-----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, PL9Ozk/SmqdlbA+p2nOl/wV0gPLxl/Jd9KTX5U3PpCbiUI4obw1CESnSP13/SO2W 5pxF3r/i/h7J4reLgAK19g== 0000950152-01-501997.txt : 20010516 0000950152-01-501997.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950152-01-501997 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1636740 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 l88431ae10-q.txt WARWICK VALLEY TELEPHONE COMPANY FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 _________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 -------------- 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 (IRS Employer or organization) Identification No.) 47 Main Street, Warwick, New York 10990 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant"s telephone number, including area code (845) 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: 1,803,519 common shares, no par value, outstanding at May 15, 2001. 2 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements - ----------------------------- WARWICK VALLEY TELEPHONE COMPANY CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31, 2001 2000 ------------ ------------ (Unaudited) (Audited) CURRENT ASSETS: Cash $ 880,378 $ 738,495 Accounts receivable, less accounts Receivable allowance 2001 -$57,834; 2000- $65,155; 4,470,569 4,090,401 Materials and supplies 2,708,938 1,665,679 Prepaid expenses 662,569 487,805 ------------ ------------ 8,722,454 6,982,380 ------------ ------------ NONCURRENT ASSETS: Unamortized debt issuance expense 14,309 15,630 Other deferred charges (113,392) 93,613 Investments 6,496,401 5,488,603 ------------ ------------ 6,397,318 5,597,846 ------------ ------------ PROPERTY, PLANT & EQUIPMENT: Plant in service 49,925,555 49,338,440 Plant under construction 3,734,986 2,454,882 ------------ ------------ 53,660,541 51,793,322 Less: Accumulated depreciation 23,252,138 22,360,624 ------------ ------------ TOTAL PLANT 30,408,403 29,432,698 ------------ ------------ TOTAL ASSETS $ 45,528,175 $ 42,012,924 ============ ============
3 Item 1. Financial Statements (Continued) - ----------------------------------------- WARWICK VALLEY TELEPHONE COMPANY CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31, LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000 ----------- ----------- (Unaudited) (Audited) CURRENT LIABILITIES: Current maturities-long term debt $ 0 $ 0 Notes payable 6,500,000 4,950,000 Accounts payable 3,331,742 2,799,229 Advance billing and payments 14,850 193,862 Customer deposits 133,950 130,990 Accrued taxes 647,332 26,432 Accrued interest 94,107 28,563 Other accrued expenses 319,339 381,023 ----------- ----------- 11,041,320 8,510,099 ----------- ----------- LONG TERM DEBT & DEFERRED CREDITS: Long-term debt 4,000,000 4,000,000 Accumulated deferred federal income taxes 2,246,744 2,207,871 Unamortized investment tax credits 72,047 81,047 Other deferred credits 47,216 47,218 Post retirement benefit obligation 740,273 772,756 ----------- ----------- 7,106,280 7,108,892 ----------- ----------- STOCKHOLDERS' EQUITY: 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 1,993,779 for 3/31/01 and 1,993,593 for 12/31/00 3,458,091 3,450,465 Retained earnings 26,807,284 25,828,268 ----------- ----------- 30,765,375 29,778,733 Less: Treasury stock at cost, 190,497 shares for 3/31/01 and 12/31/00, respectively 3,384,800 3,384,800 ----------- ----------- 27,380,575 26,393,933 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $45,528,175 $42,012,924 =========== ===========
Please see the notes to condensed consolidated financial statements. 4 Item 1. Financial Statements - -----------------------------
WARWICK VALLEY TELEPHONE COMPANY CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 2001 2000 ---- ---- OPERATING REVENUES: Local network service $ 1,118,891 $ 1,029,709 Network access and long distance Network service 2,533,464 2,400,051 Other services and sales 3,327,338 2,822,606 ------------ ------------ 6,979,693 6,252,366 Less: Provision for uncollectibles (11,250) (10,002) ------------ ------------ Total operating revenues 6,968,443 6,242,364 ------------ ------------ OPERATING EXPENSES: Plant specific 926,592 698,227 Plant non-specific: Depreciation 960,984 900,215 Other 497,965 370,295 Customer operations 1,176,392 1,084,854 Corporate operations 682,985 801,126 Cost of services and sales 563,243 501,108 ------------ ------------ Total operating expenses 4,808,161 4,355,825 ------------ ------------ OPERATING TAXES: Federal income taxes 874,800 717,465 Property, revenue and payroll 421,837 375,283 ------------ ------------ Total operating taxes 1,296,637 1,092,748 ------------ ------------ Operating income 863,645 793,791 NONOPERATING INCOME (EXPENSES)-NET: 1,039,856 777,101 ------------ ------------ Income available for fixed charges 1,903,501 1,570,892 ------------ ------------ FIXED CHARGES: Interest on funded debt 70,500 138,375 Other interest charges 107,068 8,388 Amortization 1,321 3,167 ------------ ------------ Total fixed charges 178,889 149,930 ------------ ------------ NET INCOME 1,724,612 1,420,962 PREFERRED DIVIDENDS 6,250 6,250 ------------ ------------ INCOME APPLICABLE TO COMMON STOCK $ 1,718,362 $ 1,414,712 ------------ ------------ NET INCOME PER AVERAGE SHARE OF OUTSTANDING COMMON STOCK $ 0.96 $ 0.77 ============ ============ CASH DIVIDENDS PAID PER SHARE $ 0.41 $ 0.37 ============ ============ AVERAGE SHARES OF COMMON STOCK OUTSTANDING 1,804,251 1,818,110 ============ ============
Please see the notes to condensed consolidated financial statements. 5 Item 1. Financial Statements - ----------------------------- WARWICK VALLEY TELEPHONE COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (Unaudited)
2001 2000 -------------- -------------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 1,724,612 $ 1,420,962 Adjustments to reconcile net income to net cash Provided by operating activities: Depreciation and amortization 962,306 903,382 Deferred income tax and investment tax credit (2,612) 44,093 Interest charged to construction (24,716) (19,860) Change in assets and liabilities: (Increase) Decrease in accounts receivable (380,168) 282,626 (Increase) Decrease in materials and supplies (1,043,259) (329,771) (Increase) Decrease in prepaid expenses (174,764) (132,435) (Increase) Decrease in deferred charges 207,005 128,458 Increase (Decrease) in accounts payable 532,513 (442,420) Increase (Decrease) in customers' deposits 2,960 2,108 Increase (Decrease) in advance billing and payment (179,012) 13,955 Increase (Decrease) in accrued expenses 686,444 749,690 Increase (Decrease) in other liabilities (61,684) (203,036) -------------- -------------- Net cash provided by operating activities 2,249,625 2,417,752 -------------- -------------- CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (1,936,690) (1,027,295) Interest charged to construction 24,716 19,860 Changes in other investments (1,007,798) (726,409) -------------- -------------- Net cash used in investing activities (2,919,772) (1,733,844) -------------- -------------- CASH FLOW FROM FINANCING ACTIVITIES: Increase (Decrease) in notes payable 1,550,000 (200,000) Sale of common stock 7,626 0 Dividends (745,596) (678,951) -------------- -------------- Net cash provided by (used in) financing activities 812,030 (878,951) -------------- -------------- Increase (Decrease) in cash and cash equivalents 141,883 (195,043) Cash and cash equivalents at beginning of year 738,495 865,521 -------------- -------------- Cash and cash equivalents at end of year $ 880,378 $ 670,478 ============== ==============
Please see the notes to condensed consolidated financial statements. 6 Item 1. Financial Statements - ----------------------------- WARWICK VALLEY TELEPHONE COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS 1. 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. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company's annual report on Form 10-K for the year ended December 31, 2000. 2. Non-operating Income and expenses for the three-month periods ended March 31, 2001 and 2000 were as follows: Three Months Ended March 31, 2001 2000 ----------- --------- Interest income $ 3,847 $ 5,183 Interest during construction 24,716 19,860 G/L disposition certain property 12,528 34,012 Special charges (8,956) (8,284) Other non-operating income 1,007,721 726,330 ----------- --------- $ 1,039,856 $ 777,101 =========== ========= 7 WARWICK VALLEY TELEPHONE COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS -THREE MONTHS ENDED MARCH 31, 2001 - The Company's net income from all sources increased $303,650 (or 21.4%) to $1,724,612 for the three-month period ended March 31, 2001, as compared to the same period in 2000. Operating revenues increased by $726,079 (or 11.6%) after provision for uncollectibles, to $6,968,443 for the three-month period ended March 31, 2001 as compared to $6,242,364 for the corresponding period of 2000. The change in operating revenues was due to the increases in other services and sales of $504,732 (or 17.9%), network access and long distance service of $133,413 (or 5.6%) and local network service of $89,182 (or 8.7%) during the period as compared to the same three month period of 2000. Operating expenses increased by $452,336 (or 10.4%) to $4,808,161 for the three-month period ended March 31, 2001 as compared to the same period in 2000. Increased costs of trunkline agreements (approximately $305,400) and salaries and benefits ($275,900) were partially offset by decreases in costs for non-qualified pension expense ($68,000) and employment advertising ($40,000). Non-operating income and expenses increased by $262,755 from $777,101 in the three-month period ended March 31, 2000 to $1,039,856 in the same period of 2001 largely as a result of improved earnings in the Company's cellular partnership. (See Liquidity and Capital Resources below). LIQUIDITY AND CAPITAL RESOURCES - The Company's working capital decreased to ($2,318,866) at March 31, 2001 compared to ($868,568) at March 31, 2000 largely due to the payment of the Company's $3,000,000 Series I bond at its maturity on May 1, 2000. The Company holds a 7.5% limited partnership interest in the cellular mobile telephone partnership, Verizon Wireless, 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. The Company's share in the partnership's earnings was approximately $1,007,700 during the first three months of 2001, compared to $726,000 for the corresponding 2000 period. The Company has two wholly owned subsidiaries which belong to the telephone segment of its operations. 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 $97,000 in WVMT since its operations began on April 1, 1989. WVMT earned approximately $6,600 during the first three months of 2001, compared to $18,700 for the corresponding 2000 period. 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 $105,300 during the first three months of 2001, compared to $104,700 for the corresponding 2000 period. Hometown Online, Inc. ("ONLINE"), another wholly-owned subsidiary, was established to provide connectivity to the Internet as well as local and regional information services to personal computer users. 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 $680,000 in ONLINE since its inception. ONLINE earned approximately $24,000 during the first three months of 2001, compared to $92,000 for the corresponding 2000 period. 8 The Company has an 8.9% ownership interest in Hudson Valley DataNet ("HVDN"), L.L.C., a competitive telecommunications company that plans to offer high-speed bandwidth throughout the region in which the company competes. During 2000 the Company made a capital contribution to HVDN of $1,000,000. No further capital contributions are currently scheduled, although the Company may voluntarily increase or be asked to increase its investment from time to time. The Company also has a 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. The Telecommunications Act of 1996 (the "Act") creates a nationwide structure in which competition is allowed and encouraged between local exchange carriers, interexchange carriers, competitive access providers, cable TV companies and other entities. The markets affected first have been the regional toll areas in both states. Regional toll competition was implemented in New York on January 1, 1997 and in New Jersey in May 1997. The competition in these areas has had the effect of reducing the Company's revenues. The reduction in regional toll revenues for the first three months of 2001 was $24,466 (or 9.4%) to $237,344 from $261,811 in New York and $40,263 (or 10.4%) to $347,529 from $387,792 in New Jersey. Under the Act the Company itself can provide competitive local exchange telephone service outside its franchised territory. The Company is currently competing with Citizen's Telecommunications of New York in the Middletown, New York area for local service through access lines. The Company is reviewing plans to provide limited service in other surrounding areas in both New York and New Jersey. There can be no assurances that the Company will implement any such additional plans, or that other companies will not begin providing competitive local exchange telephone service in the Company's franchise territory, hereby having a further negative impact on the Company's revenues. On February 9, 2001 the Company filed a Petition with the New York State Public Service Commission ("NYSPSC") seeking authority to issue unsecured promissory notes (the "Notes") in the amount of $21,238,971. The Company intends to use the proceeds of the Notes to replace existing equipment, to refinance existing indebtedness and to purchase equipment to be used in connection with the Company's new video business. The Petition before the NYSPSC is currently pending and NYSPSC action, as well as action by any other relevant public utility commission, is expected, but not assured, during the third quarter of 2001. The Company has filed a petition with the NYSPSC seeking approval to reorganize its corporate structure in order to create a holding company that would separate its regulated local exchange operations from its deregulated operations. Under this reorganization plan, corporate management and administrative functions would remain at Warwick Valley Telephone Company, proposed to be rename WVT Communications Inc., which would become the unregulated holding company of a regulated local exchange subsidiary (proposed to be named Warwick Valley Telephone Company) and other unregulated subsidiaries. Before the Company may complete the reorganization plan, it must first obtain the approval of both the NYSPSC and its shareholders. Assuming all approvals are obtained, the Company expects to complete this reorganization by the end of 2001. CONSOLIDATION - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in the consolidated financial statements. Certain prior year amounts have been reclassified to conform with the financial statements in the Company"s Annual Report on Form 10-K for the year ended December 31, 2000. FORWARD LOOKING STATEMENTS - Certain statements contained in this Form 10-Q, including, without limitation, statements containing the words "believes," "anticipates," "intends," "expects" and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. 9 Such factors include, among others the following: general economic and business conditions, both nationally and in the geographic regions in which the Company operates; industry capacity; demographic changes; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; legislative proposals relating to the businesses in which the Company operates; competition; or the loss of any significant ability to attract and retain qualified personnel. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligations to update any such factors or to publicly announce the results of any revision to any of the forward-looking statements contained herein to reflect future events or developments. ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - The Company does not hold or issue derivatives instruments for any purposes or other financial instruments for trading purposes. The Company's only assets exposed to market risk are its interest bearing bank accounts, into which the Company deposits its excess operating funds on a daily basis. The Company's mortgage liabilities currently bear interest at fixed rates. If the Company refinances its liabilities when they mature the nature and amount of the applicable interest rate or rates will be determined at that time. The Company also has a line of credit which accrues interest at 0.75% below prime rate. On May 1, 2000 the Company repaid its $3,000,000 Series I bond with short-term borrowing. The Company has the option of renewing such short-term borrowing every thirty, sixty or ninety days at prime rate or LIBOR rate plus 1.75%. PART II - OTHER INFORMATION ITEMS 1. (Legal Proceedings) - None, 2 (Changes in Securities) - None, 3 (Defaults Upon Senior Securities) - None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - At the Company's 2001 Annual Meeting of Shareholders held on April 27, 2001, Wisner H. Buckbee, Dr. Joesph E. DeLuca and Fred M. Knipp were elected as directors for three-year terms. The terms of Howard Conklin, Jr., Herbert Gareiss, Jr., Philip S. Demarest, Corinna S. Lewis, Robert J. DeValentino, Henry L. Nielsen and Lynn M. Pike continued following the meeting. Matters voted on at the meeting and the results of each vote are as follows: For Against Abstain --- ------- ------- 1. Set the number of directors at 1,215,521 669 4,560 ten until the next annual meeting For Abstain --- ------- 2. Election of directors - Wisner H. Buckbee 1,219,631 1,119 Dr. Joseph E. DeLuca 1,219,628 1,122 Fred M. Knipp 1,219,631 1,119 For Against Abstain --- ------- ------- 3. Ratify the appointment of 1,217,730 2,100 920 Bush and Germain, P.C. as the independent public account- ants of the Company 10 ITEM 5. OTHER INFORMATION a) Election of Officers At its meeting on April 27, 2001 immediately following the 2001 Annual Meeting of Shareholders, the Board of Directors elected the following persons to the positions set forth opposite their names: Wisner H. Buckbee - Chairman of the Board Henry L. Nielsen, Jr. - Vice Chairman of the Board M. Lynn Pike - President Herbert Gareiss, Jr. - Vice President Larry Drake - Vice President Brenda A. Schadt - Vice President Barbara Barber - Secretary Robert A. Sieczek - Treasurer Bonnie A. Jackowitz - Assistant Secretary Colleen M. Shannon - Assistant Secretary Dorinda M. Masker - Assistant Treasurer ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits - Not applicable b) Reports on Form 8-K - Not applicable 11 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Warwick Valley Telephone Company -------------------------------- Registrant Date 5/15/01 /S/ Herbert Gareiss, Jr. ------- -------------------------------- Herbert Gareiss, Jr., Vice President (Duly Authorized Officer) Date 5/15/01 /S/ Robert A. Sieczek ------- -------------------------------- Robert A. Sieczek, Treasurer (Principal Financial and Chief Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----