization of prior service (credit) cost 40,637 48,282 50,611 (19,964) (19,964) (21,494) Recognized net actuarial (gain) loss (309,700) (35,719) (98,490) 12,729 39,817 (40,835) Expected return on plan assets (873,300) (705,469) (692,142) (94,664) (78,071) (61,313) ------------------------------------ ------------------------------------ Net periodic (credit) Expense ($156,228) $ 269,984 $ 153,372 $ 149,257 $ 193,971 $ 28,589 =================================== ===================================
28 18 The following table presents a summary of plan assets, projected benefit obligation and funded status of the plans at December 31:
PENSION BENEFITS POSTRETIREMENT BENEFITS 2000 1999 2000 1999 --------------------------- ---------------------------- Fair value of plan assets at beginning of year $ 10,376,258 $ 8,966,950 $ 1,173,563 $ 962,257 Employer contributions 58,074 87,934 89,372 89,372 Actual return on plan assets 1,556,698 1,640,940 48,678 155,986 Benefits paid (335,810) (319,566) (41,793) (34,052) ---------------------------- ---------------------------- Fair value of plan assets at end of year $ 11,655,220 $ 10,376,258 $ 1,269,820 $ 1,173,563 ---------------------------- ---------------------------- Projected benefit obligation at beginning of year 8,453,470 9,320,457 1,737,385 831,259 Benefits earned 252,952 267,535 62,963 71,446 Interest cost on projected benefit obligation 679,920 642,092 136,697 129,247 Actuarial (gain) loss 1,080,796 (1,457,048) 182,148 739,485 Benefits paid (335,810) (319,566) (41,793) (34,052) ---------------------------- ---------------------------- Projected benefit obligation at year end 10,131,328 8,453,470 2,077,400 1,737,385 ---------------------------- ---------------------------- Plan assets in excess of (less than) projected benefit obligation 1,523,892 1,922,788 (807,580) (563,822) Unrecognized actuarial (gain) loss (2,228,348) (2,669,652) 582,190 366,784 Unrecognized prior service (credit) cost 373,209 148,052 (364,855) (384,819) Unrecognized net transition obligation 53,267 106,530 617,948 669,444 ---------------------------- ---------------------------- Prepaid (accrued) benefit cost $ (277,980) $ (492,282) $ 27,703 $ 87,587 ============================ ============================
Actuarial assumptions used to calculate the projected benefit obligation were as follows for the years ended December 31:
PENSION BENEFITS POSTRETIREMENT BENEFITS 2000 1999 2000 1999 ------------------------------ ----------------------------- Discount rate 7.50% 8.00% 7.50% 8.00% Expected return on plans 8.00% 8.00% 8.00% 8.00% Rate of compensation increase 5.50% 5.50% --- --- Healthcare cost trend --- --- 9.00% 9.00%
29 19 The health care cost trend rate was expected to decrease gradually (.5% per year) to an ultimate rate of 5% in 2007. An increase in the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation as of December 31, 2000 approximately $356,000 and the aggregate of the service and interest cost components of postretirement expense for the year then ended by approximately $44,000. A 1.0% decrease in the health care cost trend rate would decrease these components by approximately $288,000 and $36,000, respectively. The Company also has a Defined Contribution 401(K) Profit Sharing Plan covering substantially all employees. Under the plan, employees may contribute up to 15% of compensation, subject to certain legal limitations. In 2000 the Company made a matching contribution up to 8.0% of an eligible participant's compensation for management, clerical and traffic employees and up to 6.0% for plant employees. The Company contributed and expensed $388,636, $320,795, and $236,597 for the years ended December 31, 2000, 1999 and 1998 respectively. The Company has deferred compensation agreements in place for certain officers which become effective upon retirement. These non-qualified plans are not currently funded and a liability representing the present value of future payments has been established, with balances of $367,260 and $189,950 as of December 31, 2000 and 1999, respectively. 9. RELATED PARTY TRANSACTIONS The Company expended approximately $255,860, $225,031, and $221,880 during 2000, 1999, and 1998, respectively, in insurance premiums for required insurance coverage. These expenditures were made to an insurance agency in which a member of the Board of Directors has a financial interest. Two Board of Director members are also trustees of the Warwick Savings Bank, at which the Company has its principal bank accounts and temporary investments. 10. NONOPERATING INCOME AND EXPENSES Nonoperating income (expense) for the years ended December 31, are as follows:
2000 1999 1998 ----------- ----------- ----------- Interest charged to construction $ 84,746 $ 143,480 $ 44,292 Interest income 24,753 17,330 22,401 Income from cellular partnership 3,255,218 1,937,538 1,085,499 Non recurring gain on sale of partnership assets 0 401,305 0 Other nonoperating income (expense) 58,184 3,338 (13,741) Nonoperating federal income taxes (1,125,991) (796,354) (368,316) ----------- ----------- ----------- $ 2,296,910 $ 1,706,637 $ 770,135 =========== =========== ===========
11. COMMON STOCK Earnings per share are based on the weighted average number of shares outstanding of 1,811,653, 1,817,531, and 1,813,792 for the years ended December 31, 2000, 1999 and 1998, respectively. The following schedule summarizes the changes in the number of shares issued of capital stock for the year ended December 31, 2000:
Treasury Preferred Common Stock Stock Stock --------- --------- --------- Balance, January 1, 2000 173,352 5,000 1,991,462 Additional shares issued 17,145 0 2,131 Shares redeemed 0 0 0 --------- --------- --------- Balance, December 31, 2000 190,497 5,000 1,993,593 ========= ========= =========
30 20 12. TREASURY STOCK The Company accounts for treasury stock using the cost method of accounting. 13. PREFERRED STOCK The preferred stock may be redeemed by the Company on any dividend payment date at par plus accumulated dividends. Preferred stock ranks prior to the common stock both as to dividends and on liquidation, but has no general voting rights. However, if preferred stock dividends are in default in an amount equal to six quarterly dividends, the holder of preferred stock shall have the right to elect a majority of the Board of Directors and such voting rights would continue until all dividends in arrears have been paid. 14. COMMITMENTS The Company is required to make certain contributions to national and state associations as part of the industry practice of pooling revenues and redistributing to members based on cost to provide services or some other method. Due to recent changes in the structure of these pools, the Company's responsibility is to contribute certain fixed amounts during a transition period, after which time the amounts may change. The Company's contribution to the New York State Access Settlement Pool was $190,943 for 2000 and is expected to be $153,000 for 2001. In October of 1998 the New York State Public Service Commission implemented the Targeted Accessibility Fund (TAF) of New York to provide support of universal service in rural, high costs areas of the state. The amount the Company contributed to TAF for 2000 was $16,615 and the expected contribution for 2001 is approximately $20,000. The Company also contributes to the Universal Service Administration Co. (USAC). For 2000 the Company's contribution to USAC was $144,839 and for 2001 it will be approximately $160,000. Quarterly updates modify the amounts contributed. The amounts paid to these pools are considered part of the cost of providing access service to interexchange carriers and are included in the rates charged to them. 15. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of the instruments. The fair value of the Company's long-term debt approximates the carrying value of $4,000,000 due to the short maturity of the debt. The fair value of other financial instruments is estimated by management to approximate the carrying value. 16. BUSINESS SEGMENTS The Company reports segmented information according to Statement of Financial Accounting Standards No. 131 "Disclosure about Segments of an Enterprise and Related Information" ("SFAS 131"), which requires reporting segment information consistent with the way management internally disaggregates an entity's operations to assess performance and to allocate resources. The Company's segments consist of a local telephone operation and an internet access provider. The telephone operation offers local, long distance and cellular telephone service to customers in the Towns of Warwick, Goshen, and Wallkill, New York and the Townships of Vernon and West Milford, New Jersey, as well as providing access services to interexchange carriers and the selling and leasing of equipment. Hometown Online, Inc. ("Online"), the internet access segment offers connectivity to the Internet as well as local and regional information services to personal computer users. Service is offered within the Company's service area as well as in New York, New Jersey and Pennsylvania. The accounting policies used in measuring segment assets and operating results are the same as those described in Note 1. The Company evaluates performance of the segments based on segment operating income. The Company accounts for intersegment sales at current market prices or in accordance with regulatory requirements. 31 21 The following information summarizes the Company's business segments for the years 2000, 1999 and 1998:
2000 Intercompany Consolidated Revenues from: Telephone Internet Elimination Total ----------- ---------- ----------- ------------- Unaffiliated customers $20,681,817 $5,969,307 $ 26,651,124 Intersegment revenues 1,261,043 (1,261,043) ----------- ---------- ----------- ------------ Total revenues 21,942,860 5,969,307 (1,261,043) 26,651,124 ----------- ---------- ----------- ------------ Operating expenses 13,668,191 3,359,319 (1,261,043) 15,766,467 Depreciation 2,566,348 673,619 0 3,239,967 Federal income taxes 1,641,902 662,192 0 2,304,094 Other income (expenses) 1,665,649 11,254 0 1,676,903 ----------- ---------- ----------- ------------ Net income $ 5,732,068 $1,285,431 0 $ 7,017,499 =========== ========== ============ ============ Assets $38,275,125 $3,737,799 0 $ 42,012,924 Capital expenditures $ 4,079,229 $ 988,932 0 $ 5,068,161
1999 Intercompany Consolidated Revenues from: Telephone Internet Elimination Total ----------- ---------- ----------- ------------- Unaffiliated customers $18,510,353 $4,639,864 $ 0 $ 23,150,217 Intersegment revenues 1,010,495 0 (1,010,495) 0 ----------- ---------- ----------- ------------ Total revenues 19,520,848 4,639,864 (1,010,495) 23,150,217 ----------- ---------- ----------- ------------ Operating expenses 12,125,754 2,652,255 (1,010,495) 13,767,514 Depreciation 2,695,124 616,286 0 3,311,410 Federal income taxes 1,103,037 468,984 0 1,572,021 Other income (expenses) 1,074,302 8,042 0 1,082,344 ------------ ---------- ----------- ------------ Net income $ 4,671,235 $ 910,381 $ 0 $ 5,581,616 =========== ========== ============ ============ Assets $34,638,100 $2,338,430 $ 0 $ 36,976,530 Capital expenditures $ 5,412,642 $1,036,631 $ 0 $ 6,449,273
32 22
1998 Intercompany Consolidated Telephone Internet Elimination Total ----------- ----------- ----------- ----------- Revenues from: Unaffiliated customers $18,164,771 $ 3,153,020 $ 0 $21,317,791 Intersegment revenues 391,581 0 (391,581) 0 ----------- ----------- ----------- ----------- Total revenues 18,556,352 3,153,020 (391,581) 21,317,791 ----------- ----------- ----------- ----------- Operating expenses 11,501,820 1,813,073 (391,581) 12,923,312 Depreciation 2,477,980 420,979 0 2,898,959 Federal income taxes 1,274,431 313,902 0 1,588,333 Other income (expenses) 131,037 4,273 0 135,310 ----------- ----------- ----------- ----------- Net income $ 3,433,158 $ 609,339 $ 0 $ 4,042,497 =========== =========== =========== =========== Assets $31,591,340 $ 1,650,052 $ 0 $33,241,392 Capital expenditures $ 3,059,117 $ 769,301 $ 0 $ 3,828,418
33 23 Report of Independent Certified Public Accounts BUSH & GERMAIN, PC Certified Public Accountants 901 Lodi Street Syracuse, New York 13203 phone: (315) 424-145 fax: (315) 424-1457 February 8, 2001 To the Board of Directors Warwick Valley Telephone Company P.O. Box 592 Warwick, New York 10990 INDEPENDENT AUDITORS' REPORT We have audited the accompanying consolidated balance sheets of Warwick Valley Telephone Company as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Warwick Valley Telephone Company as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with generally accepted accounting principles. /s/ Bush & Germain, P.C. Bush & Germain, P.C. 34 24 CONCERNNG THE COMPANY'S COMMON STOCK On April 28, 1998 Warwick Valley Telephone Company's common stock began trading on the NASDAQ National Market under the symbol WWVY. Private sales are also made by holders of the Company's common stock from time to time. At March 1, 2001 there were 642 holders of the Company's common stock. The Company has paid consecutive cash dividends on its common stock quarterly since April 1, 1931 and semi-annually from July 1, 1907 until December 31, 1930. The practice of the Company has been to reinvest a substantial portion of its earnings in its capital plant. While the present intention of the Board of Directors is to continue declaring cash dividends, future dividends will necessarily depend on the Company's earnings, capital requirements, developments in the telephone industry and general economic conditions, among other factors. In 1999, the Company paid a dividend on its common stock of $1.34 per share. In 2000, the common stock dividend was $1.56 per share. The NASDAQ high and low bid prices for the Company's common stock for the first, second, third and fourth quarters of 2000 and 1999 were as follows:
------------------------------------------------------------------------------ PRICE OF THE COMPANY'S COMMON STOCK ------------------------------------------------------------------------------ QUARTER ENDED ------------------------------------------------------------------------------ March 31, June 30, September 30, December 31, 2000 2000 2000 2000 ------------------------------------------------------------------------------ High $ 48.25 $ 42.00 $ 47.00 $ 55.00 ------------------------------------------------------------------------------ Low $ 38.00 $ 37.00 $ 36.625 $ 34.50 ------------------------------------------------------------------------------
------------------------------------------------------------------------------ PRICE OF THE COMPANY'S COMMON STOCK ------------------------------------------------------------------------------ QUARTER ENDED ------------------------------------------------------------------------------ March 31, June 30, September 30, December 31, 1999 1999 1999 1999 ------------------------------------------------------------------------------ High $ 46.75 $ 45.00 $ 45.00 $ 47.00 ------------------------------------------------------------------------------ Low $ 36.50 $ 38.75 $ 39.75 $ 42.00 ------------------------------------------------------------------------------
35 25 BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY (Photo Page) Wisner H. Buckbee Henry L. Nielsen, Jr. Howard Conklin, Jr. Fred M. Knipp Chairman of the Board Vice Chairman of the Board Director, Retired, Board Director, of the Company, Board of the Company, Former President of Conklin Retired, Former President, Wisner Farms, President, Nielsen and Strong, Inc., Warwick, N.Y. President & CEO Inc., Warwick, N.Y. Construction Co., Inc., of the Company Warwick, N.Y. Philip S. Demarest Joseph E. DeLuca, M.D. Corinna S. Lewis Robert J. DeValentino Board Director, Board Director, Board Director, Board Director, Retired, Former Physician, Vernon Urgent Retired Public Relations Executive Director Vice President, Care Center, Vernon, N.J. Consultant Horton Healthcare Secretary & Treasurer Foundation, of the Company Middletown, N.Y. M. Lynn Pike Herbert Gareiss, Jr. Larry Drake Brenda A. Schadt Board Director, Board Director, Vice President of Vice President of President & C.E.O. Vice President of the Company the Company of the Company the Company
Barbara Barber Colleen Shannon Bonnie Jackowitz Robert A. Sieczek Dorinda Masker Secretary of Assistant Secretary Assistant Secretary Treasurer of Assistant Treasurer the Company of the Company of the Company the Company of the Company
36 26 PERFORMANCE HIGHLIGHTS
For years ended or at December 31, 2000 1999 1998 1997 1996 SELECTED FINANCIAL DATA Total revenues $ 26,619,398 $ 23,185,929 $ 21,362,100 $ 19,796,696 $ 17,874,115 Telephone operating revenues 19,680,683 17,240,321 16,189,377 15,590,455 15,161,873 Total expenses 17,333,719 15,622,395 14,409,432 13,395,700 12,406,564 Telephone operating expenses 13,301,687 12,098,691 11,079,344 10,081,196 9,761,435 Net income 7,017,499 5,581,616 4,042,497 3,683,709 3,095,481 Total assets 42,012,924 36,976,530 33,241,392 31,387,996 30,243,580 Current assets 6,982,380 6,265,507 6,255,355 5,919,948 5,777,625 Current liabilities 8,590,099 7,198,313 3,758,134 4,502,782 3,723,691 Long-term obligations 4,000,000 4,000,000 7,000,000 7,000,000 7,000,000 Percentage of debt to total capital 25.3 25.8 27.4 33.3 31.96 Shareholders' equity 26,393,933 22,729,708 19,571,919 17,203,139 16,710,548 COMMON STOCK DATA Income applicable to common stock 6,992,499 5,556,616 4,017,497 3,658,709 3,070,481 Income per share* 3.88 3.06 2.21 1.97 1.65 Book value* 14.29 12.23 10.51 9.01 8.69 Cash dividends per common share* 1.56 1.34 1.12 0.93 0.65 Shareholders of record 642 655 648 616 612 Shares outstanding* 1,811,653 1,817,531 1,813,792 1,853,298 1,865,091 General Access lines in service 30,601 28,935 26,786 25,154 23,719 Carrier access minutes 185,006,652 174,174,099 151,797,771 138,984,054 150,708,737
*Adjusted for 3-for1 common stock split in 1997. 37