10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

(Amendment No. 1)

R       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

£       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 000-11174

Warwick Valley Telephone Company

(Exact name of registrant as specified in its charter)

New York	14-1160510
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
47 Main Street
Warwick, New York	10990
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone, including area code: (845) 986-8080   

(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 R  NO £

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 R  NO £

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  £	Accelerated filer  R
Non-accelerated filer  £  (Do not check if a smaller reporting company)	Smaller reporting company  £

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) YES £    NO R

The number of shares of Warwick Valley Telephone Company common stock outstanding as of August 4, 2011 was 5,482,876.

Explanatory Note

The sole purpose of this amendment to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, originally filed with the Securities and Exchange Commission on August 9, 2011, is to furnish Exhibit 101 to the Form 10-Q, which contains the XBRL (eXtensible Business Reporting Language) Interactive Data File for the financial statements and notes included in Part  I, Item 1 of the Form 10-Q. As permitted by Rule 405(a)(2)(ii) of Regulation S-T, Exhibit 101 was required to be furnished by amendment within 30 days of the original filing date of the Form 10-Q.

No other changes have been made to the Form 10-Q and the Form 10-Q has not been updated to reflect events occurring subsequent to the original filing date.

ITEM 6.  EXHIBITS

10.1 Severance Agreement, dated May 5, 2011, by and between the Company and Kenneth H. Volz, former Executive Vice  President, Chief Financial Officer and Treasurer (previously filed with the original Form 10-Q).

10.2  Orange County-Poughkeepsie Limited Partnership Amendment 5, dated April 10, 2007 (previously filed with the original Form 10-Q).

10.3 Orange County-Poughkeepsie Limited Partnership Amendment 6, dated May 26, 2011 (previously filed with the original Form 10-Q).

10.4 Agreement dated May 26, 2011, by and between Verizon Wireless of the East, LP, Cellco Partnership and the Company (previously filed with the original Form 10-Q).

*10.5 Employment Agreement dated May 9, 2011, by and between the Company and Ralph Martucci, Jr. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 20, 2011).

*10.6 Amended and Restated Warwick Valley Telephone 2008 Long-Term Incentive Plan (incorporated by reference from Appendix A to the Company’s Definitive Proxy Statement filed on March 28, 2011).

31.1	Rule 13a-14(a)/15d-14(a) Certification signed by Duane W. Albro, President, and Chief Executive Officer (previously filed with the original Form 10-Q).
31.2	Rule 13a-14(a)/15d-14(a) Certification signed by Ralph Martucci, Jr., Executive Vice President, Chief Financial Officer and Treasurer (previously filed with the original Form 10-Q).
31.3	Rule 13a-14(a)/15d-14(a) Certification signed by Duane W. Albro, President, and Chief Executive Officer.
31.4	Rule 13a-14(a)/15d-14(a) Certification signed by Ralph Martucci, Jr., Executive Vice President, Chief Financial Officer and Treasurer.

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 Duane W. Albro, President, and Chief Executive Officer (previously filed with the original Form 10-Q).

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 Ralph Martucci, Jr., Executive Vice President, Chief Financial Officer and Treasurer (previously filed with the original Form 10-Q).

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement.

+ 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.

	Warwick Valley Telephone Company
	(Registrant)
Date: August 24, 2011	By:	/s/ Duane W. Albro
		Duane W. Albro
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 24, 2011	By:	/s/ Ralph Martucci, Jr.
		Ralph Martucci, Jr.
		Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

Index to Exhibits

31.3 Rule 13a-14(a)/15d-14(a) Certification signed by Duane W. Albro, President, and Chief Executive Officer.

31.4 Rule 13a-14(a)/15d-14(a) Certification signed by Ralph Martucci, Jr., Executive Vice President, Chief Financial Officer and Treasurer.

101.INS  XBRL Instance Document

101.SCH  XBRL Taxonomy Extension Schema Document

101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF  XBRL Taxonomy Extension Definition Linkbase Document

101.LAB  XBRL Taxonomy Extension Label Linkbase Document

101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document

EX-31.3

Exhibit 31.3

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Duane W. Albro, certify that: 

1.  I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-Q of Warwick Valley Telephone Company; and

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.

Date: August 24, 2011

/s/ Duane W. Albro

Duane W. Albro

President and Chief Executive Officer

EX-31.4

Exhibit 31.4

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Ralph Martucci, Jr., certify that: 

1.  I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-Q of Warwick Valley Telephone Company; and

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.

Date: August 24, 2011

/s/ Ralph Martucci, Jr.

Ralph Martucci, Jr.

Executive Vice President, Chief Financial Officer and Treasurer

XML



Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data	Jun. 30, 2011	Dec. 31, 2010
Accounts receivable, allowance for uncollectibles	$ 467	$ 350
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized shares	10,000,000	10,000,000
Common stock, issued shares	6,216,570	6,054,741
Treasury stock, common shares	733,694	635,189
Preferred Stock 100 Par Value [Member]
Preferred shares, par value	$ 100	$ 100
Preferred shares, authorized shares	5,000	5,000
Preferred shares, issued shares	5,000	5,000
Preferred Stock 0.01 Par Value [Member]
Preferred shares, par value	$ 0.01	$ 0.01
Preferred shares, authorized shares	10,000,000	10,000,000
Preferred shares, unissued shares	10,000,000	10,000,000

XML



Condensed Consolidated Statements Of Operations (USD $) In Thousands, except Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Condensed Consolidated Statements Of Operations
Operating revenues	$ 5,811	$ 5,888	$ 11,989	$ 11,947
Operating expenses
Cost of services and products (exclusive of depreciation and amortization expense)	2,944	2,939	6,191	5,807
Selling, general and administrative expenses	4,103	3,099	7,588	6,342
Depreciation and amortization	1,341	1,428	2,738	2,840
Total operating expenses	8,388	7,466	16,517	14,989
Operating loss	(2,577)	(1,578)	(4,528)	(3,042)
Other income (expense)
Interest income (expense)	2	(2)	59	(14)
Income from equity method investment	2,198	2,937	5,416	5,743
Other income (expense), net	9	(1)	15	131
Total other income (expense)	2,209	2,934	5,490	5,860
Income (loss) before income taxes	(368)	1,356	962	2,818
Income taxes (benefit)	(128)	480	330	997
Net income (loss)	(240)	876	632	1,821
Preferred dividends	7	7	13	13
Income (loss) applicable to common stock	$ (247)	$ 869	$ 619	$ 1,808
Basic earnings (loss) per share	$ (0.05)	$ 0.16	$ 0.11	$ 0.34
Diluted earnings (loss) per share	$ (0.05)	$ 0.16	$ 0.11	$ 0.33
Weighted average shares of common stock used to calculate earnings per share
Basic	5,406,894	5,360,611	5,400,822	5,359,499
Diluted	5,406,894	5,398,727	5,424,287	5,401,734
Dividends declared per common share	$ 0.26	$ 0.24	$ 0.52	$ 0.48

XML



Document And Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 04, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Entity Registrant Name	WARWICK VALLEY TELEPHONE CO
Entity Central Index Key	0000104777
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		5,482,876

XML



Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information

Segment Information

NOTE 7:  SEGMENT INFORMATION

The Company's segments are strategic business units that offer different products and services and are managed as Telephone and Online services.  The Company evaluates the performance of the segments based upon factors such as revenue growth, expense containment, market share and operating results.

The Telephone segment provides telecommunications services including local, network access, wholesale, conferencing, long distance services, wireless and directory services.  The Online segment provides high speed and dial-up Internet services, VoIP, DIRECTV and video.

The Company evaluates depreciation, amortization, impairment charges and interest expense on a total company basis because the Company does not allocate assets or debt to specific segments.  As a result, these items, along with other non-operating income or expenses, are not assigned to any segment.  Therefore, 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 income statement information for the six months ended June 30, 2011 and 2010 is set forth below: 

			2011		2010
	Segment operating revenues
		Telephone	$	9,846	$	9,253
		Online		3,409		3,604
		Eliminations		(1,266)		(910)
	Total operating revenues		$	11,989	$	11,947
	Segment operating expenses, exclusive of depreciation and amortization
		Telephone	$	10,092	$	9,367
		Online		4,188		3,552
		Eliminations		(501)		(770)
	Total operating expenses, exclusive of depreciation and amortization		$	13,779	$	12,149
	Segment operating loss, exclusive of depreciation and amortization
		Telephone	$	(246)	$	(114)
		Online		(779)		52
		Eliminations		(765)		(140)
	Total operating loss, exclusive of depreciation and amortization		$	(1,790)	$	(202)
The following table reconciles segment operating loss to net income before taxes for the six months ended June 30, 2011 and 2010:
			2011		2010
	Operating loss		$	(1,790)	$	(202)
	Total depreciation and amortization			(2,738)		(2,840)
	Interest income (expense), net			59		(14)
	Income from equity investments, net			5,416		5,743
	Other income, net			15		131
	Income before income taxes		$	962	$	2,818

Certain regulatory revenue, which includes Universal Service funds ("USF") and National Exchange Carrier Association ("NECA") pool settlements, accounted for 13% and 15% of the Company's revenues for the six months ended June 30, 2011 and 2010, respectively. Accounts receivable for certain regulatory revenue represents 13% and 14% of consolidated accounts receivable at June 30, 2011 and 2010, respectively.

Segment income statement information for the three months ended June 30, 2011 and 2010 is set forth below:

			2011		2010
	Segment operating revenues
		Telephone	$	4,729	$	4,552
		Online		1,719		1,779
		Eliminations		(637)		(443)
	Total operating revenues		$	5,811	$	5,888
	Segment operating expenses, exclusive of depreciation and amortization
		Telephone	$	4,780	$	4,601
		Online		2,209		1,810
		Eliminations		58		(373)
	Total operating expenses, exclusive of depreciation and amortization		$	7,047	$	6,038
	Segment operating loss, exclusive of depreciation and amortization
		Telephone	$	(51)	$	(49)
		Online		(490)		(31)
		Eliminations		(695)		(70)
	Total operating loss, exclusive of depreciation and amortization		$	(1,236)	$	(150)
The following table reconciles segment operating loss to net income before taxes for the three months ended June 30, 2011 and 2010:
			2,011		2010
	Operating loss		$	(1,236)	$	(150)
	Total depreciation and amortization			(1,341)		(1,428)
	Interest income (expense), net			2		(2)
	Income from equity investments, net			2,198		2,937
	Other (expenses) income, net			9		(1)
	Income (loss) before income taxes		$	(368)	$	1,356

Certain regulatory revenue, which includes Universal Service funds ("USF") and National Exchange Carrier Association ("NECA") pool settlements, accounts for 13% and 15% of the Company's revenues for the three months ended June 30, 2011 and 2010, respectively.

XML



Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

NOTE 12: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 accounting standard regarding accounting for uncertainty in income taxes requires uncertain tax positions to be classified as non-current income tax liabilities unless expected to be paid within one year.As of June 30, 2011, the Company has no liability for 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 2007 and thereafter.

XML



Investments

6 Months Ended

Jun. 30, 2011

Investments

Investments

NOTE 3:  INVESTMENTS

The following is a summary of the Company's short-term investments classified as available for sale at June 30, 2011 and December 31, 2010:

				Unrealized		Fair Value
		Amortized		Gains		Carrying
		Cost		(Losses)		Value
June 30, 2011
Bank certificate of deposit	$	258	$	0	$	258
Corporate and municipal bonds		2,240		(37)		2,203
	$	2,498	$	(37)	$	2,461
December 31, 2010
Bank certificate of deposit	$	257	$	0	$	257
Corporate bonds		2,143		(44)		2,099
Foreign bonds		284		(4)		280
	$	2,684		(48)		2,636

The Company believes that the gross unrealized losses of our short-term investments are temporary, and the Company has the ability to hold the corporate and municipal bond investments until all of its costs are recovered.

XML



Property, Plant And Equipment

6 Months Ended

Jun. 30, 2011

Property, Plant And Equipment

Property, Plant And Equipment

NOTE 9:  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost, consisting of the following as of June 30, 2011 and December 31, 2010:

		2011		2010
Land, buildings and other support equipment	$	9,786	$	9,677
Network communications equipment		35,246		35,131
Telephone plant		30,296		29,847
Online plant		7,122		7,113
Plant in service		82,450		81,768
Plant under construction		1,228		108
		83,678		81,876
Less:Accumulated depreciation		57,317		54,618
Property, plant and equipment, net	$	26,361	$	27,258

XML



Stock Based Compensation

6 Months Ended

Jun. 30, 2011

Stock Based Compensation

Stock Based Compensation

NOTE 14:  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 Company's common stock.  The Amended and Restated LTIP increases the total number of shares authorized under the Amended and Restated LTIP from 500,000 shares to 1,100,000 shares of common stock and is subject to receiving approval from the New York State Public Service Commission and the New Jersey Board of Public Utilities.  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, 2011, 156,421 common shares 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 Company's 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.  As of June 30, 2011, the Company purchased treasury stock of $1,477 as a result of plan participant's using the cashless mechanism when exercising stock options.  Issued restricted stock, stock options and restricted stock units are subject to vesting restrictions.

Restricted Common Stock Awards

The following table summarizes the restricted common stock activity with certain eligible participants during the six months ended June 30, 2011:

				Grant Date
	Date Issued	Shares		Fair Value per Share
Restricted stock granted	1/6/2011	10,573	$	14.16
Restricted stock granted	2/25/2011	19,861	$	14.70
Restricted stock granted	3/9/2011	25,542	$	14.85
Restricted stock granted	4/29/2011	200	$	15.00
Restricted stock granted	6/15/2011	2,500	$	14.80
Total restricted stock granted		58,676

 Stock-based compensation expense for restricted stock awards was $448 and $129 for the six months ended June 30, 2011 and 2010, respectively, and $333 and $69 for in the three months ended June 30, 2011 and 2010, 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 Company has determined expected forfeitures based on recent activity and is recognizing compensation expense only for those restricted common shares expected to vest.

The following table summarizes the restricted common stock activity during the six month periods ended June 30, 2011 and 2010:

	2011			2010
			Grant Date Weighted Average Price per Share			Grant Date Weighted Average Price per Share
Unvested Shares	Shares			Shares
Balance - Beginning of period	47,373	$	12.64	21,626	$	11.03
Granted	58,676		14.67	35,004		13.22
Vested	(33,986)		13.25	(2,680)		10.29
Forfeited	0		0.00	(200)		12.78
Balance - End of period	72,063	$	13.99	53,750	$	12.13

The total fair value of restricted stock vested during the six-month periods ended June 30, 2011 and 2010 was $451 and $28, respectively.

Stock Options

The following tables summarize stock option activity for the six-month periods ended June 30, 2011 and 2010, along with options exercisable at the end of the period:

	2011			2010
Options	Shares		Weighted Average Exercise Price	Shares		Weighted Average Exercise Price
Outstanding - Beginning of period	160,733	$	11.33	123,631	$	10.76
Stock options granted	148,381		14.83	43,768		12.88
Exercised	(103,319)		11.01	0		0.00
Forfeited	0		0.00	0		0.00
Outstanding - End of period	205,795	$	13.89	167,399	$	11.31
Vested and Expected to Vest at June 30	205,795			167,399
Exercisable at June 30	24,206			42,988

Stock options vest over a three-year period.  The following table summarizes information about fixed price stock options outstanding at June 30, 2011:

			Weighted	Weighted Average
			Average	Remaining		Aggregate
	Shares		Exercise	Contractual		Instrinsic
Exercise Price Per Share	Outstanding		Price	Life (Years)		Value
$10.78	15,166	$	10.78	7.1	$	56
$10.02	4,051		10.02	7.7		18
$11.20	7,517		11.20	7.8		24
$12.97	7,000		12.97	8.4		10
$12.76	1,000		12.76	8.5		2
$12.88	22,680		12.88	8.7		35
$14.70	19,761		14.70	9.7		0
$14.85	128,620		14.85	9.7		0
	205,795	$	11.31	8.9	$	299
Exercisable at June 30, 2011	7,458	$	12.34	8.6	$	20

Stock-based compensation expense for stock option awards was $178 and $35 for the six months ended June 30, 2011 and 2010, respectively, and $148 and $11 for the three months ended June 30, 2011 and 2010, respectively.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on the last trading day, June 30, 2011, 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, 2011. This amount changes based on the fair market value of the Company's common stock

The fair value of the above stock-based option awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the six months ended June 30, 2011 and 2010:

Options		2011		2010
Expected life (in years)		10		10
Interest rate		3.40%		3.78%
Volatility		32.77%		31.70%
Dividend yield		7.00%		6.83%
Weighted-average fair value per share at grant date	$	2.16	$	1.92

The following table sets forth the total stock-based compensation expense resulting from stock options and restricted stock granted to employees, as well as the effects of the acceleration of the vesting of stock options and restricted stock which had been granted to the former Chief Financial Officer in the amount of $291, that are included in the Company's consolidated statements of income for the three and six months ended June 30, 2011 and 2010:

		Three Months				Six Months
Stock-Based Compensation Expense		2011		2010		2011		2010
Cost of services and products	$	17	$	0	$	34	$	0
Selling, general and administrative expenses		464		81		592		164
	$	481	$	81	$	626	$	164

As of June 30, 2011, $967 of total unrecognized compensation expense related to stock options and restricted common stock is expected to be recognized over a weighted average period of approximately 1.9 years.

XML



Orange County-Poughkeepsie Limited Partnership

6 Months Ended

Jun. 30, 2011

Orange County-Poughkeepsie Limited Partnership

Orange County-Poughkeepsie Limited Partnership

NOTE 10:ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP

The Company is a limited partner in the Orange County-Poughkeepsie Limited Partnership ("O-P") and had a 8.108% equity interest as of June 30, 2011 and 2010, which is accounted for under the equity method of accounting.The majority owner and general partner is Verizon Wireless of the East LP.

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 provides that the O-P's business will be converted 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 2011, annual cash distributions from the O-P will be $13,600 and for 2012 and 2013 the annual cash distribution will be $13,000.  Annual cash distributions will be paid in equal quarterly amounts.  The 4G Agreement also gives the Company the right (the "Put") to require one of the O-P's limited partners to purchase all the Company's ownership interest in the O-P during April 2013 or April 2014 for an amount equal to the greater of (a) $50,000 or (b) the product of five (5) times 0.081081 times the O-P's EBITDA for the calendar year preceding the exercise of the Put.

The conversion of the O-P from a wholesale business to a retail business pursuant to the 4G Agreement will increase the cellular service costs and operating expenses incurred by the O-P, which is expected to cause a subsequent reduction in the O-P's net income.Although the Company's share of the O-P net income recorded in the Company's income statement is expected to decrease as a result of the conversion to a retail business, the annual cash distributions the Company receives from the O-P will remain unchanged pursuant to the terms of the 4G Agreement.Regardless of the O-P's net income, pursuant to the 4G Agreement, the Company will receive from the O-P an annual cash distribution of $13,600 in 2011 and annual cash distributions of $13,000 in 2012 and 2013.

The value of the Company's investment in O-P was as follows:

		June 30,		December 31,
	2011		2010
Investment, beginning of period	$	7,681	$	7,669
Income from equity method investment		5,416		12,578
Cash distributions		(6,155)		(12,566)
	$	6,942	$	7,681

The following summarizes the income statement (unaudited) for the six months ended June 30, 2011 and 2010 that the O-P provided to the Company:

		2011(1)		2010
Net sales	$	116,165	$	87,186
Cellular service cost		32,508		10,669
Operating expenses		16,868		6,115
Operating income		66,789		70,402
Other income		14		431
Net income	$	66,803	$	70,833
Company share	$	5,416	$	5,743

 

(1) The six months ended June 30, 2011 income statement represents four months of the O-P operating as a wholesale business and two months of the O-P operating as a retail business in accordance with the Amendment to the O-P Limited Partnership Agreement effective May 1, 2011.

The following summarizes the income statement (unaudited) for the three months ended June 30, 2011 and 2010 that O-P provided to the Company:

		2011		2010
Net sales	$	67,776	$	44,549
Cellular service cost		27,020		5,417
Operating expenses		13,659		3,088
Operating income		27,097		36,044
Other income		16		176
Net income	$	27,113	$	36,220
Company share	$	2,198	$	2,937

The following summarizes the balance sheet as of June 30, 2011(unaudited) and December 31, 2010 that O-P provided to the Company:

		2011		2010
Current assets	$	25,046	$	10,916
Property, plant and equipment, net		38,694		34,294
Total assets	$	63,740	$	45,210
Total liabilities	$	50,464	$	818
Partners' capital		13,277		44,392
Total liabilities and partners' capital	$	63,741	$	45,210

XML



Materials And Supplies

6 Months Ended

Jun. 30, 2011

Materials And Supplies

Materials And Supplies

NOTE 8:MATERIALS AND SUPPLIES

Material and supplies are carried at average cost.As of June 30, 2011 and December 31, 2010, material and supplies consisted of the following:

		2011		2010
Inventory for outside plant	$	344	$	368
Inventory for inside plant		294		295
Inventory for online equipment		245		227
Inventory for video equipment		74		72
Inventory for equipment held for sale or lease		19		24
	$	976	$	986

XML



Summary Of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Summary Of Significant Accounting Policies

Summary Of Significant Accounting Policies

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Warwick Valley Telephone Company (the "Company") provides communications services to customers in Warwick, Florida and Pine Island, New York, Vernon and Upper Greenwood Lake, New Jersey as well as upstate New York and selected other states.  Services include providing local and toll telephone to residential and business customers, access and billing and collection services to interexchange carriers, Internet access, video service, DIRECTV, conferencing, wholesale service and Voice over Internet Protocol ("VoIP").

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 for interim financial information and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of the Company's management, all adjustments consisting only 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, 2011 are not necessarily indicative of the results that may be expected for the entire year.

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 preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and any 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.  Actual results could differ from those estimates.  The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K for the year ended December 31, 2010.

XML



Fair Value

6 Months Ended

Jun. 30, 2011

Fair Value

Fair Value

NOTE 4:  FAIR VALUE

The following table represents the Company's fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of June 30, 2011:

		Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
Short-term investments	$	258	$	2,203	$	0	$	2,461

The following table represents the Company's fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of December 31, 2010:

		Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
Short-term investments	$	257	$	2,379	$	0	$	2,636

(1) Quoted prices in active markets for identical assets or liabilities.

(2) Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  Short-term investments classified as Level 2 are comprised of corporate and municipal bonds. 

(3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

XML



Earnings Per Share

6 Months Ended

Jun. 30, 2011

Earnings Per Share

Earnings Per Share

NOTE 5:EARNINGS PER SHARE

Basic earnings (loss) per share are computed by dividing net income (loss) applicable to common shares by the weighted average number of common shares outstanding during the period.Diluted earnings per share are computed by dividing net income applicable to common shares by the weighted average number of common shares 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 per share excludes all dilutive securities if their effect is anti-dilutive.

The weighted average number of shares of common stock used in diluted earnings per share for the three and six months ended June 30, 2011 and 2010 is as follows: 

	Three Months Ended		Six Months Ended
	June 30, 2011(1)	June 30, 2010	June 30, 2011	June 30, 2010
Weighted average shares of common stock
used in basic earnings per share	5,406,894	5,360,611	5,400,822	5,359,499
Effects of stock options	0	22,870	6,290	26,563
Effects of restricted stock	0	15,246	17,175	15,672
	5,406,894	5,398,727	5,424,287	5,401,734

(1) Basic and diluted weighted average shares were the same for the three months ended June 30, 2011 because the effects of the potentially diluted securities are anti-dilutive.

XML



Shareholders' Equity

6 Months Ended

Jun. 30, 2011

Shareholders' Equity

Shareholders' Equity

NOTE 13:SHAREHOLDERS' EQUITY

The Company has 10,000,000 authorized shares of common stock at a par value of $0.01; 5,000 authorized Preferred Shares at a par value of $100; and 10,000,000 authorized shares of preferred stock at a par value of $0.01.

A summary of the changes to shareholders' equity for the six months ended June 30, 2011 and 2010 is provided below:

		2011		2010
Shareholders' equity, beginning of period	$	36,425	$	37,905
Net income		632		1,821
Dividends paid on common stock		(2,847)		(2,596)
Dividends paid on preferred stock		(13)		(13)
Stock and stock option compensation		626		164
Treasury stock purchases		(1,476)		0
Exercise of stock options		1,136		0
Unrealized gain (loss) on investments		8		(92)
Changes in pension and postretirement benefit plans		193		240
Shareholders' equity, end of period	$	34,684	$	37,429

XML



Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2011

Comprehensive Income (Loss)

Comprehensive Income (Loss)

NOTE 6:COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consisted of the following for the three and six months ended June 30, 2011 and 2010:

			Three Months Ended June 30				Six Months Ended June 30
			2011		2010		2011		2010
Net income (loss) for the period		$	(240)	$	876	$	632	$	1,821
Other comprehensive income (loss), net of taxes
	Pension and postretirement benefits plans		81		120		193		240
	Unrealized gain (loss) on investments		13		(63)		8		(92)
	Other comprehensive income		94		57		201		148
	Total comprehensive income (loss)	$	(146)	$	933	$	833	$	1,969

XML



Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
CASH FLOW FROM OPERATING ACTIVITIES
Net Income	$ 632	$ 1,821
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,738	2,840
Stock-based compensation expense	626	164
Deferred income taxes	109	(154)
Income from equity investments, net of distributions	739	336
Changes in assets and liabilities
Accounts receivable	494	365
Other accounts receivable	(100)	61
Materials and supplies	10	(58)
Prepaid income taxes	(1,283)	564
Prepaid expenses	(167)	(224)
Other assets	(28)	0
Accounts payable	294	36
Customers' deposits	(2)	(34)
Advance billing and payment	25	79
Accrued taxes	(676)	0
Pension and postretirement benefit obligations	8	354
Other accrued expenses	(895)	(79)
Net cash provided by operating activities	2,524	6,071
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures	(1,801)	(579)
Purchase of intangibles	(15)	(35)
Sale of short-term investments	1,176	0
Purchase of short tem investments	(993)	(1,824)
Net cash used in investing activities	(1,633)	(2,438)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of long-term debt	(759)	(760)
Treasury stock purchases	(1,476)	0
Exercise of stock options	1,136	0
Dividends (Common and Preferred)	(2,860)	(2,609)
Net cash used in financing activities	(3,959)	(3,369)
Net change in cash and cash equivalents	(3,068)	264
Cash and cash equivalents at beginning of period	10,899	9,286
Cash and cash equivalents at end of period	$ 7,831	$ 9,550

XML



Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2011

Recent Accounting Pronouncements

Recent Accounting Pronouncements

NOTE 2.  RECENT ACCOUNTING PRONOUNCEMENTS

In May 2011, an accounting standard update regarding fair value measurement was issued. This standard update was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards.  This standard update also changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements.  The amendment becomes effective for annual periods beginning after December 15, 2011.  The Company does not believe this will have a material impact on the consolidated financial statements.

In June 2011, an accounting standard update regarding the presentation of comprehensive income was issued.  This standard update was issued to increase the prominence of items reported in other comprehensive income and requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  This becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company does not believe this will have a material impact on the consolidated financial statements.

XML



Pension And Postretirement Obligations

6 Months Ended

Jun. 30, 2011

Pension And Postretirement Obligations

Pension And Postretirement Obligations

NOTE 11:  PENSION AND POSTRETIREMENT OBLIGATIONS

The components of net periodic cost (gain) for the six months ended June 30, 2011 and 2010 are as follows:

	Pension Benefits				Postretirement Benefits
		2011		2010		2011		2010
Service cost	$	0	$	0	$	6	$	20
Interest cost		435		437		123		120
Expected return on plan assets		(410)		(408)		(81)		(81)
Amortization of transition asset		0		0		14		14
Amortization of prior service cost		28		28		(165)		(165)
Amortization of net loss		436		442		47		50
Net periodic benefit cost (gain)	$	489	$	499	$	(56)	$	(42)

The components of net periodic cost (gain) are for the three months ended June 30, 2011 and 2010 are as follows:

	Pension Benefits				Postretirement Benefits
		2011		2010		2011		2010
Service cost	$	0	$	0	$	3	$	11
Interest cost		217		217		61		61
Expected return on plan assets		(205)		(240)		(40)		(42)
Amortization of transition asset		0		0		7		7
Amortizaton of prior service cost		14		14		(83)		(82)
Amortization of net loss		218		264		24		25
Net periodic benefit cost (gain)	$	244	$	255	$	(28)	$	(20)

The Company expects to contribute $529 to its pension plans in 2011.   For the six months ended June 30, 2011, the Company has contributed $264 of this amount to its pension and postretirement benefits plan.

XML



Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events

NOTE 15:  SUBSEQUENT EVENTS

On July 14, 2011, the Company entered into an agreement to purchase substantially all of the assets and assume certain of the liabilities of Alteva, LLC (the" Alteva Agreement"), a cloud-based Unified Communications solutions provider and enterprise hosted Voice over Internet Protocol provider in exchange for cash and stock with a potential combined value of $17,000. The issuance of stock contemplated under the Alteva Agreement is subject to regulatory approval by the New York State Public Service Commission ("PSC") and the New Jersey Board of Public Utilities ("BPU").

On August 5, 2011, the Company purchased substantially all of the assets and assumed certain of the liabilities of Alteva, LLC pursuant to the terms of the Alteva Agreement.  In exchange for the assets of Alteva, LLC, the Company made the following payments:

·$9,392 in cash to Alteva, LLC (of which $85 was used to pay Alteva's share of the cost for a representation and warranty insurance policy);

·$773 was used to retire certain indebtedness of Alteva, LLC; and

·$4,000 in cash was placed in escrow, which amount will be (i) returned to the Company upon the issuance of unregistered shares of the Company's common stock having a value of approximately $4,000 upon receipt of PSC and BPU approvals, or (ii) be released to Alteva, LLC in the event that PSC and BPU approvals are not received prior to December 3, 2011, in which case the Company will pay Alteva, LLC $4,000 cash in lieu of the Company's common stock.

In addition, up to a total of $2,000 in cash is payable to Alteva, LLC, on August 5, 2012 and 2013 (or prior to January 1, 2013 depending on certain tax law changes), if certain performance-based conditions are satisfied.  There will also be a post-closing working capital adjustment to the purchase price.  The Company withheld $750 from the purchase price as security for a potential working capital adjustment, the payment of certain liabilities and for possible indemnification claims.  On August 5, 2012, the Company will pay to Alteva, LLC  the sum of $750, less any amounts offset against such amount pursuant to the terms of the Agreement.   

On August 1, 2011, the Company drew down its entire $4,000 line of credit with Provident Bank.  Pursuant to the terms of the Alteva Agreement, the funds were deposited in an escrow account and the balance in the escrow account will be distributed to Alteva, LLC if PSC and BPU approval of the stock transaction is not received within 120 days of closing.  If the PSC and BPU approval is received within 120 days of closing, the balance in the escrow account will be returned to the Company.

On August 3, 2011, the Company entered into a supplement to its master loan agreement with CoBank, ACB.  The supplement provides for a $5,000 revolving loan facility in the principal amount of $5,000 (the "CoBank Revolving Loan").  Also on August 3, 2011, the Company drew down the entire $5,000 principal amount of the CoBank Revolving Loan to fund a portion of the purchase price of the Alteva Agreement.  The CoBank Revolving Loan becomes due and payable on August 2, 2012. 

The CoBank Revolving Loan incurs interest at a variable rate determined by CoBank, ACB or, if selected by the Company, at LIBOR plus 3.50%.  Interest is payable quarterly in arrears.  The Company paid CoBank, ACB a $50 origination fee in connection with the CoBank Revolving Loan. 

On August 4, 2011, the Board of Directors declared a regular quarterly dividend of $.26 per share of the Company's common stock and $1.25 per share of the Company's preferred stock.  The dividends are payable on September 30, 2011 to the shareholders of record on September 20, 2011.

XML



Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Assets
Cash and cash equivalents	$ 7,831	$ 10,899
Short term investments	2,461	2,636
Accounts receivable - net of allowance for uncollectibles - $467 and $350 in 2011 and 2010, respectively	1,957	2,451
Other accounts receivable	194	94
Materials and supplies	976	986
Prepaid expenses	705	538
Prepaid income taxes	1,283	0
Total current assets	15,407	17,604
Property, plant and equipment, net	26,361	27,258
Unamortized debt issuance costs	14	21
Intangible assets, net	199	217
Investments	6,942	7,681
Other assets	322	294
Total assets	49,245	53,075
Liabilities and Shareholders' Equity
Accounts payable	1,468	1,174
Current maturities of long-term debt	1,519	1,519
Advance billing and payments	422	397
Customer deposits	54	56
Deferred income taxes	38	38
Accrued taxes	365	1,041
Pension and postretirement benefit obligations	529	529
Other accrued expenses	1,367	2,262
Total current liabilities	5,762	7,016
Long-term debt, net of current maturities	380	1,139
Deferred income taxes	2,050	1,941
Pension and postretirement benefit obligations	6,369	6,554
Total liabilities	14,561	16,650
Shareholders' equity
Preferred shares - $100 par value; authorized and issued shares of 5,000; $0.01 par value authorized and unissued shares of 10,000,000	500	500
Common stock - $0.01 par value; authorized shares of 10,000,000 issued 6,216,570 and 6,054,741 shares at June 30, 2011 and December 31, 2010, respectively	62	60
Treasury stock - at cost, 733,694 and 635,189 Common Shares at June 30, 2011 and December 31, 2010, respectively	(6,247)	(4,770)
Additional paid in capital	5,824	4,063
Accumulated other comprehensive loss	(2,583)	(2,784)
Retained earnings	37,128	39,356
Total shareholders' equity	34,684	36,425
Total liabilities and shareholders' equity	$ 49,245	$ 53,075