UNITED STATES
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, 2013
OR
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 000-35724
Alteva, Inc.
(Exact name of registrant as specified in its charter)
New York |
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14-1160510 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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401 Market Street |
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Philadelphia, Pennsylvania |
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19106 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone, including area code: (877) 258-3722
Warwick Valley Telephone Company, 47 Main Street, Warwick, New York 10990
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark 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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
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Accelerated filer x |
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Non-accelerated filer o (Do not check if a smaller reporting company) |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). YES o NO x
The number of shares of Alteva, Inc. common stock outstanding as of July 29, 2013 was 6,146,006.
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Condensed Consolidated Balance Sheets as of June 30, 2013 (unaudited) and December 31, 2012 |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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Part I Financial Information
ALTEVA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share amounts)
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June 30, |
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December 31, |
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2013 |
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2012 |
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(Unaudited) |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
790 |
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$ |
1,799 |
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Accounts receivable, net of allowance for uncollectibles - $463 and $638, respectively |
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2,892 |
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3,320 |
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Prepaid income taxes |
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1,667 |
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1,222 |
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Deferred income taxes, current portion |
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268 |
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268 |
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Other current assets |
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1,682 |
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1,844 |
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Total current assets |
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7,299 |
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8,453 |
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Property, plant and equipment, net |
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15,535 |
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16,446 |
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Seat licenses, net |
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1,727 |
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1,514 |
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Intangible assets, net |
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6,256 |
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6,617 |
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Goodwill |
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9,121 |
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9,121 |
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Deferred income taxes |
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771 |
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874 |
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Other assets |
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613 |
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420 |
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Total assets |
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$ |
41,322 |
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$ |
43,445 |
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Liabilities and Shareholders Equity |
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Current liabilities |
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Short-term debt |
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$ |
14,764 |
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$ |
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Accounts payable |
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1,139 |
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886 |
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Advance billing and payments |
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390 |
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367 |
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Accrued taxes |
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625 |
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619 |
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Pension and postretirement benefit obligations, current portion |
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1,089 |
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1,089 |
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Accrued wages |
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1,454 |
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1,005 |
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Other accrued expenses |
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2,629 |
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2,754 |
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Total current liabilities |
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22,090 |
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6,720 |
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Long-term debt |
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147 |
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14,095 |
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Pension and postretirement benefit obligations |
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7,929 |
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8,095 |
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Total liabilities |
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30,166 |
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28,910 |
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Commitments and contingencies |
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Shareholders equity |
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Preferred shares - $100 par value; authorized and issued shares of 5; $0.01 par value authorized and unissued shares of 10,000 |
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500 |
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500 |
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Common stock - $0.01 par value; authorized shares of 10,000 issued 6,977 and 6,577 shares, respectively |
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70 |
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66 |
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Treasury stock - at cost, 830 and 818 shares, respectively of common stock |
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(7,612 |
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(7,486 |
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Additional paid-in capital |
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12,509 |
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11,826 |
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Accumulated other comprehensive loss |
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(3,813 |
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(3,999 |
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Retained earnings |
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9,502 |
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13,628 |
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Total shareholders equity |
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11,156 |
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14,535 |
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Total liabilities and shareholders equity |
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$ |
41,322 |
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$ |
43,445 |
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Please see accompanying condensed notes, which are an integral part of the condensed consolidated financial statements.
ALTEVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(amounts in thousands, except per share amounts)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2013 |
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2012 |
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2013 |
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2012 |
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Net Revenue |
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Unified Communications |
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$ |
3,920 |
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$ |
3,252 |
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$ |
7,876 |
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$ |
6,526 |
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Telephone |
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3,527 |
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3,634 |
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7,311 |
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7,441 |
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Total operating revenues |
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7,447 |
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6,886 |
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15,187 |
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13,967 |
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Operating expenses |
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Cost of services and products (exclusive of depreciation and amortization expense) |
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3,215 |
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3,434 |
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7,004 |
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6,982 |
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Selling, general and administrative expenses |
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6,329 |
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5,603 |
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13,681 |
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11,011 |
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Depreciation and amortization |
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961 |
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1,296 |
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1,963 |
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2,575 |
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Total operating expenses |
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10,505 |
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10,333 |
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22,648 |
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20,568 |
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Operating loss |
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(3,058 |
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(3,447 |
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(7,461 |
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(6,601 |
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Other income (expense) |
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Interest income (expense) |
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(178 |
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(112 |
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(414 |
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(169 |
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Income from equity method investment |
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3,250 |
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3,096 |
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6,500 |
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4,521 |
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Other income (expense), net |
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29 |
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136 |
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137 |
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131 |
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Total other income |
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3,101 |
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3,120 |
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6,223 |
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4,483 |
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Income (loss) before income taxes |
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43 |
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(327 |
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(1,238 |
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(2,118 |
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Income tax expense (benefit) |
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3 |
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(99 |
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(445 |
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(656 |
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Net income (loss) |
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40 |
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(228 |
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(793 |
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(1,462 |
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Preferred dividends |
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7 |
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7 |
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13 |
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13 |
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Income (loss) applicable to common stock |
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$ |
33 |
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$ |
(235 |
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$ |
(806 |
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(1,475 |
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Basic earnings (loss) per share |
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$ |
0.01 |
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(0.04 |
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$ |
(0.14 |
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$ |
(0.26 |
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Basic earnings (loss) per puttable common share |
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$ |
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(0.04 |
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$ |
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$ |
(0.26 |
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Diluted earnings (loss) per share |
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$ |
0.01 |
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$ |
(0.04 |
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$ |
(0.14 |
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$ |
(0.26 |
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Diluted earnings (loss) per puttable common share |
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$ |
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$ |
(0.04 |
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$ |
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$ |
(0.26 |
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Weighted average shares of common stock used to calculate earnings per share |
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Basic |
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5,775 |
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5,731 |
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5,760 |
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5,723 |
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Basic (puttable common) |
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272 |
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272 |
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Diluted |
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5,775 |
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5,731 |
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5,760 |
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5,723 |
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Diluted (puttable common) |
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272 |
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272 |
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Dividends declared per common share |
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$ |
0.27 |
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$ |
0.27 |
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$ |
0.54 |
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$ |
0.54 |
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Please see accompanying condensed notes, which are an integral part of the condensed consolidated financial statements.
ALTEVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(amounts in thousands)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2013 |
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2012 |
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2013 |
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2012 |
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Net income (loss) |
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$ |
40 |
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$ |
(228 |
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$ |
(793 |
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$ |
(1,462 |
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Other comprehensive income (loss): |
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Pension and postretirement plans: |
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Amounts included in net periodic benefit costs: |
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Amortization of transition asset |
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8 |
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14 |
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Prior service cost |
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(68 |
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(68 |
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(137 |
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(137 |
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Amortization of actuarial gain (loss) |
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213 |
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264 |
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427 |
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527 |
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Income tax expense (benefit) |
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52 |
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73 |
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104 |
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144 |
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Other comprehensive loss arising during period, net of tax expense |
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93 |
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131 |
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186 |
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260 |
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Comprehensive income (loss) |
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$ |
133 |
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$ |
(97 |
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$ |
(607 |
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$ |
(1,202 |
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Please see accompanying notes, which are an integral part of the condensed consolidated financial statements.
ALTEVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
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Six Months Ended June 30, |
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2013 |
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2012 |
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CASH FLOW FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
(793 |
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$ |
(1,462 |
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Adjustments to reconcile net loss to net cash provided (used) by operating activities: |
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Depreciation and amortization |
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1,963 |
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2,575 |
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Write off of deferred financing fees |
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61 |
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Allowance (recoveries) for uncollectibles |
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(175 |
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160 |
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Write off obsolete inventory |
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92 |
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Stock based compensation expense |
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687 |
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398 |
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Distribution in excess of income from equity investment included in net loss |
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(2,839 |
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(1,384 |
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Change in fair value of derivative liability |
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(65 |
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Changes in assets and liabilities: |
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Trade accounts receivable |
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603 |
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(970 |
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Other current assets |
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(510 |
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(841 |
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Accounts payable |
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253 |
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(121 |
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Other accruals and liabilitites |
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477 |
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(487 |
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Net cash used in operating activities |
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(181 |
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(2,197 |
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CASH FLOW FROM INVESTING ACTIVITIES |
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Capital expenditures |
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(414 |
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(1,499 |
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Acquired intangibles |
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(57 |
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Purchase of seat licenses |
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(333 |
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(405 |
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Distribution in excess of income from equity investment |
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2,839 |
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3,363 |
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Net cash provided by investing activities |
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2,035 |
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1,459 |
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CASH FLOW FROM FINANCING ACTIVITIES |
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Proceeds from borrowings |
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17,593 |
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1,725 |
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Repayment of borrowings |
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(16,878 |
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(759 |
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Payment of fees for acquisition of debt |
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(119 |
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Payment of amount due in connection with business acquisition |
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(118 |
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Purchase of treasury stock |
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(126 |
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(111 |
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Dividends (Common and Preferred) |
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(3,333 |
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(3,144 |
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Net cash used in financing activities |
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(2,863 |
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(2,407 |
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Net change in cash and cash equivalents |
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(1,009 |
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(3,145 |
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Cash and cash equivalents at beginning of period |
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1,799 |
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4,575 |
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Cash and cash equivalents at end of period |
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$ |
790 |
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$ |
1,430 |
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Supplemental disclosure of non-cash financing activities: |
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Capital lease obligations incurred for the acuisition of seat licenses |
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$ |
101 |
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$ |
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Treasury stock acquired in connection with cashless exercise of stock options |
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$ |
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$ |
677 |
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Please see the accompanying notes, which are an integral part of the condensed consolidated financial statements.
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS DESCRIPTION
Nature of Operations
Alteva, Inc., formerly Warwick Valley Telephone Company, (the Company) is a cloud-based communications company that provides Unified Communications (UC) solutions and enterprise hosted Voice over Internet Protocol (VoIP) and also operates as a regional Incumbent Local Exchange Carrier (ILEC) in southern Orange County, New York and northern New Jersey. Unless otherwise indicated or unless the context requires, all references to the Company means the Company and its wholly-owned subsidiaries. The Company delivers cloud-based UC solutions including VoIP, Hosted Microsoft Communication Services (OCS and Lync), fixed mobile convergence and advanced voice applications for a broad customer base including, medium and large-sized businesses and enterprise business customers. The Companys ILEC operations consist of providing local and toll telephone service to residential and business customers, Internet high-speed broadband service, and satellite television services provided by DIRECTV.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) 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 U.S. GAAP for complete financial statements. In the opinion of the Companys management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results and cash flows for the six month period ended June 30, 2013 are not necessarily indicative of the results that may be expected for the entire year. The consolidated balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
The condensed 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 condensed consolidated financial statements. The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Amended Annual Report on Form 10-K/A for the year ended December 31, 2012.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP 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 the financial statements, and the reported amounts of revenues and expenses during the reported period. Significant estimates include, but are not limited to, depreciation expense, allowance for doubtful accounts, long-lived assets, pension and postretirement expenses and income taxes. Actual results could differ from those estimates.
Revenue Recognition
The Company derives its revenue from the sale of UC services as well as traditional telephone service. The Company recognizes revenue when (i) persuasive evidence of an arrangement between the Company and the customer exists, (ii) the delivery of the product to the customer has occurred or service has been provided to the customer, (iii) the price to the customer is fixed or determinable, and (iv) collectability of the sales or service price is reasonably assured. Revenue is reported net of all applicable sales tax.
Unified Communication
The Companys UC services and solutions consist primarily of its hosted VoIP UC system, certain UC applications, and other professional services associated with installation and activation. Additionally, the Company offers customers the ability to purchase telephone equipment from the Company directly, or they can independently purchase such equipment.
Multiple-element arrangements primarily include the sale of telephone equipment, along with professional services associated with installation, activation and implementation services, as well as follow-on hosting services. When a UC arrangement involves multiple elements, revenue is allocated to each respective element. In the event that the Company enters into a multiple element arrangement and there are undelivered elements as of the balance sheet date, the Company assesses whether the elements are separable and have determinable fair values in assessing the amount of revenue to record. Allocation of revenue to elements of the arrangement is based on fair value of the element being sold on a stand-alone basis. Telephone equipment meets the criteria to qualify as a separate unit of accounting. The Company utilizes third party list prices as evidence for stand-alone value for its equipment sales.
The Company bills a portion of its monthly recurring hosted service revenue a month in advance. Any amounts billed and collected, but for which the service is not yet delivered, are included in deferred revenue. These amounts are recognized as revenues only when the service is delivered.
Equipment sales associated with the sale of telephone equipment is recognized upon delivery to the customer in accordance with the applicable shipping terms, as it is considered a separate earnings process. Other upfront fees, not including equipment, along with associated costs, up to but not exceeding these fees, are deferred and recognized over the estimated life of the customer relationship.
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Telephone
Revenue is earned from monthly billings to customers for local voice services, long distance, DSL, Internet services, hardware and other services. Revenue is also derived from charges for network access to the local exchange telephone network from subscriber line charges and from contractual arrangements for services such as billing and collection and directory advertising. Revenue is recognized in the period in which service is provided to the customer. Directory advertising revenue is recorded ratably over the life of the directory. With multiple billing cycles, the Company accrues revenue earned but not yet billed at the end of a quarter. The Company also defers services billed in advance and recognizes them as income when earned.
The Telephone Segment markets competitive service bundles which may include multiple deliverables. The base bundles consist of voice services (including a business or residential phone line), calling features and long distance services and customers may choose to add internet services to a base bundle package. Separate units of accounting within the bundled packages include voice services, long distance and Internet services. Revenue for all services included in bundles are recognized over the same service period, which is the time period in which the service is provided to the customer.
Certain revenue is realized under pooling arrangements with other service providers and is divided among the companies based on respective costs and investments to provide the services. The companies that take part in pooling arrangements may adjust their costs and investments for a period of two years, which causes the dollars distributed by the pool to be adjusted retroactively. The Company believes that recorded amounts represent reasonable estimates of the final distribution from these pools. However, to the extent that the companies participating in these pools make adjustments, there will be corresponding adjustments to the Companys recorded revenue in future periods.
Certain revenue from these pooling arrangements which includes Universal Service Funds (USF) and National Exchange Carrier Association (NECA) pool settlements, accounted for 5% and 8% of the Companys consolidated revenues for the three months ended June 30, 2013 and 2012, respectively, and 6% and 8% of the Companys consolidated revenues for the six months ended June 30, 2013 and 2012, respectively.
Goodwill
Goodwill represents the excess of the purchase price of an acquired business over the net fair value of identifiable assets acquired and liabilities assumed. Goodwill is not amortized, but rather is assessed for impairment at least annually. The Company tests goodwill for impairment annually on October 1, or whenever events or circumstances indicate an impairment. If it is determined that an impairment has occurred, the Company will record a write down of the carrying value and record the charge for the impairment as an operating expense in the period the determination is made.
The Unified Communications reporting unit includes $9.1 million of goodwill as of June 30, 2013, resulting from the Companys acquisition of certain assets and certain liabilities of Alteva, LLC in 2011. No events or circumstances occurred during the quarter ended June 30, 2013 that would have more likely than not reduced the fair value of this reporting unit below its carrying value.
Materials and Supplies
Material and supplies are carried at average cost and consisted of principally material and supply finished goods as of June 30, 2013 and December 31, 2012. Material and supplies was approximately $0.4 million and $0.5 million as of June 30, 2013 and December 31, 2012, respectively, and is included in other current assets on the balance sheet.
Income Taxes
The Company records deferred taxes that arise from temporary differences between the financial statement and the 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 tax assets and deferred tax liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment. The Companys deferred taxes result principally from differences in the timing of depreciation and in the accounting for pensions and other postretirement benefits. A valuation allowance is recorded against the deferred tax assets which are not expected to be realized.
Accounting Policies
There were no material changes to the Companys other accounting policies as presented in Item 8 of the Companys Amended Annual Report on Form 10-K/A for the year ended December 31, 2012.
NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS
In December 2011, an Accounting Standards Update (ASU) regarding balance sheet disclosures of offsetting assets and liabilities was issued and the scope was clarified in January 2013. This update requires disclosure on information about offsetting and related arrangements to enable users of an entitys financial statements to understand the effect of those arrangements on its financial position. This applies to derivatives accounted for in accordance with Topic 815, including bifurcated embedded instruments, repurchase agreements and reverse repurchase agreements and securities borrowings and securities lending transactions. An entity is required to apply this update for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by this update retrospectively for all comparative periods presented. The Company adopted this standard January 1, 2013 and it did not have a material impact on its disclosures or consolidated financial statements.
In February 2013, an ASU regarding the reporting of amounts reclassified out of accumulated other comprehensive income was issued. This update requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP. An entity is required to apply the update prospectively
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for reporting periods beginning after December 15, 2012. The Company adopted this standard effective January 1, 2013 and it did not have a material impact on its disclosures or consolidated financial statements.
NOTE 4: EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of common stock adjusted to include the effect of potentially dilutive securities. Potentially dilutive securities include incremental shares issuable upon exercise of outstanding stock options and shares of unvested restricted stock. Diluted earnings (loss) per share exclude all dilutive securities if their effect is anti-dilutive.
The Companys restricted stock awards are considered participating securities because they contain non-forfeitable rights to dividends. Under the two-class method, earnings per share (EPS) is computed by dividing earnings allocated to common shareholders by the weighted-average number of common shares outstanding for the period. In applying the two-class method, earnings are allocated to both shares of common stock and participating securities based on their respective weighted-average shares outstanding for the period.
For the three months ended June 30, 2013, the Company analyzed its EPS using the two-class method and determined that EPS was the same for both the common stock and the participating securities during this period.
For the three months ended June 30, 2012 and for the six months ended June 30, 2013 and 2012, the Company experienced a net loss. As a result, the effect of participating securities was excluded from the computation of basic and diluted EPS. The net losses were not allocated because the restricted stockholders are not required to fund losses.
The weighted average number of shares of common stock used in basic and diluted earnings per share for the three and six months ended June 30, 2013 and 2012 is as follows:
|
|
Three Months Ended June 30, |
| ||||
(amounts in thousands, except for per share) |
|
2013 |
|
2012 |
| ||
NUMERATOR: |
|
|
|
|
| ||
Net income (loss) before participating securities |
|
$ |
33 |
|
$ |
(235 |
) |
Less: income applicable to participating securities (1) |
|
(2 |
) |
|
| ||
Net income (loss) applicable to common stockholders |
|
$ |
31 |
|
$ |
(235 |
) |
|
|
|
|
|
| ||
DENOMINATOR: |
|
|
|
|
| ||
Weighted average shares of common stock |
|
|
|
|
| ||
used in basic earnings per share |
|
5,775 |
|
5,459 |
| ||
Effects of puttable common stock (2) |
|
|
|
272 |
| ||
Weighted average shares outstanding - Basic and Diluted (3) |
|
5,775 |
|
5,731 |
| ||
|
|
|
|
|
| ||
EPS: |
|
|
|
|
| ||
Net income (loss) per share - Basic and Diluted |
|
$ |
0.01 |
|
$ |
(0.04 |
) |
(1) For the three months ended June 30, 2013, the Company had 0.4 million nonvested restricted stock that are considered participating securities to which income is allocated. For the three months ended June 30, 2012, the Company had 0.1 million nonvested participating securities. As the participating securities do not participate in losses, there was no allocation of loss for the period.
(2) Included in the weighted average shares basic for 2012 were puttable common shares that arose from the Alteva, LLC acquisition in August 2011. During the second half of 2012, all of the puttable shares were either exercised or the put option was terminated and are no longer outstanding.
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(3) For the three months ended June 30, 2013, 0.2 million potentially dilutive shares related to out of the money common stock options were excluded from EPS, as their effect was anti-dilutive. For the three months ended June 30, 2012, 0.2 million potentially dilutive shares related to out of the money stock options were excluded from EPS as their effect was anti-dilutive.
|
|
Six Months Ended June 30, |
| ||||
(amounts in thousands, except for per share) |
|
2013 |
|
2012 |
| ||
NUMERATOR: |
|
|
|
|
| ||
Net income (loss), before participating securities |
|
$ |
(806 |
) |
$ |
(1,475 |
) |
Less: income applicable to participating securities |
|
|
|
|
| ||
Net income (loss) applicable to common stockholders |
|
$ |
(806 |
) |
$ |
(1,475 |
) |
|
|
|
|
|
| ||
DENOMINATOR: |
|
|
|
|
| ||
Weighted average shares of common stock |
|
|
|
|
| ||
used in basic earnings per share |
|
5,760 |
|
5,451 |
| ||
Effects of puttable common stock (2) |
|
|
|
272 |
| ||
Weighted average shares outstanding - Basic and Diluted (3) |
|
5,760 |
|
5,723 |
| ||
|
|
|
|
|
| ||
EPS: |
|
|
|
|
| ||
Net income (loss) per share - Basic and Dilutive |
|
$ |
(0.14 |
) |
$ |
(0.26 |
) |
(1) For the six months ended June 30, 2013 and 2012, the Company had 0.4 million and 0.1 million nonvested restricted stock that are considered participating securities to which income is allocated, respectively. As the participating securities do not participate in losses, there was no allocation of loss for the periods.
(2) Included in the weighted average shares basic for 2012 were puttable common shares that arose from the Alteva, LLC acquisition in August 2011. During the second half of 2012, all of the puttable shares were either exercised or the put option was terminated and are no longer outstanding.
(3) Basic and diluted weighted average shares were the same for the six months ended June 30, 2013 and 2012 because the effects of the potentially dilutive securities were anti-dilutive and were excluded from the calculation. Such securities included 0.2 million and 0.1 million common stock options at June 30, 2013 and June 30, 2012, respectively.
NOTE 5: SEAT LICENSES AND OTHER INTANGIBLE ASSETS
Intangible assets with finite lives are amortized over their respective estimated useful lives to their estimated residual value. Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The components of seat licenses are as follows:
|
|
Estimated |
|
Gross |
|
Accumulated |
|
Net |
| |||
($ in thousands) |
|
Useful Lives |
|
Value |
|
Amortization |
|
Value |
| |||
As of June 30, 2013 |
|
|
|
|
|
|
|
|
| |||
Seat licenses |
|
5 years |
|
$ |
2,506 |
|
$ |
(779 |
) |
$ |
1,727 |
|
|
|
Estimated |
|
Gross |
|
Accumulated |
|
Net |
| |||
($ in thousands) |
|
Useful Lives |
|
Value |
|
Amortization |
|
Value |
| |||
As of December 31, 2012 |
|
|
|
|
|
|
|
|
| |||
Seat licenses |
|
5 years |
|
$ |
2,072 |
|
$ |
(558 |
) |
$ |
1,514 |
|
The components of other intangible assets are as follows:
|
|
Estimated |
|
Gross |
|
Accumulated |
|
Net |
| |||
($ in thousands) |
|
Useful Lives |
|
Value |
|
Amortization |
|
Value |
| |||
As of June 30, 2013 |
|
|
|
|
|
|
|
|
| |||
Customer relationships |
|
8 years |
|
$ |
5,400 |
|
$ |
(1,293 |
) |
$ |
4,107 |
|
Trade name |
|
15 years |
|
2,400 |
|
(307 |
) |
2,093 |
| |||
Domain name |
|
15 years |
|
58 |
|
(2 |
) |
56 |
| |||
Total |
|
|
|
$ |
7,858 |
|
$ |
(1,602 |
) |
$ |
6,256 |
|
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
Estimated |
|
Gross |
|
Accumulated |
|
Net |
| |||
($ in thousands) |
|
Useful Lives |
|
Value |
|
Amortization |
|
Value |
| |||
As of December 31, 2012 |
|
|
|
|
|
|
|
|
| |||
Customer relationships |
|
8 years |
|
$ |
5,400 |
|
$ |
(956 |
) |
$ |
4,444 |
|
Trade name |
|
15 years |
|
2,400 |
|
(227 |
) |
2,173 |
| |||
Total |
|
|
|
$ |
7,800 |
|
$ |
(1,183 |
) |
$ |
6,617 |
|
NOTE 6: SEGMENT INFORMATION
The Companys segments are strategic business units that offer different products and services and are managed as UC and Telephone services. The Company evaluates the performance of the segments based upon factors such as revenue growth, expense containment, market share and operating results.
The UC segment provides enterprise hosted VoIP services, wholesale carrier services and conference services.
The Telephone segment provides telecommunications services including local, network access, long distance services, wireless, broadband, satellite TV service and directory services.
The segment results presented below are not necessarily indicative of the results of operations these segments would have achieved had they operated as stand-alone entities during the periods presented.
Segment balance sheet information as of June 30, 2013 and December 31, 2012 is set forth below:
($ in thousands) |
|
June 30, 2013 |
|
December 31, 2012 |
| ||
Segment assets |
|
|
|
|
| ||
Unified Communications |
|
$ |
22,800 |
|
$ |
23,500 |
|
Telephon |
|
18,522 |
|
19,945 |
| ||
Total assets |
|
$ |
41,322 |
|
$ |
43,445 |
|
Segment statement of operations information for the three months ended June 30, 2013 and 2012 is set forth below:
|
|
For the three months ended |
| ||||||||||||||||
|
|
June 30, 2013 |
|
June 30, 2012 |
| ||||||||||||||
|
|
Unified |
|
Telephone |
|
Consolidated |
|
Unified |
|
Telephone |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Revenues |
|
$ |
3,920 |
|
$ |
3,527 |
|
$ |
7,447 |
|
$ |
3,252 |
|
$ |
3,634 |
|
$ |
6,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cost of services and products |
|
2,015 |
|
1,200 |
|
3,215 |
|
2,198 |
|
1,236 |
|
3,434 |
| ||||||
Selling, general and administrative expense |
|
3,863 |
|
2,466 |
|
6,329 |
|
3,724 |
|
1,879 |
|
5,603 |
| ||||||
Depreciation and amortization |
|
564 |
|
397 |
|
961 |
|
467 |
|
829 |
|
1,296 |
| ||||||
Total Operating Expenses |
|
6,442 |
|
4,063 |
|
10,505 |
|
6,389 |
|
3,944 |
|
10,333 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Loss |
|
$ |
(2,522 |
) |
$ |
(536 |
) |
$ |
(3,058 |
) |
$ |
(3,137 |
) |
$ |
(310 |
) |
$ |
(3,447 |
) |
Segment income statement information for the six months ended June 30, 2013 and 2012 is set forth below:
|
|
For the six months ended |
| ||||||||||||||||
|
|
June 30, 2013 |
|
June 30, 2012 |
| ||||||||||||||
|
|
Unified |
|
Telephone |
|
Consolidated |
|
Unified |
|
Telephone |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Revenues |
|
$ |
7,876 |
|
$ |
7,311 |
|
$ |
15,187 |
|
$ |
6,526 |
|
$ |
7,441 |
|
$ |
13,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cost of services and products |
|
4,585 |
|
2,419 |
|
7,004 |
|
4,504 |
|
2,478 |
|
6,982 |
| ||||||
Selling, general and administrative expense |
|
8,604 |
|
5,077 |
|
13,681 |
|
7,036 |
|
3,975 |
|
11,011 |
| ||||||
Depreciation and amortization |
|
1,182 |
|
781 |
|
1,963 |
|
894 |
|
1,681 |
|
2,575 |
| ||||||
Total Operating Expenses |
|
14,371 |
|
8,277 |
|
22,648 |
|
12,434 |
|
8,134 |
|
20,568 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Loss |
|
(6,495 |
) |
(966 |
) |
(7,461 |
) |
(5,908 |
) |
(693 |
) |
(6,601 |
) | ||||||
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: SEVERANCE
On March 5, 2013, the Company announced the termination of an employment agreement between the Company and Duane W. Albro (Mr. Albro), dated December 14, 2011 (the Employment Agreement), and the departure of Mr. Albro as Chief Executive Officer of the Company, effective immediately.
Under the terms of the separation agreement signed in May 2013, and consistent with the Employment Agreement, Mr. Albro received a lump-sum cash payment of $470,000, which represented one years annual salary and a lump-sum separation benefit, which was paid in the second quarter of 2013. Also under the separation agreement, the Company accelerated the unvested portions of Mr. Albros equity based awards, which was accounted for as a forfeiture and issuance of new award equivalent to his unvested awards at his departure date. The revaluation of the new awards, along with their immediate vesting, resulted in a nominal recognition of non-cash expense during the second quarter of 2013.
On May 21, 2013, the Company announced a reduction in workforce of its Warwick, New York facility of approximately 17% due to the decline in work associated with the Telephone segment. Total expense recognized in selling general and administrative expenses during the second quarter of 2013 related to this reduction was $0.3 million. As of June 30, 2013, the liability remained at $0.3 million, which the Company expects to pay out through August 2014.
NOTE 8: ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP
The Company is a limited partner in the Orange County-Poughkeepsie Limited Partnership (the O-P) and had an 8.108% equity interest in the O-P as of June 30, 2013 and 2012, which is accounted for under the equity method of accounting. The majority owner and general partner of the O-P is Verizon Wireless of the East L.P.
On May 26, 2011, the Company entered into an agreement with Verizon Wireless of the East LP, the general partner and a limited partner, and Cellco Partnership, the other limited partner, in the O-P to make certain changes to the O-P partnership agreement which, among other things, specifies that the O-P will provide 4G cellular services (the 4G Agreement). The 4G Agreement converted the O-Ps business from a wholesale business to a retail business. The 4G Agreement provides for guaranteed annual cash distributions to the Company from the O-P through 2013. For 2012, the annual cash distribution from the O-P was $13.0 million and for 2013 the annual cash distributions will be $13.0 million. Annual cash distributions are paid in equal quarterly amounts. The 4G Agreement also gives the Company the right (the Put) to require one of the O-Ps limited partners to purchase all the Companys ownership interest in the O-P during April 2013 or April 2014 for an amount equal to the greater of (a) $50 million or (b) the product of five (5) times 0.081081 times the O-Ps EBITDA, as defined in the 4G Agreement. The Company did not exercise the Put during April 2013.
The conversion of the O-P from a wholesale business to a retail business in 2011 pursuant to the 4G Agreement increased the cellular service costs and operating expenses incurred by the O-P, which caused a subsequent reduction in the O-Ps net income primarily due to the inclusion of sales and marketing expenses. Annual cash distributions the Company receives from the O-P will remain unchanged through 2013 pursuant to the terms of the 4G Agreement.
Pursuant to the equity method of accounting, the Company is required to record the income from the O-P as an increase to the Companys investment account. As a result of receiving the fixed guaranteed cash distributions from the O-P in excess of the Companys cumulative proportionate share of the O-P income, the investment account was reduced to zero during the first six months of 2012. These payments are shown as a return on investment in the investing section of the Condensed Consolidated Statements of Cash Flows. Thereafter, the Company recorded the fixed guaranteed cash distributions that were received from the O-P in excess of the proportionate share of the O-P income directly to the Companys statement of operations as other income. All payments received in excess of the Companys proportionate share of the O-P income are considered a return of investment and is shown in the investing section of the Condensed Consolidated Statements of Cash Flows.
The following summarizes the income statement (unaudited) for the three months ended June 30, 2013 and 2012 that the O-P provided to the Company:
|
|
Three Months Ended |
| ||||
($ in thousands) |
|
June 30, 2013 |
|
June 30, 2012 |
| ||
Net sales |
|
$ |
81,176 |
|
$ |
76,180 |
|
Cellular service cost |
|
36,307 |
|
34,305 |
| ||
Operating expenses |
|
22,237 |
|
20,755 |
| ||
Operating income |
|
22,632 |
|
21,120 |
| ||
Other income |
|
4 |
|
4 |
| ||
Net income |
|
$ |
22,636 |
|
$ |
21,124 |
|
|
|
|
|
|
| ||
Company share |
|
$ |
1,835 |
|
$ |
1,713 |
|
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following summarizes the income statement (unaudited) for the six months ended June 30, 2013 and 2012 that the O-P provided to the Company:
|
|
Six Months Ended |
| ||||
($ in thousands) |
|
June 30, 2013 |
|
June 30, 2012 |
| ||
Net sales |
|
$ |
161,068 |
|
$ |
150,416 |
|
Cellular service cost |
|
72,287 |
|
70,353 |
| ||
Operating expenses |
|
43,635 |
|
41,375 |
| ||
Operating income |
|
45,146 |
|
38,688 |
| ||
Other income |
|
7 |
|
6 |
| ||
Net income |
|
$ |
45,153 |
|
$ |
38,694 |
|
|
|
|
|
|
| ||
Company share |
|
$ |
3,661 |
|
$ |
3,137 |
|
The following summarizes the balance sheet as of June 30, 2013 (unaudited) and December 31, 2012 that O-P provided to the Company:
|
|
As of |
| ||||
($ in thousands) |
|
June 30, 2013 |
|
December 31, 2012 |
| ||
Current assets |
|
$ |
21,901 |
|
$ |
22,370 |
|
Property, plant and equipment, net |
|
41,130 |
|
41,072 |
| ||
Total assets |
|
$ |
63,031 |
|
$ |
63,442 |
|
|
|
|
|
|
| ||
Total liabilities |
|
$ |
22,590 |
|
$ |
30,162 |
|
Partners capital |
|
40,441 |
|
33,280 |
| ||
Total liabilities and partners capital |
|
$ |
63,031 |
|
$ |
63,442 |
|
NOTE 9: PENSION AND POSTRETIREMENT OBLIGATIONS
The components of net periodic cost (gain) for the three months ended June 30, 2013 and 2012 are as follows:
|
|
Pension Benefits |
|
Postretirement Benefits |
| ||||||||
|
|
Three Months Ended |
| ||||||||||
($ in thousands) |
|
June 30, 2013 |
|
June 30, 2012 |
|
June 30, 2013 |
|
June 30, 2012 |
| ||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
3 |
|
$ |
4 |
|
Interest cost |
|
190 |
|
192 |
|
57 |
|
54 |
| ||||
Expected return on plan assets |
|
(219 |
) |
(219 |
) |
(44 |
) |
(43 |
) | ||||
Amortization of transition asset |
|
|
|
|
|
7 |
|
7 |
| ||||
Amortizaton of prior service cost |
|
14 |
|
14 |
|
(82 |
) |
(83 |
) | ||||
Amortization of net loss |
|
227 |
|
231 |
|
33 |
|
34 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net periodic benefit cost (gain) |
|
$ |
212 |
|
$ |
218 |
|
$ |
(26 |
) |
$ |
(27 |
) |
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The components of net periodic cost (gain) for the six months ended June 30, 2013 and 2012 are as follows:
|
|
Pension Benefits |
|
Postretirement Benefits |
| ||||||||
|
|
Six Months Ended |
| ||||||||||
($ in thousands) |
|
June 30, 2013 |
|
June 30, 2012 |
|
June 30, 2013 |
|
June 30, 2012 |
| ||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
7 |
|
$ |
8 |
|
Interest cost |
|
380 |
|
383 |
|
113 |
|
108 |
| ||||
Expected return on plan assets |
|
(438 |
) |
(438 |
) |
(87 |
) |
(86 |
) | ||||
Amortization of transition asset |
|
|
|
|
|
14 |
|
14 |
| ||||
Amortizaton of prior service cost |
|
28 |
|
28 |
|
(165 |
) |
(165 |
) | ||||
Amortization of net loss |
|
454 |
|
463 |
|
66 |
|
67 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net periodic benefit cost (gain) |
|
$ |
424 |
|
$ |
436 |
|
$ |
(52 |
) |
$ |
(54 |
) |
The Company expects to contribute a total of $1.1 million to its pension and postretirement benefit plans in 2013. For the six months ended June 30, 2013, the Company has contributed $0.3 and $0.1 million of this amount to its pension and postretirement benefit plans, respectively. Amounts reclassified from other comprehensive income (loss) related to the Companys pension and post retirement obligations were not material for the three and six months ended June 30, 2013 and 2012.
NOTE 10: DEBT OBLIGATIONS
Debt obligations consisted of the following as of June 30, 2013 and December 31, 2012:
|
|
As of |
| ||||
($ in thousands) |
|
June 30, 2013 |
|
December 31, 2012 |
| ||
Long-term debt: |
|
|
|
|
| ||
Capital lease and other borrowings |
|
$ |
147 |
|
$ |
|
|
CoBank ACB revolving loan facility |
|
|
|
8,595 |
| ||
Provident Bank credit line |
|
|
|
4,000 |
| ||
TriState credit line |
|
|
|
1,500 |
| ||
|
|
147 |
|
14,095 |
| ||
Short-term debt: |
|
|
|
|
| ||
TriState credit line |
|
14,523 |
|
|
| ||
Capital lease and other borrowings |
|
241 |
|
|
| ||
|
|
14,764 |
|
|
| ||
Total debt obligations |
|
$ |
14,911 |
|
$ |
14,095 |
|
As of December 31, 2012, the Company had three debt facilities. The Company had a revolving loan facility with CoBank, ACB (CoBank) for $10.0 million with an interest rate (payable quarterly in arrears) at LIBOR plus 4.50%. The interest rate on the outstanding balance under the revolving loan facility with CoBank as of December 31, 2012 was 4.71%. The Company had an unsecured line of credit with Provident Bank (Provident) of $4.0 million of which the entire amount had been drawn down at December 31, 2012. The interest rate (payable monthly in arrears) on the Provident unsecured line of credit was fixed at 2.50%. The Company had a credit agreement with TriState Capital Bank (TriState) that provided for borrowings up to $2.5 million, with a variable interest rate based on either LIBOR or a Base Rate, as defined in the credit agreement, plus an applicable margin 4.0% or 3.0%, respectively.
On March 11, 2013, the Company entered into a credit agreement with TriState to provide for borrowings up to $17.0 million with the ability to increase the facility for borrowings up to $20.0 million with the participation of another lender. All borrowings become due and payable on June 30, 2014. The TriState borrowings incur interest at a variable rate based on either LIBOR or a Base Rate, as defined in the credit agreement, plus an applicable margin of 3.50% or 2.00%, respectively. Under the terms of the TriState credit agreement, the Company is required to comply with certain loan covenants, which include, but are not limited to, the achievement of certain financial ratios as well as certain financial reporting requirements. The Company must maintain a consolidated liquidity ratio, as defined in the TriState credit agreement, in excess of 1.0 to 1.0, including the value of the Put calculated in accordance with the 4G Agreement, until April 30, 2014. The Company is required to obtain the consent of TriState prior to agreeing to any amendment to the agreements the Company has with the O-P. The Companys obligations under the TriState credit facility are secured by all of the Companys asset and guaranteed by all of the Companys wholly-owned subsidiaries except for the Companys ILEC subsidiary. The ILEC subsidiary entered into a negative pledge agreement with TriState whereby the ILEC subsidiary agreed not to pledge any of its assets as collateral or lien to be placed on any of its assets. On March 11, 2013, the Company borrowed $15.2 million to repay all borrowings outstanding under the CoBank, Provident and prior TriState credit facilities and retired those facilities.
The Company entered into a capital finance agreement for $0.1 million at interest rate of 8.55% and a maturity date of 3 years. The Company utilizes capital leases to fund equipment and software purchases.
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: INCOME TAXES
Generally, for interim tax reporting, one overall estimated annual effective tax rate is computed for tax jurisdictions not subject to valuation allowance and applied to the year to date ordinary income/loss. The effective tax rate for the three months ended June 30, 2013 and 2012 was 7.0% and 30.3%, respectively, and the effective tax rate for the six months ended June 30, 2013 and 2012 was 36.0% and 31.0%, respectively. The adjusted tax rate for the three and six months ended June 30, 2013 differed from the U.S. statutory rate primarily due to state tax losses for which the Company does not receive benefit as well as other nondeductible expenses.
As of June 30, 2013 and December 31, 2012, the Company maintained a valuation allowance on certain state net operating loss (principally New Jersey) carryforward deferred tax assets because management determined that it was not more likely than not that it would realize the benefits of such state deferred tax assets.
As of June 30, 2013 and December 31, 2012, the Company had no liability for unrecognized tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense. For the six months ended June 30, 2013 and 2012, no interest expense or penalties were incurred relating to unrecognized tax benefits.
The Company and its subsidiaries file a U.S. federal consolidated income tax return. The U.S. federal statute of limitations remains open for the years 2009 and thereafter.
NOTE 12: SHAREHOLDERS EQUITY
A summary of the changes to shareholders equity for the six months ended June 30, 2013 is provided below:
|
|
Six Months Ended |
| ||||
($ in thousands) |
|
June 30, 2013 |
|
June 30, 2012 |
| ||
Shareholders equity, beginning of period |
|
$ |
14,535 |
|
$ |
26,153 |
|
Net income (loss) |
|
(793 |
) |
(1,462 |
) | ||
Dividends paid on common stock |
|
(3,320 |
) |
(3,131 |
) | ||
Dividends paid on preferred stock |
|
(13 |
) |
(13 |
) | ||
Stock based compensation |
|
687 |
|
398 |
| ||
Treasury stock purchases |
|
(126 |
) |
(789 |
) | ||
Exercise of stock options |
|
|
|
677 |
| ||
Changes in pension and postretirement benefit plans |
|
186 |
|
260 |
| ||
|
|
|
|
|
| ||
Shareholders equity, end of period |
|
$ |
11,156 |
|
$ |
22,093 |
|
NOTE 13: STOCK BASED COMPENSATION
The Company adopted and, at the annual meeting held on April 29, 2011, its shareholders approved, the Amended and Restated 2008 Long-Term Incentive Plan (the Amended and Restated LTIP) to assist the Company and its affiliates in attracting, motivating and retaining selected individuals to serve as employees, directors, consultants and advisors of the Company and its affiliates by providing incentives to such individuals through the ownership and performance of the Companys common stock. The Amended and Restated LTIP increased the total number of shares authorized under the Amended and Restated LTIP from 500,000 shares to 1,100,000 shares of common stock. The increases in the number of shares available under the Amended and Restated LTIP required approval from the New York Public Service Commission (NYPSC) and New Jersey Board of Public Utilities (NJBPU). As of March 31, 2012, the Company received approval from both the NYPSC and the NJBPU for the Amended and Restated LTIP. Shares available for grant under the Amended and Restated LTIP may be either authorized but unissued shares or shares that have been reacquired by the Company and designated as treasury shares. As of June 30, 2013 and December 31, 2012, 34,563 and 675,956 shares, respectively, of the Companys common stock were available for grant under the Amended and Restated LTIP. The Amended and Restated LTIP permits the issuance by the Company of awards in the form of stock options, stock appreciation rights, restricted stock and restricted stock units and performance shares. The exercise price per share of the Companys common stock purchasable under any stock option or stock appreciation right may not be less than 100% of the fair market value of one share of common stock on the date of grant. The term of any stock option or stock appreciation may not exceed ten years. The Amended and Restated LTIP also provides plan participants with a cashless mechanism to exercise their stock options. Issued restricted stock, stock options and restricted stock units are subject to vesting restrictions.
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Restricted Common Stock Awards
Stock-based compensation expense for restricted stock awards was $0.5 million and $0.2 million for the three months ended June 30, 2013 and 2012, respectively and $0.7 million and $0.3 million for the six months ended June 30, 2013 and 2012, respectively. Restricted stock awards are amortized over their respective vesting periods of two or three years. The Company records stock-based compensation for grants of restricted stock awards on a straight-line basis.
The following table summarizes the restricted common stock activity during the six-month period ended June 30, 2013:
|
|
June 30, 2013 |
| |||
Unvested Shares |
|
Shares |
|
Weighted |
| |
|
|
|
|
|
| |
Balance - nonvested at January 1, 2013 |
|
59,078 |
|
$ |
14.10 |
|
Granted |
|
420,824 |
|
10.19 |
| |
Vested |
|
(35,846 |
) |
12.09 |
| |
Forfeited |
|
(19,974 |
) |
14.64 |
| |
Balance - nonvested at June 30, 2013 |
|
424,082 |
|
$ |
10.37 |
|
The total fair value of restricted stock vested during the six-month period ended June 30, 2013 and 2012 was $0.4 million. As of June 30, 2013, $3.9 million of total unrecognized compensation expense related to restricted common stock is expected to be recognized over a weighted average period of approximately 3 years.
Stock Options
The following tables summarize stock option activity for the six-month period ended June 30, 2013, along with stock options exercisable at the end of the period:
|
|
For the Six Months Ended |
| ||||||||
|
|
June 30,2013 |
| ||||||||
Options |
|
Shares |
|
Weighted |
|
Weighted |
|
Aggregate |
| ||
|
|
|
|
|
|
|
|
|
| ||
Outstanding - Beginning of period |
|
263,554 |
|
$ |
14.02 |
|
|
|
|
| |
Stock options granted |
|
476,189 |
|
10.86 |
|
|
|
|
| ||
Exercised |
|
|
|
|
|
|
|
|
| ||
Forfeited |
|
(224,036 |
) |
12.45 |
|
|
|
|
| ||
Outstanding - End of period |
|
515,707 |
|
$ |
11.79 |
|
9 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||
Vested and Expected to Vest at June 30 |
|
489,922 |
|
|
|
|
|
$ |
|
| |
Exercisable at June 30 |
|
180,425 |
|
|
|
|
|
$ |
|
|
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Companys closing stock price on the last trading day, June 30, 2013, and the exercise price times the number of shares) that would have been received by the option holders had all the option holders exercised in-the-money options on June 30, 2013. This amount changes based on the fair market value of the Companys common stock.
ALTEVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the stock-based awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the three and six months ended June 30, 2013:
|
|
Three Months Ended |
|
Six Months Ended |
| ||
|
|
June 30, 2013 |
| ||||
Expected life (in years) |
|
4 |
|
6 |
| ||
Interest rate |
|
0.58 |
% |
0.97 |
% | ||
Volatility |
|
21.56 |
% |
27.89 |
% | ||
Dividend yield |
|
11.09 |
% |
10.78 |
% | ||
Weighted-average fair value per share at grant date |
|
$ |
0.06 |
|
$ |
0.50 |
|
The following table sets forth the total stock-based compensation expense resulting from stock options and restricted stock granted to employees that are included in the Companys consolidated statements of income for the three months ended and six months ended June 30, 2013 and 2012:
($ in thousands) |
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
Stock-Based Compensation Expense |
|
June 30, 2013 |
|
June 30, 2012 |
|
June 30, 2013 |
|
June 30, 2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cost of services and products |
|
$ |
3 |
|
$ |
|
|
$ |
6 |
|
$ |
|
|
Selling, general and administrative expenses |
|
466 |
|
206 |
|
681 |
|
398 |
| ||||
|
|
$ |
469 |
|
$ |
206 |
|
$ |
687 |
|
$ |
398 |
|
As of June 30, 2013, $0.2 million of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted average period of approximately 3 years.
NOTE 15: SUBSEQUENT EVENTS
The Company has evaluated subsequent events occurring after the balance sheet date. Based on this evaluation, the Company has determined that no subsequent events have occurred which require disclosure in the condensed consolidated financial statements.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained in this Quarterly Report on 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 our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and in the geographic regions in which we operate; industry capacity; our ability to continue to pay dividends; goodwill and long-lived asset impairment; changes in the Orange County-Poughkeepsie Limited Partnership (O-P) distributions; risks associated with the exercise of our option to sell our O-P interest back to Verizon; demographic changes; management turnover; technological changes and changes in consumer demand; existing governmental regulations and changes in or our failure to comply with, governmental regulations; legislative proposals relating to the businesses in which we operate; changes to the USF; risks associated with our unfunded pension liability; competition; the loss of any significant ability to attract and retain highly skilled personnel and any other factors that are described in Risk Factors. Given these uncertainties, current and prospective investors should be cautioned regarding reliance on such forward-looking statements. Except as required by law, we disclaim any obligation 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. For a further discussion of the matters described above, see Item 1A, Risk Factors in our Annual Report on Form 10-K/A for the year ended December 31, 2012.
Overview
Alteva, Inc., formerly Warwick Valley Telephone Company, (we, our or us) is a cloud-based communications company that provides Unified Communications (UC) solutions that unify an organizations communications systems, including enterprise hosted Voice over Internet Protocol (VoIP). We also operate a regional Incumbent Local Exchange Carrier (ILEC) in southern Orange County, New York and northern New Jersey. We deliver cloud-based UC solutions including enterprise hosted VoIP, Hosted Microsoft Communication Services (OCS and Lync), fixed mobile convergence and advanced voice applications for the desktop. By combining voice service with Microsoft Communications Services products, our customers receive a voice-enabled UC solution that integrates with existing business applications. Our ILEC operations consist of providing local and toll telephone service to residential and business customers, Internet high speed broadband service, and DIRECTV.
On May 16, 2013, as part of our annual shareholders meeting, our shareholders approved the proposal to amend our certificate of incorporation, changing our name from Warwick Valley Telephone Company to Alteva, Inc.
This discussion and analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.
Executive Summary
Revenues increased $0.5 million or 8% to $7.4 million for the three months ended June 30, 2013, in comparison to $6.9 million for the three months ended June 30, 2012. The increase in revenues was attributable to a 21% increase in revenues from our UC segment resulting from the addition of new customers on our platform. This increase was partially offset by the decrease in our Telephone segment due to the continued decline in access lines, partially offset by increases in Broadband and rate changes.
During the three months ended June 30, 2013, we had slightly positive net income, compared to a net loss of $0.2 million for the three months ended June 30, 2012. This increase was primarily attributable to the increase of $0.8 million, or 23%, in gross profit, calculated as net revenues less cost of services and products (exclusive of depreciation and amortization expense), driven by our increase in UC revenue and our ability to leverage our UC infrastructure.
Results of Operations for the Three Months Ended June 30, 2013 and 2012
The following table presents a summary of operating results for our UC and Telephone operating segments for the periods indicated:
|
|
Three months ended June 30, 2013 |
|
Three months ended June 30, 2012 |
| ||||||||||||||||
|
|
|
|
% of Total |
|
Segment |
|
Segment |
|
|
|
% of Total |
|
Segment |
|
Segment |
| ||||
($ in thousands) |
|
Revenue |
|
Revenue |
|
Profit (loss) |
|
Margin |
|
Revenue |
|
Revenue |
|
Profit (loss) |
|
Margin |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unified Communications |
|
$ |
3,920 |
|
53 |
% |
$ |
(2,522 |
) |
(64 |
)% |
$ |
3,252 |
|
47 |
% |
$ |
(3,137 |
) |
(96 |
)% |
Telephone |
|
3,527 |
|
47 |
% |
(536 |
) |
(15 |
)% |
3,634 |
|
53 |
% |
(310 |
) |
(9 |
)% | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
|
$ |
7,447 |
|
100 |
% |
$ |
(3,058 |
) |
(41 |
)% |
$ |
6,886 |
|
100 |
% |
$ |
(3,447 |
) |
(50 |
)% |
OPERATING REVENUES
Operating revenues for the three months ended June 30, 2013 increased $0.5 million, or 8%, to $7.4 million from $6.9 million in the same period in 2012. This increase was due primarily to a 21% increase in revenues from the organic growth of our UC segment resulting from the addition of new customers on our platform.
Revenues for our UC segment increased 21% to $3.9 million for the three months ended June 30, 2013 from $3.3 million for the three months ended June 30, 2012. This increase was primarily due to an increase in recurring license and usage revenue of $0.5 million and in equipment revenue of $0.1 million resulting primarily from new customers.
Revenues for our Telephone segment decreased 3% to $3.5 million for the three months ended June 30, 2013 from $3.6 million for the three months ended June 30, 2012. The decrease was primarily due to the continued decline in access lines partially offset by increases in Broadband and rate changes.
OPERATING EXPENSES
Cost of Services and Products
The cost of services and products for the three months ended June 30, 2013 decreased $0.2 million or 6% to $3.2 million from $3.4 million for the same period in 2012 primarily as a result of lower carrier circuits cost due to initiatives to reduce costs in 2012 and 2013.
Cost of services and products for our UC segment decreased $0.2 million, or 8%, to $2.0 million for the three months ended June 30, 2013 from $2.2 million for the three months ended June 30, 2012. This decrease was primarily due to lower third-party carrier costs as part of our cost reduction initiative.
Cost of services and products for our Telephone segment remained consistent at $1.2 million for the three months ended June 30, 2013 and June 30, 2012.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended June 30, 2013 increased $0.7 million, or 13%, to $6.3 million from $5.6 million for the same period in 2012. This increase was primarily associated with severance costs related to management changes and the workforce reduction in our Telephone segment $0.3 million, as well as a $0.3 million increase in non-cash stock expense related to 2013 restricted stock and option grants. We believe that the current level of selling, general and administrative expenses are sufficient to support our business as we focus on growth and profitability.
Depreciation and Amortization Expense
Depreciation and amortization expense for the three months ended June 30, 2013 decreased $0.3 million, or 26%, to $1.0 million from $1.3 million for the same period in 2012. This is primarily due to the lower depreciable basis on our Telephone segment assets as a result of the $8.9 million write-down of property, plant and equipment during the three months ended December 31, 2012.
TOTAL OTHER INCOME (EXPENSE)
Total other income (expense) for the three months ended June 30, 2013 and 2012 remained consistent at $3.1 million.
Results of Operations for the Six Months Ended June 30, 2013 and 2012
The following table presents a summary of operating results for our UC and Telephone operating segments for the periods indicated:
|
|
Six months ended June 30, 2013 |
|
Six months ended June 30, 2012 |
| ||||||||||||||||
|
|
|
|
% of Total |
|
Segment |
|
Segment |
|
|
|
% of Total |
|
Segment |
|
Segment |
| ||||
($ in thousands) |
|
Revenue |
|
Revenue |
|
Profit (loss) |
|
Margin |
|
Revenue |
|
Revenue |
|
Profit (loss) |
|
Margin |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unified Communications |
|
$ |
7,876 |
|
52 |
% |
$ |
(6,495 |
) |
(82 |
)% |
$ |
6,526 |
|
47 |
% |
$ |
(5,908 |
) |
(91 |
)% |
Telephone |
|
7,311 |
|
48 |
% |
(966 |
) |
(13 |
)% |
7,441 |
|
53 |
% |
(693 |
) |
(9 |
)% | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
|
$ |
15,187 |
|
100 |
% |
$ |
(7,461 |
) |
(49 |
)% |
$ |
13,967 |
|
100 |
% |
$ |
(6,601 |
) |
(47 |
)% |
OPERATING REVENUES
Operating revenues for the six months ended June 30, 2013 increased $1.2 million, or 9%, to $15.2 million from $14.0 million during the same period in 2012. This increase was due primarily to a 21% increase in revenues from the organic growth of our UC segment resulting from the addition of new customers on our platform.
Revenues for our UC segment increased $1.4 million, or 21%, to $7.9 million for the six months ended June 30, 2013 from $6.5 million for the six months ended June 30, 2012. This increase was primarily due to an increase in recurring license and usage revenue of $0.8 million and equipment revenue of $0.6 million resulting primarily from the addition of new customers.
Revenues for our Telephone segment decreased $0.1 million, or 2%, to $7.3 million for the six months ended June 30, 2013 from $7.4 million for the six months ended June 30, 2012. The decrease was primarily due to the continued decline in access lines, partially offset by increases in Broadband and rate increases.
OPERATING EXPENSES
Operating expenses for the six months ended June 30, 2013 increased $2.1 million or 10% to $22.7 million from $20.6 million for the same period in 2012. This increase was primarily due to an increase of 24% in selling, general and administrative expenses associated with the growth of our UC segment, primarily from management changes and staff rationalization of $1.6 million as well as a $0.3 million increase in non-cash stock expense related to 2013 restricted stock and option grants. We believe that the current level of selling, general and administrative expenses are sufficient to support our business as we focus on growth and profitability.
Cost of Services and Products
The cost of services and products remained consistent at $7.0 million for the six months ended June 30, 2013 and 2012.
Cost of services and products for our UC segment increased $0.1 million or 2% from $4.5 million for the six months ended June 30, 2012 to $4.6 million for the six months ended June 30, 2013 and decreased as a percentage of revenue from 69% to 58%. The decrease as a percentage of revenue was due to leveraging the UC infrastructure over a larger revenue base.
Cost of services and products for our Telephone segment remained consistent at $2.4 million for the six months ended June 30, 2012 and 2013.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months ended June 30, 2013 increased $2.7 million, or 24%, to $13.7 from $11.0 million for the same period in 2012. This increase was primarily associated with investments in personnel made to support the growth of the UC segment and severance costs related to management changes and staff rationalization of $1.6 million, as well as a $0.3 million increase in non-cash stock expense related to 2013 restricted stock and option grants. This increase was also due to the ramp-up of infrastructure in the second half of 2012 to support the growth of our UC segment. We believe that selling, general and administrative expenses are at adequate levels to support our near-term growth initiatives. We believe that the current level of selling, general and administrative expenses are sufficient to support our business as we focus on growth and profitability.
Depreciation and Amortization Expense
Depreciation and amortization expense for the six months ended June 30, 2013 decreased $0.6 million, or 24%, to $2.0 million from $2.6 million for the same period in 2012. This is primarily due to the lower depreciable basis on our Telephone segment assets as a result of the $8.9 million write-down of property, plant and equipment during the three months ended December 31, 2012.
TOTAL OTHER INCOME (EXPENSE)
Total other income (expense) for the six months ended June 30, 2013 increased $1.7 million or 39% to $6.2 million from $4.5 million in the same period of 2012. This increase is due primarily to the increase in our income from the equity method investment, which was $6.5 million for the six months ended June 30, 2013, an increase of 44%, or $2.0 million from the prior year quarter. During the second quarter of 2012, our remaining investment in the O-P was reduced to zero. As a result, all subsequent disbursements received from the O-P are recorded as other income. The annual cash distributions of $13.0 million we will receive in 2013 from the O-P remains unchanged pursuant to the terms of the 4G Agreement. For more information on the 4G Agreement and the accounting treatment of the distributions we receive from the O-P, see Note 8 to our Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
We had $0.8 million of cash and cash equivalents at June 30, 2013, as compared with $1.8 million at December 31, 2012. Our primary source of liquidity continues to be our guaranteed payments from the O-P pursuant to the 4G Agreement and borrowings under our credit facility. Pursuant to the terms of the 4G Agreement, we are guaranteed annual cash distributions from the O-P of $13.0 million for 2013. The O-Ps cash distributions are made to us on a quarterly basis. The distributions in excess of our proportionate share of O-P income are considered a return of our investment.
The 4G Agreement also gives us the right (the Put) to require one of the O-Ps limited partners to purchase all our ownership interest in the O-P during April 2014 for an amount equal to the greater of (a) $50 million or (b) the product of five (5) times 0.081081 times the O-Ps 2013 EBITDA, as defined in the 4G Agreement.
As of June 30, 2013, we had a working capital deficit of $14.8 million, which was primarily due to borrowings of $14.5 million under the TriState credit facility that matures on June 30, 2014. This debt was primarily incurred to fund the purchase of Alteva, LLC in 2011. We believe this working capital deficiency is short-term in nature and we expect to satisfy these short-term borrowings by extending or refinancing our debt before its maturity and, if necessary, utilizing cash distributions received from the O-P.
CASH FROM OPERATING ACTIVITIES
Net cash used in operating activities for the six months ended June 30, 2013 was $0.2 million, as compared to $2.2 million for the six months ended June 30, 2012. Operating cash flows for the six months ended June 30, 2013 included $3.7 million of distributions from the O-P that represented our share of the O-Ps income, as compared $3.1 million for the six months ended June 30, 2012. The improvement in operating cash flows was primarily attributable to the increase in gross profit driven by our increase in UC revenue and our ability to leverage our UC infrastructure. The additional operating cash flows were also driven by improvements in working capital, including trade accounts receivable.
CASH FROM INVESTING ACTIVITIES
Cash flow from investing activities provided $2.0 million for the six months ended June 30, 2013, as compared to $1.5 million for the six months ended June 30, 2012. Net cash provided by investing activities for the six months ended June 30, 2013 included distributions we received from the O-P in excess of our share of the O-Ps income of $2.8 million, as compared to $3.4 million for the six months ended June 30, 2012. Capital expenditures, excluding seat licenses, decreased to $0.4 million during the six months ended June 30, 2013, as compared to $1.5 million for the corresponding period in 2012. Our planned expenditures for 2013 are down compared to 2012, as we made significant additions to our infrastructure in 2012 to support future revenue growth. Generally, planned capital expenditures for 2013 are to support our planned product releases as we seek to enhance our solutions and provide increased value to our customers.
CASH FROM FINANCING ACTIVITIES
We used $2.9 million in financing activities during the six months ended June 30, 2013 compared to $2.4 million for the six months ended June 30, 2012. Dividends declared on our common shares by the Board of Directors were $0.54 per share for the six months ended June 30, 2013 and 2012. The total amount of dividends paid on our common shares by us for each of the six months ended June 30, 2013 and 2012 was $3.3 million and $3.1 million, respectively. The additional financing activities for the six months ended June 30, 2013 is attributed to the repayment of debt of $15.1 million offset by $15.5 million proceeds from our new debt with TriState during the first quarter of 2013. The remaining $1.8 million repayments and $2.1 million proceeds relate to our working capital financing activities under our TriState facility and capital leases. Additional financing activities for the six months ended June 30, 2012 were attributed to $1.7 million in proceeds of short-term borrowings related to working capital financing activities, offset by repayment of long-term borrowing of $0.8 million.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
We entered into a purchase commitment from one of our vendors to purchase $0.7 million in software licenses through March 2014. As of June 30, 2013 we have made $0.4 million purchases against the commitment.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to changes in interest rates results from our borrowing activities. There were no material changes to our quantitative disclosure about market risk as presented in Item 7A of our Amended Annual Report on Form 10-K/A for the year ended December 31, 2012
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of June 30, 2013, our management carried out an assessment, under the supervision of and with the participation of our Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). As a result of this assessment, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2013
Plan for Remediation of Material Weaknesses
As part of our evaluation of and improvement of the effectiveness of our internal control over financial reporting, we have taken the following measures to remediate the material weakness that was identified as of December 31, 2012 specifically related to the accuracy and valuation of the accounting for and disclosure of income taxes, as well as the material weakness that was identified as of March 31, 2013 specifically related to the presentation of excess earnings from equity investments in the statement of cash flows. During the second quarter of 2013, we continued to work with our internal and external resources to enhance our process around the identification, evaluation, review and reporting of our taxes as well as adding additional reviews and have added additional personnel with technical backgrounds to the financial reporting function to handle complex accounting matters, including the presentation and disclosure of our equity method investment.
Changes in Internal Control Over Financial Reporting
Other than as discussed above under Plan for Remediation of Material Weakness, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the second quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(3)(i) Articles of Incorporation
3.1 Certificate of Amendment of the Certificate of Incorporation filed with the New York Department of State on May 21, 2013
(3)(ii) Bylaws
3.2 By-laws, as amended May 16, 2013
(10) Material Contracts
10.1 Separation Agreement and Release of all Claims between Warwick Valley Telephone Company and Duane W. Albro, dated May 7, 2013
(31) Rule 13a-14(a)/15d-14(a) Certifications
31.1 Rule 13a-14(a)/15d-14(a) Certification signed by David J. Cuthbert, President and Chief Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification signed by Brian H. Callahan, Executive Vice President, Chief Financial Officer and Treasurer
(32) Section 1350 Certifications
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by David J. Cuthbert, President and Chief Executive Officer
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Brian H. Callahan, Executive Vice President, Chief Financial Officer and Treasurer
(101) Interactive Data File
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101.INS |
XBRL Instance Document |
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101.SCH |
XBRL Taxonomy Extension Schema Document |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
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Pursuant to Rule 406T of Regulation S-T, the information in this exhibit is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
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.
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Alteva, Inc. | |||
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(Registrant) | |||
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Date: |
August 9, 2013 |
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By: |
/s/ David J. Cuthbert |
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David J. Cuthbert | ||
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President and Chief Executive Officer | ||
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(Principal Executive Officer) | ||
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Date: |
August 9, 2013 |
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By: |
/s/ Brian H. Callahan |
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Brian H. Callahan | ||
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Executive Vice President, Chief Financial Officer | ||
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and Treasurer (Principal Financial and Accounting Officer) |
Index to Exhibits
(3)(i) Articles of Incorporation
3.1 Certificate of Amendment of the Certificate of Incorporation filed with the New York Department of State on May 21, 2013
(3)(ii) Bylaws
3.2 By-laws, as amended May 16, 2013
(10) Material Contracts
10.1 Separation Agreement and Release of all Claims between Warwick Valley Telephone Company and Duane W. Albro, dated May 7, 2013
(31) Rule 13a-14(a)/15d-14(a) Certifications
31.1 Rule 13a-14(a)/15d-14(a) Certification signed by David J. Cuthbert, President and Chief Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification signed by Brian H. Callahan, Executive Vice President, Chief Financial Officer and Treasurer
(32) Section 1350 Certifications
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by David J. Cuthbert, President and Chief Executive Officer
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Brian H. Callahan, Executive Vice President, Chief Financial Officer and Treasurer
(101) Interactive Data File
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101.INS |
XBRL Instance Document |
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101.SCH |
XBRL Taxonomy Extension Schema Document |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
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Pursuant to Rule 406T of Regulation S-T, the information in this exhibit is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
WARWICK VALLEY TELEPHONE COMPANY
Under Section 805 of the Business Corporation Law
1. The name of the Corporation is Warwick Valley Telephone Company.
2. The Corporations Certificate of Incorporation was filed by the Department of State on January 16, 1902.
3. The Certificate of Incorporation of the Corporation is hereby amended to change the name of the Corporation, so that said Paragraph FIRST shall provide in its entirety as follows:
FIRST. The name of the Corporation is Alteva, Inc.
4. This Certificate of Amendment was authorized by a vote of the Board of Directors followed by a vote of a majority of all of the outstanding shares entitled to vote thereon at a meeting of shareholders.
IN WITNESS WHEREOF, I have signed this Certificate this 16th day of May, 2013.
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/s/ David J. Cuthbert |
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David J. Cuthbert |
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President and Chief Executive Officer |
Exhibit 3.2
BY-LAWS
ALTEVA, INC.
ARTICLE I.
OFFICES
Section 1. Principal Office. The principal office of the Company shall be located in the City of Philadelphia, Commonwealth of Pennsylvania.
Section 2. Additional Offices. The Company may also have offices and places of business at such other places, within or without the State of New York, as the Board of Directors may from time to time determine.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Time and Place. The annual meeting of the shareholders and all special meetings of the shareholders may be held at such time and place within or without the State of New York as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meeting of shareholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held each year on the last Friday in April (if not a legal holiday, and if a legal holiday then on the next succeeding, business day), or on such other business day as the Board of Directors shall determine prior to the date for serving notice of such meeting.
Section 3. Special Meetings. Except as otherwise provided by law or by the certificate of incorporation, special meetings of the shareholders, for any purpose or purposes set forth in the notice of meeting, may be called by the President or the Board of Directors, and shall be called by the President at the request in writing of the holders of record of at least twenty-five percent (25%) of the outstanding shares of a class of stock of the Company entitled to vote on the proposals to come before the meeting. Such request shall state the purpose or purposes of the proposed meeting.
Section 4. Notice of Meeting of Shareholders. Written notice of a meeting of shareholders, stating the place, date and hour of the meeting, and for meetings other than annual meetings, stating by or at whose direction and for what purpose or purposes the meeting is called, shall be given personally or by mail to each shareholder entitled to vote thereat, not less than ten (10) nor more than fifty (50) days prior to the meeting. If mailed, such notice shall be directed to each shareholder at his address, as it appears on the records of the shareholders of the Company, or if he shall have previously filed with the Secretary of the Company a written request that notices to him be mailed to some other address, then directed to him at such other address. If, at any meeting, action is proposed to be taken which would, if taken, entitle shareholders fulfilling the requirements of Section 623 of the New York Business Corporation Law to receive payment for their shares, the notice of such meeting shall also include a statement to that effect and shall be accompanied by a copy of Section 623 or an outline of its material terms.
Section 5. No Notice Required. Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such notice and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who,
in person or by proxy, submits a signed waiver of notice either before or after such meeting. Except as otherwise provided by statute, notice of any adjourned meeting of shareholders need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken.
Section 6. Quorum. Except as otherwise provided by the certificate of incorporation, the holders of record of a majority of the shares of the Company issued and outstanding and entitled to vote thereat upon a specified item of business, present in person or represented by proxy, shall be necessary to and shall constitute a quorum for the transaction of such specified item of business at any meeting of the shareholders.
If, however, as to any item or items of business noticed to come before any meeting of shareholders such quorum shall not be present or represented at such meeting, the shareholders entitled to vote thereon present in person or represented by proxy shall have power to adjourn the meeting as to such item or items of business for which a quorum is not present from time to time, until a quorum for the transaction of such item or items of business shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed.
The chairman of any meeting of shareholders shall, at the beginning of such meeting, determine whether a quorum is present for the transaction of each item of business noticed to come before such meeting. A quorum for the transaction of any item of business, once present, shall not be broken by the subsequent withdrawal of any shareholders or their representatives.
Section 7. Voting. At any meeting of the shareholders every shareholder having the right to vote shall be entitled to vote in person, or by proxy. Except as otherwise provided by law or the certificate of incorporation, each shareholder of record shall be entitled to one vote for each share of stock standing in the shareholders name on the books of the Company. All elections shall be determined by a plurality vote, and, except as otherwise provided by law or the certificate of incorporation, all other matters shall be determined by vote of a majority of the shares present or represented at such meeting and voting on such questions.
Section 8. Proxies. Every proxy must be executed in writing by the shareholder or by his attorney-in-fact. No proxy shall be valid, after the expiration of eleven (11) months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where an irrevocable proxy is permitted by law.
Section 9. Notice of Shareholder Business. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting or by the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder.
For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely, the shareholders notice must be delivered to or mailed and received at the principal executive offices of the Company, not less than 120 days prior to the first anniversary of the date on which the Company first mailed its proxy materials for the prior years annual meeting; provided, however, that in the event the annual meeting is called for a date that is not within 30 days before or after the anniversary date of the prior years annual meeting, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which notice of the date of the meeting was mailed or public disclosure of such date was made by the Company. The shareholders notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting:
(a) a brief description of the business desired to be brought to the annual meeting and the reasons for conducting business at the annual meeting,
(b) the name and address, as they appear on the Companys books, of the shareholder proposing such business,
(c) the class and number of shares of the Company which are beneficially owned by the shareholder, and
(d) any material interest of the shareholder in such business.
Notwithstanding anything in the By-laws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 9.
The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and, in accordance with the provisions of this Section 9, and if he should so determine, the chairman shall so declare to the meeting and such business not properly brought before the meeting shall not be transacted.
ARTICLE III.
DIRECTORS
Section 1. Duties; Powers. The Board of Directors is responsible for directing, guiding and overseeing the conduct of WVTs business. It ensures that the interests of the shareholders, customers and employees are served.
Section 2. Number; Qualification. The number of directors which shall constitute the entire Board of Directors shall not be less than three (3) nor more than eight (8), the actual number to be established at the annual shareholders meeting. Each director shall be at least eighteen years of age.
Section 3. Election; Term. Directors shall be elected at each annual meeting and each director shall hold office until the next annual meeting and until his or her successor is elected, or until his or her earlier resignation, removal from office or death.
Section 4. Resignation; Removal. Any director may resign at any time by giving written notice to the President or the Secretary. Such resignation shall take effect at the time stated therein. The Board of Directors may, by majority vote of all directors then in office, remove a director for cause. A notice of intention to take action to remove a director stating the date, time and place action is to be taken shall be mailed to the director at the directors address of record on the books of the Company at least twenty (20) days prior to the time such action is to be taken. The shareholders entitled to vote for the election of directors may remove a director for cause.
Section 5. Vacancies. If any vacancy should occur in the Board of Directors by reason of the death, resignation, retirement or disqualification of any director, or the removal from office of any director, all of the directors then in office, although less than a quorum, may, by majority vote, choose a successor or successors to fill the vacated directorship, and any director so chosen to fill an existing vacancy shall hold office until the next annual meeting of the shareholders and until his successor shall be duly elected and qualified.
Section 6. Notice of Shareholder Nominees. Only persons who are nominated in accordance with the procedures set forth in this Section 6 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Company may be made at the annual meeting of shareholders by or at the direction of the Board of Directors, or by any shareholder of the Company entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 6. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Company.
To be timely, a shareholders notice shall be delivered or mailed and received at the principal executive offices of the Company not less than 120 days prior to the first anniversary of the date on which the Company first mailed its proxy materials for the prior years annual meeting; provided, however, that in the event the annual meeting is called for a date that is not within 30 days before or after the anniversary date of the prior years annual meeting, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which notice of the date of the meeting was mailed or public disclosure of such date was made by the Company. The shareholders notice shall set forth:
(a) as to each person whom the shareholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of such person,
(ii) the principal occupation or employment of such person,
(iii) the class and number of shares of the Company which are beneficially owned by such person, and
(iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such persons written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and
(b) as to the shareholder giving the notice,
(i) the name and address, as they appear on the Companys books, of such shareholder, and
(ii) the class and number of shares of the Company which are beneficially owned by such shareholder.
At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Company that information required to be set forth in a shareholders notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the Company unless nominated in accordance with the procedures set forth in this Section 6.
The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-laws, and if the chairman should so determine, the chairman shall so declare to the meeting and the defective nomination shall be disregarded.
ARTICLE IV.
MEETINGS OF THE BOARD
Section 1. Place. The Board of Directors of the Company may hold meetings, both regular and special, either within or without the State of New York.
Section 2. First Meeting. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be announced at the annual meeting of the shareholders, and no further notice of such meeting to the newly elected directors shall be necessary in order to constitute the meeting, provided a quorum shall be present. In the event of the failure to so announce the time and place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so announced, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a duly executed waiver of notice thereof. The first order of business shall be to elect a Chairman of the Board and a Vice Chairman of the Board and the officers of the Company for the ensuing year. The Chairman and Vice Chairman shall be Directors of the Company who are not employees of the Company. The Chairman shall preside at all meetings of the Board of Directors and shareholders and shall consult with the officers as needed. The Vice Chairman shall assume the responsibilities of the Chairman in his absence.
Section 3. Regular Meetings. Regular meetings of the Board of Directors may be held at such time and at such place as shall from time to time be determined by the Board.
Section 4. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board on two days notice to each director. Special meetings shall be called by the President or Secretary on like notice at the written request of two directors.
Section 5. Quorum. At all meetings of the Board of Directors a majority of the entire Board shall constitute a quorum for the transaction of business, and the vote of a majority of the
directors present at the time of the vote if a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by law or by the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. Notice of any such adjournment shall be given to any directors who were not present and, unless announced at the meeting, to the other directors.
Section 6. Meetings by Telephone; Action Without Meeting. Any one or more members of the Board of Directors may participate in a meeting of such Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Prior notice of such meeting shall be furnished to each director.
Any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board shall be filed with the minutes of the proceedings of the Board.
Section 7. Compensation. Directors, as such, shall not receive any stated salary for their services, but by resolution of the Board of Directors a fixed fee and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board or of any committee of the Board, provided that nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity and receiving compensation therefore.
ARTICLE V.
COMMITTEES OF THE BOARD
Section 1. Designation. The Board of Directors, by resolution adopted by a majority of the entire Board, shall elect from among its members an Audit Committee, a Compensation Committee and such other committees, each consisting of three or more directors, as it shall deem appropriate. No such committee shall have authority as to any of the following matters:
the submission to shareholders of any action as to which shareholders authorization is required by law;
the filling of vacancies in the Board of Directors or on any committee;
the fixing of compensation of any director for serving on the Board or on any committee;
the amendment or repeal of these By-Laws or the adoption of new By-Laws; or
the amendment or repeal of any resolution of the Board which by its terms shall not be so amendable or repealable.
The Board may designate one or more directors as alternate members of any such committee who may replace any absent member or members at any meeting of such committee.
Section 2. Audit Committee. The Board of Directors shall designate an Audit Committee to consist of not fewer than three members, the actual number to be determined and elected by the
affirmative vote of a majority of the whole Board or if the majority of the Board is unable to elect such directors, the Chairman of the Board shall appoint them. Members of the Audit Committee, in the judgment of the Board of Directors, shall be independent in accordance with NASDAQ listing standards or any other standards that law or regulation may require or that the Board of Directors shall determine to apply. At least annually, the Audit Committee shall nominate the independent and internal auditors of the Company to be appointed by the shareholders at the annual meeting or any special meeting. In addition, the Audit Committee shall from time to time discuss the audit work with the auditors appointed to perform the audit.
Section 3. Compensation Committee. The Board of Directors shall designate a Compensation Committee to consist of not fewer than three members, elected by the affirmative vote of a majority of the whole Board or if the majority of the Board is unable to elect such directors, the Chairman of the Board shall appoint them. Members of the Compensation Committee, in the judgment of the Board of Directors, shall be independent in accordance with NASDAQ listing standards or any other standards that law or regulation may require or that the Board of Directors shall determine to apply. The Compensation Committee shall meet annually or at such other times as may be required by the Board to review the current compensation of the officers of the Company and to establish the annual compensation of the officers for the coming twelve-month period or such other time period as may be appropriate.
Section 4. Meetings by Telephone; Action Without Meeting. Any one or more members of any committee of the Board of Directors may participate in a meeting of such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.
Any action required or permitted to be taken by any committee of the Board of Directors may be taken without a meeting if all members of the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the committee shall be filed with the minutes of the committee.
Section 5. Tenure: Reports. Each committee shall serve at the pleasure of the Board of Directors. It shall keep minutes of its meetings and report the same to the Board of Directors.
ARTICLE VI.
NOTICES
Section 1. Form; Delivery. Notices to directors and shareholders shall be in writing and may be delivered personally or by mail or e-mail. Notice by mail shall be deemed to be given at the time when deposited in the United States mail, with postage thereon prepaid, and addressed to directors or shareholders at their addresses appearing on the records of the Company.
Section 2. Waiver. Whenever a notice is required to be given by any statute, the certificate of incorporation or these By-Laws, a waiver thereof in writing, signed by the person, or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. In addition, any shareholder attending a meeting of shareholders in person or by proxy without protesting prior to the conclusion of the meeting the lack of notice thereof to him,
and any director attending a meeting of the Board of Directors without protesting prior to the meeting or at its commencement such lack of notice shall be conclusively deemed to have waived notice of such meeting.
ARTICLE VII.
OFFICERS
Section 1. Officers. The officers of the Company shall be a President, one or more Vice-Presidents, a Secretary, an Assistant Secretary, a Treasurer and an Assistant Treasurer. Any two or more of the foregoing offices, except those of President and Secretary, may be held by the same person.
Section 2. Authority and Duties. All officers, as between themselves and the Company, shall have such authority and perform such duties in the management of the Company as may be provided in these By-Laws, or, to the extent not so provided, by the Board of Directors.
Section 3. Election; Term of Office; Removal. All officers shall be elected by the Board of Directors and shall hold office at the pleasure of the Board or for such term as may be prescribed by the Board. Any officer elected or appointed by the Board may be removed with or without cause at any time by the Board.
Section 4. Compensation. The compensation of all officers of the Company shall be fixed by the Board of Directors, and the compensation of agents shall either be so fixed or shall be fixed by officers thereunto duly authorized.
Section 5. Vacancies. If an office becomes vacant for any reason, the Board of Directors shall fill such vacancy. Any officer so appointed or elected by the Board shall serve only until such time as the unexposed term of his predecessor shall have expired unless reappointed or reelected by the Board.
Section 6. The President. The President shall be the Chief Executive Officer of the Company; he shall be ex officio a member of all standing committees except the Audit Committee and Compensation Committee; shall have general and active management and control of the business and affairs of the Company subject to the control of the Board of Directors, and shall see that all orders and resolutions of the Board are carried into effect.
Section 7. Vice-Presidents. The Vice-Presidents (who may have such designations, if any, as the Board of Directors may determine) in the order of their seniority or in any other order determined by the Board, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall generally assist the President and perform such other duties as the Board of Directors or the President shall prescribe.
Section 8. The Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose supervision he shall act. He shall keep in safe custody the seal of the Company and, when authorized by the Board, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the Treasurer or an Assistant Secretary or Assistant Treasurer. He shall keep in safe custody the certificate books and shareholder records and such other books and records as the Board may direct and shall perform all other duties incident to the office of the Secretary.
Section 9. Assistant Secretaries. The Assistant Secretaries, if any, in order of their seniority or in any other order determined by the Board of Directors shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors or the Secretary shall prescribe.
Section 10. The Treasurer. The Treasurer shall have the care and custody of the corporate funds, and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and the Board, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial conditions of the Company. If required by the Board of Directors, the Treasurer shall give the Company a bond for such term, in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration to the Company, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Company, the charge for such bond to be at the Companys expense.
Section 11. Assistant Treasurers. The Assistant Treasurers, if any, in the order of their seniority or in any other order determined by the Board, shall in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors or the Treasurer shall prescribe.
Section 12. Additional Officers. In addition to the officers provided by these By-Laws, the Board of Directors may, from time to time, designate and appoint such other officers as may be necessary or convenient for the transaction of the business and affairs of the Company. Such other officers shall have the powers and duties which may be assigned to them by resolution of the Board of Directors.
ARTICLE VIII.
SHARE CERTIFICATES
Section 1. Form; Signature. The Company shall have the power to authorize the issuance of some or all of the shares of any class or series of its stock either with or without certificates. Any such authorization shall not affect shares already represented by certificates until such certificates are surrendered to the Company or its transfer agent, at which time the treatment of any certificates so surrendered shall be governed by any then effective and applicable resolution
of the Companys Board of Directors, provision of these By-Laws or rule or regulation of any exchange or other market on which the shares represented by the certificates so surrendered may be listed or traded. Any certificates for shares of the Company shall be in such form as shall be determined by the Board of Directors and shall be numbered consecutively and entered in the books of the Company as they are issued. Each certificate shall exhibit the registered holders name and the number and class of shares, and shall be signed by the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, and shall bear the seal of the Company or a facsimile thereof. Where any such certificate is countersigned by a transfer agent, or registered by a registrar, the signature of any such officer may be the facsimile signature. In case any officer who signed, or whose facsimile signature or signatures were placed on any such certificate shall have ceased to be such officer before such certificate is issued, it may nevertheless be issued by the Company with the same effect as if he were such officer at the date of issue. With respect to the issuance or transfer of shares without certificates pursuant to the authorization described above, the Company or its transfer agent shall, within a reasonable time after such issuance or transfer, provide the applicable shareholder or shareholders a written notice containing the information required by the New York Business Corporation Law, the New York Uniform Commercial Code and any other applicable law, rule or regulation to be set forth or stated on certificates or on such written statements.
Section 2. Lost Certificates. The Board of Directors or an officer or officers duly authorized thereunto by the Board may direct a new share certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Company alleged to have been lost, destroyed or wrongfully taken upon the making of a sworn affidavit of that fact by the person claiming the certificate to have been lost, destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the Board of Directors or any authorized officer or officers may, in its, his or their discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed or wrongfully taken certificate or certificates, or his legal representative, to give the Company a bond in such sum as may be directed as indemnity against any claim that may be made against the Company with respect to the certificate alleged to have been lost, destroyed or wrongfully taken.
Section 3. Registration of Transfer. Subject to the provisions of the Federal securities laws and to any contractual restriction which may be evidenced by a legend upon the face of the certificate representing such shares or may otherwise be applicable to such shares (including to uncertificated shares if the Company has issued such shares pursuant to Section 1 of this Article VIII), upon surrender to the Company or any transfer agent of the Company of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, or, in the case of uncertificated shares, upon the presentation to the Company or such transfer agent of a genuine and authorized instruction or similar document required by law to effect the transfer of uncertificated securities, together with whatever other types of documentation or assurance the Company or such transfer agent may be entitled by law to request, it shall be the duty of the Company or such transfer agent, in the case of certificated shares, to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books, and in the case of uncertificated shares, to register the transfer as instructed.
Section 4. Registered Shareholders. Except as otherwise provided by law, the Company shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends or other distributions, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or legal claim to or interest in such share or shares on the part of any other person.
Section 5. Record Date. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action affecting the interests of shareholders, the Board of Directors may fix, in advance, a record date. Such date shall not be more than fifty (50) nor less than ten (10) days before the date of any such meeting, nor more than fifty (50) days prior to any other action.
In each such case, except as otherwise provided by law, only such persons as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to express such consent or dissent, or to receive payment of such dividend, or such allotment of rights, or otherwise to be recognized as shareholders for the related purpose, notwithstanding any registration of transfer of shares on the books of the Company after any such record date so fixed.
ARTICLE IX.
GENERAL PROVISIONS
Section 1. Dividends. Subject to the applicable provisions of the certificate of incorporation, if any, dividends upon the outstanding shares of the Company may be declared by the Board of Directors at any regular or special meeting, pursuant to law, and may be paid in cash, in property, or in shares of the Company.
Section 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Company available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Company, or for such other purpose as the Board shall think conducive to the interest of the Company, and the Board may modify or abolish any such reserve in the manner in which it was created.
Section 3. Instruments Under Seal. All deeds, bonds, mortgages, contracts, and other instruments requiring a seal may be signed in the name of the Company by the President or by any other officer authorized to sign such instrument by the President or the Board of Directors.
Section 4. Checks, etc. All checks or demands for money and notes or other instruments evidencing indebtedness or obligations of the Company shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the Company shall, unless otherwise fixed by the Board of Directors, begin on the 1st day of January and end on the 31st day of December in each calendar year.
Section 6. Seal. The corporate seal shall have inscribed thereon the words The Warwick Valley Telephone Company, Corporate Seal, Warwick, N.Y. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.
ARTICLE X.
INDEMNIFICATON AND INSURANCE
Section 1. Indemnification. Any person made a party to an action by or in the right of the Company to procure a judgment in its favor, or made, or threatened to be made, a party to an action or proceeding other than one by or in the right of the Company to procure a judgment ill in its favor, by reason of the fact that he, his testator or intestate is or was a director or officer of the Company, or while serving as a director or officer of the Company, is or was serving, at the request of the Company, as a director, officer, or in any other capacity, any other corporation, domestic or foreign, any partnership, joint venture, trust, employee benefit plan or other enterprise or organization, whether profit or nonprofit, shall be indemnified by the Company against the reasonable expenses (including attorneys fees, judgments, fines, and amounts paid in settlement) actually incurred by him as a result of such action or proceeding, or any appeal therein, to the full extent permissible under the New York Business Corporation Law.
Section 2. Insurance. The Company may purchase and maintain insurance to indemnify the Company and its directors and officers to the extent permitted under the New York Business Corporation Law.
Section 3. Agreements. The Company may, so far as permitted by law, enter into an agreement to indemnify and advance expenses to any officer or director who is made, or threatened to be made, a party to any action or proceeding by reason of the fact that he or she is or was an officer or director of the Company, or is or was serving at the request of the Company in any capacity for the Company or any other enterprise.
Section 4. Preservation of Rights. Neither the amendment or repeal of this Article X, nor the adoption of any provision of these By-Laws inconsistent with this Article X, shall eliminate or reduce the protection afforded by this Article X to a director or officer of the Company in respect to any matter which occurred or any action or proceeding which accrued or arose, prior to such amendment, repeal or adoption.
ARTICLE XI.
AMENDMENTS
Section 1. Power to Amend. The Board of Directors shall have the power to amend, repeal or adopt By-Laws at any regular or special meeting of the Board; provided, however, that any Bylaw adopted by the Board may be amended or repealed by vote of the holders of shares entitled at the time to vote for the election of directors; provided, further, that any amendment or repeal of ARTICLE III, Section 3, or this ARTICLE XI, Section 1, of these By-Laws, or any part
of either thereof, shall in each event require ratification by the vote of the holders of seventy percent (70%) of the combined voting power of the shares of the corporations capital stock entitled at the time to vote for the election of directors; and provided, further, that the Board of Directors shall not amend the By-Laws unless notice thereof, containing a statement of the proposed amendment, shall have been given at a prior meeting of the Board.
Section 2. Amendment Affecting Election of Directors; Notice. If any By-law regulating an impending election of directors is adopted, amended or repealed by the Board, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the By-law so adopted, amended or repealed, together with a concise statement of the changes affected by such adoption, amendment or repeal.
AS OF MAY 16, 2013
EXHIBIT 10.1
SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS
This Separation Agreement and Release of All Claims (the Agreement) is entered into by and between Warwick Valley Telephone Company (the Company) and Duane W. Albro (the Executive or you) for Executives orderly separation from employment with the Company and for the complete resolution of any and all disagreements, disputes, or claims arising out of Executives employment and separation of Executives employment.
1. Effective Separation Date. You agree that your employment as Chief Executive Officer (CEO) of the Company terminated effective as of the end of business on March 5, 2013 (the Effective Separation Date). You further agree that you resign as Director of the Company and/or any of its predecessors, successors and/or affiliates on the Effective Date of this Agreement as defined in paragraph 24 below.
2. Final Compensation and Benefits. You acknowledge and agree that you have received your regular wages and employment-related benefits through the Effective Separation Date, all of which was paid in accordance with the Companys regular payroll schedule and benefit policies and practices. You acknowledge and agree that your payment for employment-related benefits through the Effective Separation Date included payment for accrued and unused vacation days in the amount of Fifty-three Thousand Three Hundred Sixty-five Dollars ($53,365). You acknowledge and agree that you have also received reimbursement of any appropriately documented expenses that were incurred but unpaid up through the Effective Separation Date that were as a result of conducting business activities on behalf of the Company. You received and may retain such wages and employment-related benefits described in this Paragraph 2 even if you decide not to sign this Agreement. You acknowledge and agree that the payments you received that are described in this Paragraph 2 are all wages and employment-related benefits due to you based upon your employment with the Company.
3. Termination of Compensation and Benefits. Except as specifically described in Paragraph 5 below, all of your compensation and employment-related benefits will end on either the Effective Separation Date or the last day of the month in which your employment ended, depending upon the benefit. If not already provided, you will receive additional information regarding the date on which each benefit ends as well as your rights, if any, to insurance continuation (at your expense). To the extent that you have such rights, nothing in this Agreement will impair them.
4. Company Property.
a) You have returned to the Company all documents (and all copies thereof) and other property, data, information, and knowledge belonging to or in any way relating to the business of the Company or to a client of the Company, that you have in your possession or control, with the exception of any property that the Company authorizes you in writing to retain. The documents and property returned by you include, but are not limited to, all files, correspondence, e-mail, memoranda, documents, forms, notes, notebooks, drawings, records, plans, forecasts, reports, studies, analyses, compilations of data, proposals, agreements, financial
information and forecasts, research and development information, customer information, lists of clients and referral sources, client data, marketing information, operational and personnel information, employee handbooks, supervisors manuals, operation manuals, specifications, code, software, software documentation, databases, computer-recorded information, computer programs, tangible property and equipment (including, but not limited to, facsimile machines, mobile telephones and servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part).
b) You have previously provided the Company with a computer-useable copy of all Company confidential or proprietary data, materials or information stored on a computer, server and/or email systems owned by you or a member of your immediate family. You also acknowledge and agree that you have permanently deleted and expunged such confidential or proprietary data, materials or information from those systems, and have already provided a signed and notarized certification acknowledging that you have done so.
c) You agree that the Company arranged to have all of your personal belongings boxed and mailed to you, and that you received those personal belongings.
d) The Company will allow you to keep your company issued cell phone and cell phone number. If you wish to retain the cell phone number for your personal use you will be required to port the number, at your expense. Both parties agree to execute any documents necessary to accomplish the transfer of that cell phone number. You will bear the expense and pay any fees associated with that transfer.
5. Separation Benefit. In consideration of your acceptance of the terms of this Agreement, which memorializes the Release and Waiver referenced in Paragraph 8 of the Employment Agreement between you and the Company dated December 14, 2011 (incorporated herein and attached as Exhibit A), and provided you do not revoke your acceptance of this Agreement, the Company will provide you with the separation benefits described in this Paragraph 5.
a) You will receive a separation benefit equal to $375,000.00, less customary payroll deductions and withholdings, which amount is equal to 100% of one year of your Base Salary, as defined in your December 14, 2011 Employment Agreement (Exhibit A), in effect as of the Effective Separation Date. This separation benefit will be paid in a lump sum within ninety (90) days of the Effective Separation Date, but after the Effective Date of this Agreement as defined in Paragraph 24 below.
b) For the one-year period following the Effective Separation Date, the Company will continue to provide you and your family with the life insurance and short-term and long-term disability benefits coverage that was in place as of the Effective Separation Date. You agree and acknowledge that your continued participation in such benefits is conditioned upon the continued availability of such coverage and is subject to any changes that may be made to such coverage by the applicable insurance companies. You also agree and acknowledge that the Company is only obligated to make premium payments for continuation of the same types and levels of coverage that you had as of your Effective Separation Date and that you are also
responsible to make any required contributions toward the premiums on the same terms as during your employment.
c) The Company shall pay you an additional lump sum separation benefit equal to $95,000.00, less customary payroll deductions and withholdings. This additional separation benefit will be paid in a lump sum within ninety (90) days of the Effective Separation Date, but after the Effective Date of this Agreement as defined in Paragraph 24 below.
d) All outstanding stock options held by you on March 5, 2013 will vest upon the Effective Date of this Agreement (as defined in Paragraph 24 below) and become immediately exercisable, and your outstanding stock options may be exercised at any time before their applicable expiration dates. In addition, all shares of restricted stock held by you on March 5, 2013 will become 100% vested as of the Effective Date of this Agreement (as defined in Paragraph 24 below); provided, however, the number of shares with a value necessary to cover the minimum taxes required to be withheld on the value of the accelerated vesting of your restricted stock on the Effective Date of this Agreement (as defined in Paragraph 24 below) shall be withheld by the Company to cover such withholding, and you shall be entitled to the net number of shares after such deduction.
The Company makes no representations to you regarding the taxability and/or tax implications of this Agreement. You are solely responsible for any tax consequences associated with the payments made pursuant to this Agreement, regardless of whether the Company should have contributed and withheld taxes from the amounts paid (including Social Security and Medicare). You agree to defend, indemnify, reimburse and hold the Company harmless for any and all taxes, contributions, withholdings, fees, assessments, interest, costs, penalties and other charges that may be imposed on the Company by the Internal Revenue Service, the New York State Tax Department or any other federal, state or local taxing authority by reason of the payments above, the absence of withholdings and deductions made from certain payments above and/or your non-payment or late payment of taxes due, and you alone assume all liability for all such amounts.
You acknowledge and agree that, in the absence of this Agreement, you are not entitled to the separation benefit set forth in this Paragraph 5. You agree that you are not entitled to any other compensation (including but not limited to, salary or bonuses) or benefits of any kind or description from the Company, or from or under any benefit plan sponsored by the Company, other than as described above and those in which you may already be vested.
You further agree that you will not sell any of your Company Shares until after the one-year anniversary of the Effective Date of this Agreement (the Release Date), unless such sale complies with the volume limitations contained in Rule 144(e)(1) of the Securities Act of 1933, as amended (the Securities Act), regardless of whether such sale is required to comply with Rule 144 of the Securities Act. You further agree that you will not Transfer your Company Shares to any third party unless such third party enters into an agreement with the Company prior to such Transfer to be bound by the restrictions on resale contained in this Section. Company Shares means (i) all shares of the Companys common stock, $.01 par value per share (the common stock), held by Executive as of the Effective Separation Date, (ii) any shares of common stock acquired by Executive pursuant to the exercise on or before the Release Date of any stock option held by Executive as of the Effective Separation Date, and (iii) any shares of
restricted stock held by Executive on the Effective Separation Date that vest on or before the Release Date. Transfer means any transfer, donation, gift, assignment, pledge, hypothecation, grant of a security interest in or other disposition or attempted disposition, other than a sale, whether voluntary or involuntary. Any sale, proposed sale, Transfer, or proposed Transfer of Company Shares made or attempted in contravention of this Section will not be recognized by the Company and will be void and of no effect. You further agree that appropriate legends may be placed on any certificate(s) representing the Company Shares and you also agree and consent to the entry of stop transfer instructions with the Companys transfer agent and registrar, to reflect the restrictions set forth in this Section and any restrictions on Transfer that may be imposed under applicable securities laws, for so long as such restrictions exist.
6. RELEASE OF ALL CLAIMS
a) By signing this Agreement you agree that you are releasing and waiving your right to bring any legal claim of any nature against the Company from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to or at Executives termination. This Agreement is intended to be interpreted in the broadest possible manner to include all actual or potential legal claims you may have against the Company, except as expressly provided otherwise in Paragraph 6(e) below.
b) Specifically, you agree to fully and forever give up all of your legal rights and claims against the Company, including future legal rights and claims, whether or not presently known to you, that are based on events occurring before you sign this Agreement. You agree that the legal rights and claims you are waiving include, but are not limited to, all rights and claims under, as amended, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (the ADEA), the Older Workers Benefit Protection Act of 1990 (the OWBPA), the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Genetic Information Nondiscrimination Act of 2008 (GINA), the Equal Pay Act of 1963, the Sarbanes-Oxley Act of 2002, the New York Human Rights Law, and any similar federal, state, or local statute, regulation, order, or common law. You specifically agree that you are releasing claims of discrimination based upon age, race, color, sex, sexual orientation or preference, marital status, religion, national origin, citizenship, veteran status, disability, genetic predisposition or carrier status, and other legally protected categories.
c) You also agree that the legal rights and claims you are giving up include your rights under, as amended, the Family and Medical Leave Act of 1993, the Employee Retirement Income Security Act of 1974 (ERISA), the federal Worker Adjustment and Retraining Notification Act of 1989 (WARN), the New York Worker Adjustment and Retraining Notification Act (NY WARN), the New York Labor Law (except unemployment insurance and minimum wage claims), the New York Business Corporation Law, and any similar federal, state, or local statute, regulation, or order. You agree that the legal rights and claims you are giving up include all common law rights and claims, such as a breach of express or implied contract, tort (whether negligent or intentional), wrongful discharge, constructive discharge, infliction of emotional distress, defamation, promissory estoppel, and any claim for fraud, omission, or misrepresentation. You also agree that you are giving up and forever releasing any
right you may have to attorneys fees for any of the rights and claims described in this Paragraph 6.
d) You agree that the release of all claims described in this Paragraph 6 applies not only to the Company, but also to the its predecessors, successors and their past, current and future parents, subsidiaries, affiliates, related entities, and all of their members, shareholders, officers, directors, agents, attorneys, executives, partners, employees, insurers, and assigns.
e) The claims you are giving up and releasing do not include your vested rights, if any, under any qualified retirement plan in which you participate, and your COBRA, unemployment insurance, and workers compensation rights, if any. Nothing in this Agreement shall be construed to constitute a waiver of: (i) any claims you may have against the Company that arise from events that occur after the date that you sign this Agreement; (ii) your right to file an administrative charge with any governmental agency alleging employment discrimination or challenging the validity of this release; (iii) your right to participate in any administrative or court investigation, hearing or proceeding; or (iv) any other right that you cannot waive as a matter of law. You agree, however, to waive and release any right to receive any individual remedy or to recover any individual monetary or non-monetary damages as a result of any administrative charge, complaint or lawsuit filed by you or on your behalf. In addition, the release of all claims set forth in this Agreement does not affect your rights as expressly created by this Agreement, and does not limit your ability to enforce this Agreement.
7. No Pending Action. You represent that, as of the date that you sign this Agreement, you have not filed any charge, complaint or action against the Company in any forum. This Agreement may be used as a complete defense in the future if you bring a lawsuit based on any claim that you have released, and if the Company prevails in such lawsuit, you will pay for all costs incurred by the Company, including reasonable attorneys fees.
8. Future Cooperation. You agree that upon reasonable request of the Company, you will do whatever is necessary to assure an orderly transition of your work and responsibilities and to reasonably cooperate with any requests by the Company for information about the business of the Company or your involvement and participation therein. You further agree that you will fully cooperate with any investigation, audit or review by the Company or any federal, state or local regulatory, quasi-regulatory or self-governing authority (including, without limitation, the Securities and Exchange Commission) as any such investigation, audit or review relates to events or incidents that occurred during your employment with the Company, as well as with litigation or other proceedings involving matters that occurred during your employment by the Company. Such cooperation shall include, but not be limited to (taking into account your personal and professional obligations, including those to any new employer or entity to which you provide services), being available to meet and speak with officers or employees of the Company and/or the Companys counsel at reasonable times and locations, executing accurate and truthful documents, giving accurate and truthful testimony, and taking such other actions as may reasonably be requested by the Company and/or the Companys counsel to effectuate the foregoing. You shall be entitled to reimbursement, upon receipt by the Company of suitable documentation, for reasonable and necessary travel and other expenses that you may incur at the specific request of the Company and as approved by the Company in
advance and in accordance with its policies and procedures established from time to time. You may also receive reasonable compensation from the Company for time expended while assisting the Company with respect to investigations, audits, reviews, litigations or other proceedings. However, you and the Company agree that no compensation shall be paid for the content or substance of any testimony.
9. Confidentiality. You shall keep secret and retain the confidential nature of all Confidential Information (as defined in Paragraph 9(b) below) of or belonging to the Company and take such other precautions with respect thereto as the Company, in its sole discretion, may reasonably request.
a) You shall not at any time, whether before or after the termination of your employment, use, copy, disclose or make available any Confidential Information to any individual, corporation, partnership, trust, governmental body or other entity; except that you may use, copy or disclose any Confidential Information (i) to the extent it becomes publicly available through no fault on your part, and (ii) to the extent you are required to do so pursuant to applicable law or pursuant to a final order of a court or arbitrator having jurisdiction thereof; provided, however, that prior to such disclosure you shall promptly notify the Company in writing of any such order or request to disclose and shall cooperate fully with the Company in protecting against any such disclosure by narrowing the scope of such disclosure and/or obtaining a protective order with respect to the permitted use of the Confidential Information.
b) For purposes of this Agreement, Confidential Information shall mean all information pertaining to the business and operations of the Company that is not generally available to the public and the Company desires to keep confidential, including, but not limited to, information relating to the Companys products, services, suppliers, business partners, operations, research, trade secrets, intellectual property, finances and all documents and other tangible items relating to or containing any such information. You acknowledge that the Confidential Information is vital, sensitive, confidential and proprietary to the Company.
c) The obligations contained in this Paragraph 9 are in addition to any covenants contained in the December 14, 2011 Employment Agreement, which is incorporated herein and attached as Exhibit A.
10. No Derogatory Statements. You agree that you will not directly or indirectly make, or cause to be made, any written or oral statement or other communication that is derogatory or disparaging to the Company or the Companys predecessors, successors, or their past, current or future parents, subsidiaries, related entities, or any of their members, shareholders, officers, directors, agents, attorneys, employees, or assigns. The inclusion of specific individuals in this provision (including, but not limited to, shareholders, officers, directors, agents, attorneys, and employees) to protect them from derogatory or disparaging remarks is a material term of this Agreement and intended to make such individuals third-party beneficiaries of this particular provision of the Agreement, with all applicable rights to enforce its terms in the event of a violation.
The Company agrees that the members of its Board of Directors and its Senior Management will not directly or indirectly make, or cause to be made, any written or oral
statement or other communication that is derogatory or disparaging to you. Communications between the individuals listed above in their official capacities shall not violate this provision.
Nothing in this Agreement is intended to or shall prevent or limit you or members of the Companys Board of Directors and Senior Management from providing testimony in response to a valid subpoena, court order, regulatory request or other judicial, administrative or legal process or otherwise as required by law. Both parties will notify the other in writing as promptly as practicable after receiving any request for testimony or information in response to a subpoena, court order, regulatory request or other judicial, administrative or legal process or otherwise as required by law, regarding the anticipated testimony or information to be provided and at least fourteen (14) days prior to providing such testimony or information (or, if such notice is not possible under the circumstances, with as much prior notice as is possible).
11. Confidentiality of Agreement. You agree that you will keep the terms of this Agreement, the benefit being paid under it and the fact of its payment, confidential and that you shall not disclose such information, except that you may disclose this information to your spouse, attorney, accountant or other professional advisor to whom you must make the disclosure in order for them to render professional services to you. You will instruct them, however, to maintain the confidentiality of this information just as you must maintain such confidentiality.
12. Interim Obligations. You understand and agree that the obligations contained in Paragraphs 9 to 11 above, as well as in Paragraph 9 of the December 14, 2011 Employment Agreement, which is incorporated herein at Exhibit A, are material provisions of this Agreement, for which good and sufficient consideration is provided. However, you also acknowledge and agree that those provisions could be undermined and/or rendered ineffective if you take actions that would be violations of Paragraphs 9 to 11 of this Agreement and Paragraph 9 of the Employment Agreement after the Effective Date of this Agreement as defined at Paragraph 24 below, between the date you were presented with a draft of this Agreement (March 5, 2013) and the Effective Date of this Agreement (the Interim Period). Accordingly, as a material inducement for the Company to enter this Agreement, you represent and warrant that, during the Interim Period, you did not and will not take any actions, directly or indirectly, that would be violations of this Agreement if they occurred after the Effective Date of this Agreement. This includes, but is not limited to, disclosing confidential information, engaging in Restricted Activities, soliciting customers or employees of the Company, making derogatory statements concerning the Company or any of the entities/individuals listed in Paragraph 10, and/or disclosing the terms of this Agreement or the amounts or benefits to be paid under this Agreement (other than as allowed in Paragraph 11).
13. Remedies. In the event that you breach any of your obligations under this Agreement or as otherwise imposed by law, the Company may, at its option, obtain monetary damages, a court order requiring you to comply with this Agreement, or other remedies as appropriate and allowed by law. Further, in the event that a court of competent jurisdiction determines that you have breached any of the covenants contained in this Agreement, you agree that the Company shall have no further obligation to make any further payments to you under Paragraph 5 of this Agreement and you will be liable to the Company for any payments already made under Paragraph 5 above.
14. Future Employment. You agree that neither you, nor anyone acting on your behalf, will apply for or seek employment with the Company in the future. You agree that in the event that you apply for or seek employment with the Company in the future, the Company is under no obligation to consider that application and may deny said application based on this Agreement.
15. No Admission of Liability. You agree that neither any payment under this Agreement, nor any term or condition of it, shall be construed, at any time, as an admission of liability or wrongdoing by the Company.
16. Binding Nature. The rights and benefits of the Company under this Agreement shall be transferable to, or enforceable by or against, the Companys successors and assigns. You agree that this Agreement also binds all persons who might assert a legal right or claim on your behalf, such as your heirs, personal representatives and assigns, now and in the future.
17. Entire Agreement. This Agreement contains the entire agreement between the Company and you regarding your separation from employment and compensation following that separation of employment, and supersedes and renders null and void all prior or contemporaneous oral or written understandings, statements, representations or promises. However, this Agreement does not supersede any prior agreements between you and the Company concerning your conduct and rights after your separation from employment (other than compensation following that separation of employment, which is addressed in this Agreement), including, but not limited to, the Executive Covenants at Paragraph 9 of the December 14, 2011 Employment Agreement at Exhibit A (Non-Disclosure of Confidential Information and Trade Secrets, Non-Solicitation of Customers, and Non-Compete), which remain in full force and effect in accordance with their terms.
18. Legal Proceedings and Governing Law. This Agreement shall be construed and governed by the laws of the State of New York. Disputes arising under it shall be heard exclusively by the state court located in Orange County, New York or in the federal court for the Southern District of New York. Neither party waives any right it may have to remove such an action to the United States District Court for the Southern District of New York. If any provision of this Agreement, excluding the waiver of claims under any particular statute, should be deemed unenforceable, the remaining provisions shall, to the extent possible, be carried into effect, taking into account the general purpose and spirit of this Agreement. If a court finds that the Release of All Claims (set forth in Paragraph 6 above) is illegal, void or unenforceable, you agree, promptly upon request, to execute a second release that is legal and enforceable, without further consideration, payments or compensation.
19. Waiver of Jury Trial. EACH PARTY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ITS RIGHT TO A TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW IN ANY ACTION OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. THIS WAIVER APPLIES TO ANY ACTION OR OTHER LEGAL PROCEEDING, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH PARTY ACKNOWLEDGES THAT IT HAS RECEIVED THE ADVICE OF COMPETENT COUNSEL.
20. Compliance with IRS Deferred Compensation Regulations. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other official guidance promulgated and issued thereunder, and this Agreement shall be administered and interpreted consistent with that intent.
21. Voluntary Agreement. You agree that you are voluntarily signing this Agreement, that you have not been pressured into agreeing to its terms and that you have enough information to decide whether to sign it. If, for any reason, you believe that this Agreement is not entirely voluntary, or if you believe that you do not have enough information, then you should not sign this Agreement.
22. Attorney Consultation. You are advised to consult with an attorney of your choice before signing this Agreement.
23. Period to Consider Agreement. You have a minimum of 21 calendar days from the date you receive this Agreement to accept the terms of this Agreement by signing and dating it in the space designated below, and returning it to Jennifer M. Brown at Alteva, 401 Market Street, First Floor, Philadelphia, PA 19106 (an extra copy of the Agreement is enclosed for your files). If you sign this Agreement prior to the expiration of the 21-day calendar period for review, you acknowledge and agree that you did so willingly. Please note that any amendments to this Agreement, whether material or immaterial, made after March 5, 2013, which is the date that you first received this Agreement, will not re-start the 21-day period of review.
24. Revocation Period; Effective Date. After you accept and execute this Agreement, you will have seven calendar days to revoke your acceptance. To revoke this Agreement, you must send written notice by certified mail to: Jennifer M. Brown at Alteva, 401 Market Street, First Floor, Philadelphia, PA 19016. If you do not revoke your acceptance, then the 8th day after the date you sign this Agreement will be the Effective Date of the Agreement and you may not thereafter revoke it.
25. Counterparts. This Agreement may be executed in multiple originals, each of which shall be considered as an original instrument, but all of which together shall constitute one Agreement, and shall bind the Parties, their shareholders, officers, directors, parents, subsidiaries, affiliates, heirs, successors and assigns. A scanned .pdf copy, photocopy or facsimile of the original signed document containing all signatures and exhibits will have the same force and effect as the original.
BY SIGNING THIS AGREEMENT, I ACKNOWLEDGE THAT I HAVE HAD 21 DAYS TO CONSIDER THE AGREEMENT AND THAT I HAVE HAD THE OPPORTUNITY TO REVIEW THIS AGREEMENT CAREFULLY WITH AN ATTORNEY OF MY CHOICE. I HAVE READ THIS AGREEMENT, I UNDERSTAND ITS TERMS, AND I VOLUNTARILY AGREE TO THEM.
Dated: |
May 7, 2013 |
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/s/ Duane W. Albro |
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Duane W. Albro |
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State of New York) |
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County of Suffolk) ss: |
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On this 7 day of May 2013, before me personally came , to me known and known to me to be the individual described herein and who executed the foregoing instrument, and the above-named person acknowledged to me that said person executed the same.
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/s/ Roger Seebald | ||
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Notary Public | ||
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Dated: |
May 8, 2013 |
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Warwick Valley Telephone Company | |
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By: |
/s/ Jennifer M. Brown | |
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Jennifer M. Brown | |
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EVP & CAO and Corporate Secretary | |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, David J. Cuthbert, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Alteva, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 9, 2013 |
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/s/ David J. Cuthbert |
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David J. Cuthbert |
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President and Chief Executive Officer |
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Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Brian H. Callahan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Alteva, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 9, 2013 |
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/s/ Brian H. Callahan |
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Brian H. Callahan |
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Executive Vice President, Chief Financial Officer and Treasurer |
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT 0F 2002
In connection with the Quarterly Report of Alteva, Inc. (the Company) on Form 10-Q for the period ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, David J. Cuthbert, the President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ David J. Cuthbert |
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David J. Cuthbert |
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President and Chief Executive Officer |
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August 9, 2013 |
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A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT 0F 2002
In connection with the Quarterly Report of Alteva, Inc. (the Company) on Form 10-Q for the period ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Brian H. Callahan, the Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Brian H. Callahan |
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Brian H. Callahan |
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Executive Vice President, Chief Financial Officer and Treasurer |
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August 9, 2013 |
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A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request
Income Taxes
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6 Months Ended |
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Jun. 30, 2013
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Income Taxes [Abstract] | |
Income Taxes | NOTE 11: INCOME TAXES Generally, for interim tax reporting, one overall estimated annual effective tax rate is computed for tax jurisdictions not subject to valuation allowance and applied to the year to date ordinary income/loss. The effective tax rate for the three months ended June 30, 2013 and 2012 was 7.0% and 30.3%, respectively, and the effective tax rate for the six months ended June 30, 2013 and 2012 was 36.0% and 31.0%, respectively. The adjusted tax rate for the three and six months ended June 30, 2013 differed from the U.S. statutory rate primarily due to state tax losses for which the Company does not receive benefit as well as other nondeductible expenses. As of June 30, 2013 and December 31, 2012, the Company maintained a valuation allowance on certain state net operating loss (principally New Jersey) carryforward deferred tax assets because management determined that it was not more likely than not that it would realize the benefits of such state deferred tax assets. As of June 30, 2013 and December 31, 2012, the Company had no liability for unrecognized tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense. For the six months ended June 30, 2013 and 2012, no interest expense or penalties were incurred relating to unrecognized tax benefits. The Company and its subsidiaries file a U.S. federal consolidated income tax return. The U.S. federal statute of limitations remains open for the years 2009 and thereafter. |
Earnings (Loss) Per Share
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Jun. 30, 2013
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Earnings (Loss) Per Share | NOTE 4: EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of common stock adjusted to include the effect of potentially dilutive securities. Potentially dilutive securities include incremental shares issuable upon exercise of outstanding stock options and shares of unvested restricted stock. Diluted earnings (loss) per share exclude all dilutive securities if their effect is anti-dilutive. The Company's restricted stock awards are considered "participating securities" because they contain non-forfeitable rights to dividends. Under the two-class method, earnings per share ("EPS") is computed by dividing earnings allocated to common shareholders by the weighted-average number of common shares outstanding for the period. In applying the two-class method, earnings are allocated to both shares of common stock and participating securities based on their respective weighted-average shares outstanding for the period. For the three months ended June 30, 2013, the Company analyzed its EPS using the two-class method and determined that EPS was the same for both the common stock and the participating securities during this period. For the three months ended June 30, 2012 and for the six months ended June 30, 2013 and 2012, the Company experienced a net loss. As a result, the effect of participating securities was excluded from the computation of basic and diluted EPS. The net losses were not allocated because the restricted stockholders are not required to fund losses. The weighted average number of shares of common stock used in basic and diluted earnings per share for the three and six months ended June 30, 2013 and 2012 is as follows:
(1) For the three months ended June 30, 2013, the Company had 0.4 million nonvested restricted stock that are considered participating securities to which income is allocated. For the three months ended June 30, 2012, the Company had 0.1 million nonvested participating securities. As the participating securities do not participate in losses, there was no allocation of loss for the period. (2) Included in the weighted average shares – basic for 2012 were puttable common shares that arose from the Alteva, LLC acquisition in August 2011. During the second half of 2012, all of the puttable shares were either exercised or the put option was terminated and are no longer outstanding. (3) For the three months ended June 30, 2013, 0.2 million potentially dilutive shares related to out of the money common stock options were excluded from EPS, as their effect was anti-dilutive. For the three months ended June 30, 2012, 0.2 million potentially dilutive shares related to out of the money stock options were excluded from EPS as their effect was anti-dilutive.
(1) For the six months ended June 30, 2013 and 2012, the Company had 0.4 million and 0.1 million nonvested restricted stock that are considered participating securities to which income is allocated, respectively. As the participating securities do not participate in losses, there was no allocation of loss for the periods. (2) Included in the weighted average shares – basic for 2012 were puttable common shares that arose from the Alteva, LLC acquisition in August 2011. During the second half of 2012, all of the puttable shares were either exercised or the put option was terminated and are no longer outstanding. (3) Basic and diluted weighted average shares were the same for the six months ended June 30, 2013 and 2012 because the effects of the potentially dilutive securities were anti-dilutive and were excluded from the calculation. Such securities included 0.2 million and 0.1 million common stock options at June 30, 2013 and June 30, 2012, respectively. |
Segment Information (Tables)
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Segment Reporting Information |
Segment statement of operations information for the three months ended June 30, 2013 and 2012 is set forth below:
Segment income statement information for the six months ended June 30, 2013 and 2012 is set forth below:
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Shareholders' Equity
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Jun. 30, 2013
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Shareholders' Equity | NOTE 12: SHAREHOLDERS' EQUITY A summary of the changes to shareholders' equity for the six months ended June 30, 2013 is provided below:
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Stock Based Compensation (Schedule Of Stock-Based Compensation Expense) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | $ 469 | $ 206 | $ 687 | $ 398 |
Cost of Sales [Member]
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Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | 3 | 6 | ||
Selling, General And Administrative Expenses [Member]
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Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | $ 466 | $ 206 | $ 681 | $ 398 |
Pension And Postretirement Obligations (Narrative) (Details) (USD $)
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Jun. 30, 2013
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Defined Benefit Plan Disclosure [Line Items] | |
Expected contributions in 2013 | $ 1.1 |
Pension Plans, Defined Benefit [Member]
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Defined Benefit Plan Disclosure [Line Items] | |
Company contributions | 0.3 |
Other Postretirement Benefit Plans, Defined Benefit [Member]
|
|
Defined Benefit Plan Disclosure [Line Items] | |
Company contributions | $ 0.1 |
Debt Obligations (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Debt Obligations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Debt Obligations |
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Pension And Postretirement Obligations (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Pension And Postretirement Obligations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components Of Net Periodic Cost (Gain) |
The components of net periodic cost (gain) for the six months ended June 30, 2013 and 2012 are as follows:
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Stock Based Compensation (Schedule Of Stock Option Activity) (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Share-based Compensation [Abstract] | |
Outstanding - Beginning of period, Shares | 263,554 |
Stock options granted, Shares | 476,189 |
Forfeited, Shares | (224,036) |
Outstanding - End of period, Shares | 515,707 |
Weighted Average Contractual Life (Years) | 9 years |
Vested and Expected to Vest at June 30, Shares | 489,922 |
Exercisable at June 30, Shares | 180,425 |
Outstanding - Beginning of period, Weighted Average Exercise Price | $ 14.02 |
Stock options granted, Weighted Average Exercise Price | $ 10.86 |
Forfeited, Weighted Average Exercise Price | $ 12.45 |
Outstanding - End of period, Weighted Average Exercise Price | $ 11.79 |
Severance (Details) (USD $)
|
1 Months Ended | 0 Months Ended | 3 Months Ended |
---|---|---|---|
May 31, 2013
Mr. Albro Employment Agreement [Member]
|
May 21, 2013
Employee Severance [Member]
|
Jun. 30, 2013
Employee Severance [Member]
|
|
Severance costs | $ 470,000 | $ 300,000 | |
Workforce reduction, percentage | 17.00% |
Debt Obligations (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | 12 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Mar. 11, 2013
|
Dec. 31, 2012
item
|
Dec. 31, 2012
Provident Bank [Member]
|
Dec. 31, 2012
TriState Capital Bank [Member]
|
Mar. 11, 2013
Maximum [Member]
TriState Capital Bank [Member]
|
Dec. 31, 2012
Maximum [Member]
TriState Capital Bank [Member]
|
Mar. 11, 2013
Minimum [Member]
TriState Capital Bank [Member]
|
Dec. 31, 2012
Minimum [Member]
TriState Capital Bank [Member]
|
Dec. 31, 2012
CoBank ACB Revolving Loan Facility [Member]
|
Jun. 30, 2013
Capital Finance Agreement [Member]
|
|
Line of Credit Facility [Line Items] | |||||||||||
Number of debt facilities | 3 | ||||||||||
Interest rate on borrowing | 4.71% | 8.55% | |||||||||
Revolving loan facilty, borrowing capacity | $ 2.5 | $ 10.0 | |||||||||
Interest rate percent, plus LIBOR | 3.50% | 4.00% | 2.00% | 3.00% | 4.50% | ||||||
Line of credit, drawdown | 4.0 | ||||||||||
Fixed interest rate percent | 2.50% | ||||||||||
Consolidated liquidity ratio | 100.00% | ||||||||||
Line of credit facility, maximum | 20.0 | 17.0 | |||||||||
Line of credit facility, outstanding | 15.2 | ||||||||||
Long-term debt amount | $ 0.1 | ||||||||||
Maturity period | 3 years |
Earnings (Loss) Per Share (Schedule Of Weighted Average Number Of Shares Of Common Stock Used In Diluted Earnings (Loss) Per Share) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
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Net income (loss), before participating securities | $ 33 | $ (235) | $ (806) | $ (1,475) | ||||||||||||
Less: income applicable to participated securities | (2) | [1] | ||||||||||||||
Net income (loss) applicable to common stockholders | $ 31 | $ (235) | $ (806) | $ (1,475) | ||||||||||||
Weighted average shares of common stock used in basic earnings per share | 5,775,000 | 5,459,000 | 5,760,000 | 5,451,000 | ||||||||||||
Effects of puttable common stock | 272,000 | [2] | 272,000 | [2] | ||||||||||||
Weighted average shares outstanding - Basic and Diluted | 5,775,000 | [3] | 5,731,000 | [3] | 5,760,000 | [4] | 5,723,000 | [4] | ||||||||
Net income (loss) per share - Basic and Diluted | $ 0.01 | $ (0.04) | $ (0.14) | $ (0.26) | ||||||||||||
Money Stock Options [Member]
|
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Shares excluded from EPS | 200,000 | |||||||||||||||
Restricted Stock [Member]
|
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Shares excluded from EPS | 400,000 | 400,000 | 100,000 | |||||||||||||
Stock Options [Member]
|
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Shares excluded from EPS | 200,000 | 200,000 | 100,000 | |||||||||||||
Participating Securities [Member]
|
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Shares excluded from EPS | 100,000 | |||||||||||||||
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Shareholders' Equity (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Shareholders' Equity [Abstract] | ||||
Shareholders' equity, beginning of period | $ 14,535 | $ 26,153 | ||
Net income (loss) | 40 | (228) | (793) | (1,462) |
Dividends paid on common stock | (3,320) | (3,131) | ||
Dividends paid on preferred stock | (13) | (13) | ||
Stock based compensation | 687 | 398 | ||
Treasury stock purchases | (126) | (789) | ||
Exercise of stock options | 677 | |||
Changes in pension and postretirement benefit plans | 186 | 260 | ||
Shareholders' equity, end of period | $ 11,156 | $ 22,093 | $ 11,156 | $ 22,093 |
Orange County-Poughkeepsie Limited Partnership (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Orange County-Poughkeepsie Limited Partnership [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized O-P Income Statement Information | The following summarizes the income statement (unaudited) for the three months ended June 30, 2013 and 2012 that the O-P provided to the Company:
The following summarizes the income statement (unaudited) for the six months ended June 30, 2013 and 2012 that the O-P provided to the Company:
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Summarized O-P Balance Sheet Information |
|
Summary Of Significant Accounting Policies
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Summary Of Significant Accounting Policies [Abstract] | |
Summary Of Significant Accounting Policies | NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") 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 U.S. GAAP for complete financial statements. In the opinion of the Company's management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results and cash flows for the six month period ended June 30, 2013 are not necessarily indicative of the results that may be expected for the entire year. The consolidated balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed 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 condensed consolidated financial statements. The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Amended Annual Report on Form 10-K/A for the year ended December 31, 2012. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP 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 the financial statements, and the reported amounts of revenues and expenses during the reported period. Significant estimates include, but are not limited to, depreciation expense, allowance for doubtful accounts, long-lived assets, pension and postretirement expenses and income taxes. Actual results could differ from those estimates.
Revenue Recognition The Company derives its revenue from the sale of UC services as well as traditional telephone service. The Company recognizes revenue when (i) persuasive evidence of an arrangement between the Company and the customer exists, (ii) the delivery of the product to the customer has occurred or service has been provided to the customer, (iii) the price to the customer is fixed or determinable, and (iv) collectability of the sales or service price is reasonably assured. Revenue is reported net of all applicable sales tax. Unified Communication The Company's UC services and solutions consist primarily of its hosted VoIP UC system, certain UC applications, and other professional services associated with installation and activation. Additionally, the Company offers customers the ability to purchase telephone equipment from the Company directly, or they can independently purchase such equipment. Multiple-element arrangements primarily include the sale of telephone equipment, along with professional services associated with installation, activation and implementation services, as well as follow-on hosting services. When a UC arrangement involves multiple elements, revenue is allocated to each respective element. In the event that the Company enters into a multiple element arrangement and there are undelivered elements as of the balance sheet date, the Company assesses whether the elements are separable and have determinable fair values in assessing the amount of revenue to record. Allocation of revenue to elements of the arrangement is based on fair value of the element being sold on a stand-alone basis. Telephone equipment meets the criteria to qualify as a separate unit of accounting. The Company utilizes third party list prices as evidence for stand-alone value for its equipment sales. The Company bills a portion of its monthly recurring hosted service revenue a month in advance. Any amounts billed and collected, but for which the service is not yet delivered, are included in deferred revenue. These amounts are recognized as revenues only when the service is delivered. Equipment sales associated with the sale of telephone equipment is recognized upon delivery to the customer in accordance with the applicable shipping terms, as it is considered a separate earnings process. Other upfront fees, not including equipment, along with associated costs, up to but not exceeding these fees, are deferred and recognized over the estimated life of the customer relationship. Telephone Revenue is earned from monthly billings to customers for local voice services, long distance, DSL, Internet services, hardware and other services. Revenue is also derived from charges for network access to the local exchange telephone network from subscriber line charges and from contractual arrangements for services such as billing and collection and directory advertising. Revenue is recognized in the period in which service is provided to the customer. Directory advertising revenue is recorded ratably over the life of the directory. With multiple billing cycles, the Company accrues revenue earned but not yet billed at the end of a quarter. The Company also defers services billed in advance and recognizes them as income when earned. The Telephone Segment markets competitive service bundles which may include multiple deliverables. The base bundles consist of voice services (including a business or residential phone line), calling features and long distance services and customers may choose to add internet services to a base bundle package. Separate units of accounting within the bundled packages include voice services, long distance and Internet services. Revenue for all services included in bundles are recognized over the same service period, which is the time period in which the service is provided to the customer. Certain revenue is realized under pooling arrangements with other service providers and is divided among the companies based on respective costs and investments to provide the services. The companies that take part in pooling arrangements may adjust their costs and investments for a period of two years, which causes the dollars distributed by the pool to be adjusted retroactively. The Company believes that recorded amounts represent reasonable estimates of the final distribution from these pools. However, to the extent that the companies participating in these pools make adjustments, there will be corresponding adjustments to the Company's recorded revenue in future periods. Certain revenue from these pooling arrangements which includes Universal Service Funds ("USF") and National Exchange Carrier Association ("NECA") pool settlements, accounted for 5% and 8% of the Company's consolidated revenues for the three months ended June 30, 2013 and 2012, respectively, and 6% and 8% of the Company's consolidated revenues for the six months ended June 30, 2013 and 2012, respectively. Goodwill Goodwill represents the excess of the purchase price of an acquired business over the net fair value of identifiable assets acquired and liabilities assumed. Goodwill is not amortized, but rather is assessed for impairment at least annually. The Company tests goodwill for impairment annually on October 1, or whenever events or circumstances indicate an impairment. If it is determined that an impairment has occurred, the Company will record a write down of the carrying value and record the charge for the impairment as an operating expense in the period the determination is made. The Unified Communications reporting unit includes $9.1 million of goodwill as of June 30, 2013, resulting from the Company's acquisition of certain assets and certain liabilities of Alteva, LLC in 2011. No events or circumstances occurred during the quarter ended June 30, 2013 that would have more likely than not reduced the fair value of this reporting unit below its carrying value.
Materials and Supplies
Material and supplies are carried at average cost and consisted of principally material and supply finished goods as of June 30, 2013 and December 31, 2012. Material and supplies was approximately $0.4 million and $0.5 million as of June 30, 2013 and December 31, 2012, respectively, and is included in other current assets on the balance sheet. Income Taxes The Company records deferred taxes that arise from temporary differences between the financial statement and the 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 tax assets and deferred tax liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment. The Company's deferred taxes result principally from differences in the timing of depreciation and in the accounting for pensions and other postretirement benefits. A valuation allowance is recorded against the deferred tax assets which are not expected to be realized.
Accounting Policies
There were no material changes to the Company's other accounting policies as presented in Item 8 of the Company's Amended Annual Report on Form 10-K/A for the year ended December 31, 2012. |
Seat Licenses And Other Intangible Assets
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Goodwill And Intangibles Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Seat Licenses And Other Intangible Assets | NOTE 5: SEAT LICENSES AND OTHER INTANGIBLE ASSETS Intangible assets with finite lives are amortized over their respective estimated useful lives to their estimated residual value. Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The components of seat licenses are as follows:
The components of other intangible assets are as follows:
|
Recent Accounting Pronouncements
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements | NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS In December 2011, an Accounting Standards Update ("ASU") regarding balance sheet disclosures of offsetting assets and liabilities was issued and the scope was clarified in January 2013. This update requires disclosure on information about offsetting and related arrangements to enable users of an entity's financial statements to understand the effect of those arrangements on its financial position. This applies to derivatives accounted for in accordance with Topic 815, including bifurcated embedded instruments, repurchase agreements and reverse repurchase agreements and securities borrowings and securities lending transactions. An entity is required to apply this update for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by this update retrospectively for all comparative periods presented. The Company adopted this standard January 1, 2013 and it did not have a material impact on its disclosures or consolidated financial statements. In February 2013, an ASU regarding the reporting of amounts reclassified out of accumulated other comprehensive income was issued. This update requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP. An entity is required to apply the update prospectively for reporting periods beginning after December 15, 2012. The Company adopted this standard effective January 1, 2013 and it did not have a material impact on its disclosures or consolidated financial statements. |
Debt Obligations (Schedule Of Debt Obligations) (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Debt Instrument [Line Items] | ||
Long-term debt | $ 147 | $ 14,095 |
Short-term debt | 14,764 | |
Total debt obligations | 14,911 | 14,095 |
Capital Leases And Other Borrowings [Member]
|
||
Debt Instrument [Line Items] | ||
Long-term debt | 147 | |
Short-term debt | 241 | |
CoBank ACB Revolving Loan Facility [Member]
|
||
Debt Instrument [Line Items] | ||
Long-term debt | 8,595 | |
Provident Bank Credit Line [Member]
|
||
Debt Instrument [Line Items] | ||
Long-term debt | 4,000 | |
TriState Capital Bank [Member]
|
||
Debt Instrument [Line Items] | ||
Long-term debt | 1,500 | |
Short-term debt | $ 14,523 |
Shareholders' Equity (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Shareholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of The Changes To Shareholders' Equity |
|
Seat Licenses And Other Intangible Assets (Components Of Other Intangible Assets) (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
|
Finite-Lived Intangible Assets [Line Items] | ||
Gross Value | $ 7,858 | $ 7,800 |
Accumulated Amortization | (1,602) | (1,183) |
Net Value | 6,256 | 6,617 |
Seat Licenses [Member]
|
||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 5 years | 5 years |
Gross Value | 2,506 | 2,072 |
Accumulated Amortization | (779) | (558) |
Net Value | 1,727 | 1,514 |
Customer Relationships [Member]
|
||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 8 years | 8 years |
Gross Value | 5,400 | 5,400 |
Accumulated Amortization | (1,293) | (956) |
Net Value | 4,107 | 4,444 |
Trade Name [Member]
|
||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 15 years | 15 years |
Gross Value | 2,400 | 2,400 |
Accumulated Amortization | (307) | (227) |
Net Value | 2,093 | 2,173 |
Domain Name [Member]
|
||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 15 years | |
Gross Value | 58 | |
Accumulated Amortization | (2) | |
Net Value | $ 56 |
Orange County-Poughkeepsie Limited Partnership (Summarized O-P Balance Sheet Information) (Details) (O-P [Member], USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
O-P [Member]
|
||
Schedule of Equity Method Investments [Line Items] | ||
Current assets | $ 21,901 | $ 22,370 |
Property, plant and equipment, net | 41,130 | 41,072 |
Total assets | 63,031 | 63,442 |
Total liabilities | 22,590 | 30,162 |
Partners' capital | 40,441 | 33,280 |
Total liabilities and partners' capital | $ 63,031 | $ 63,442 |