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 __September 30, 1995 __
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to_________________
Commission file number 0-11174
__________________ WARWICK VALLEY TELEPHONE COMPANY___________________
(Exact name of registrant as specified in its charter)
_________________New York_____________________________14-1160510__________
(State or other jurisdiction of incorporation (I.R.S.Employer
or organization) Identification No.)
__47-49 Main Street, Warwick, New York___________________10990____________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code ______(914)986-1101____
__________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
Yes__X__ No _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
619,016 common shares, no par value, outstanding at September 30,
1995.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WARWICK VALLEY TELEPHONE COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1995 1994
(Unaudited) (Audited)
CURRENT ASSETS:
Cash $ 455,177 $ 422,037
Telecommunications accounts receivable, less accounts 2,431,279 1,682,568
receivable allowance 1995-$68,013; 1994-$65,155
Refundable income tax 0 42,034
Other accounts receivable 489,808 964,485
Materials and supplies 1,435,541 1,293,091
Prepaid expenses 434,798 285,819
TOTAL CURRENT ASSETS 5,246,603 4,690,034
NON-CURRENT ASSETS
Unamortized debt issuance expense 78,631 41,686
Other deferred charges 130,394 162,616
Investment in affiliated company 5,086 0
Investment in non-affiliated company 920,914 779,806
TOTAL NON-CURRENT ASSETS 1,135,025 984,108
TELEPHONE PLANT, AT COST:
Land, buildings and equipment
In service 31,608,158 30,666,549
Under construction 1,394,607 839,392
33,002,765 31,505,941
Less: Accumulated depreciation 10,806,875 9,522,504
TOTAL PLANT 22,195,890 21,983,437
TOTAL ASSETS $ 28,577,518 $ 27,657,579
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
-2-
Item 1. Financial Statements (Continued)
WARWICK VALLEY TELEPHONE COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
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September 30, December 31,
STOCKHOLDERS' EQUITY AND LIABILITIES 1995 1994
(Unaudited) (Audited)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 120,000 $ 120,000
Accounts payable 1,755,799 1,766,777
Notes payable 550,000 900,000
Advance billing and payments 186,037 202,358
Customer deposits 186,696 257,226
Accrued taxes 195,824 31,426
Other accrued liabilities 665,610 523,866
TOTAL CURRENT LIABILITIES 3,659,966 3,801,653
LONG TERM DEBT:
Funded debt 7,277,500 7,370,000
TOTAL LONG TERM DEBT 7,277,500 7,370,000
OTHER LIABILITIES & DEFERRED CREDITS:
Unamortized operating investment tax credit - net 316,177 354,427
Unamortized non-operating investment tax credit - net 18,179 18,179
Net non-current deferred operating income tax 2,296,272 1,973,117
Other deferred credits 340,439 640,961
TOTAL OTHER LIABILITIES & DEFERRED CREDITS 2,971,067 2,986,684
STOCKHOLDERS' EQUITY
Preferred stock - 5% cumulative, $100 par value;
7,500 shares authorized
5,000 shares issued and outstanding 500,000 500,000
Common stock, without par value;
720,000 shares authorized;
Issued and outstanding: 644,816 shares at 9/30/95
and 639,263 shares at 12/31/94 2,283,665 2,089,642
Retained earnings 12,660,520 11,684,800
15,444,185 14,274,442
Less: Treasury stock 25,800 shares at cost 775,200 775,200
TOTAL STOCKHOLDERS' EQUITY 14,668,985 13,499,242
TOTAL LIABILITIES $ 28,577,518 $ 27,657,579
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
-3-
Item 1. Financial Statements (Continued)
WARWICK VALLEY TELEPHONE COMPANY
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
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Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Operating revenues:
Local network service $ 816,580 $ 709,895 $2,382,044 $2,176,341
Network access and long distance
network service 2,391,255 2,217,896 6,816,431 6,257,553
Miscellaneous 280,127 270,751 784,399 745,320
3,487,962 3,198,542 9,982,874 9,179,214
Less: Provisions for uncollectibles 7,200 7,200 21,600 21,600
Operating revenues 3,480,762 3,191,342 9,961,274 9,157,614
Operating expenses:
Plant specific 560,428 442,156 1,538,528 1,422,494
Plant non-specific 644,160 632,809 1,959,659 1,853,933
Customer operations 698,141 696,776 2,069,636 2,003,514
Corporate operations 442,276 366,793 1,299,385 1,305,543
Operating expenses 2,345,005 2,138,534 6,867,208 6,585,484
Operating taxes:
Federal income taxes 225,665 189,726 548,912 396,731
Operating other taxes 272,572 269,069 792,381 753,357
Operating taxes 498,237 458,795 1,341,293 1,150,088
Income from operations 637,520 594,013 1,752,773 1,422,042
Non-operating income & expenses -
net (Note 2) 176,526 111,460 422,263 374,103
Income before fixed charges 814,046 705,473 2,175,036 1,796,145
Interest & related items:
Interest on funded debt 148,218 150,941 446,299 468,726
Other interest deductions 13,458 1,189 14,755 2,136
Amortization of debt issuance expense 3,461 2,140 15,888 6,422
Total interest & related items 165,137 154,270 476,942 477,284
Net income all sources 648,909 551,203 1,698,094 1,318,861
PREFERRED DIVIDENDS 6,250 6,250 18,750 18,750
INCOME APPLICABLE TO COMMON STOCK $ 642,659 $ 544,953 $1,679,344 $1,300,111
NET INCOME PER AVERAGE SHARE
OF OUTSTANDING COMMON STOCK 1.04 0.89 2.73 2.13
CASH DIVIDENDS PAID PER SHARE 0.37 0.37 1.11 1.11
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 619,016 613,463 616,240 611,034
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 4 -
WARWICK VALLEY TELEPHONE COMPANY
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
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1995 1994
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,698,094 $ 1,318,861
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,533,758 1,321,603
Non-current deferred income taxes-dr. 0 0
Deferred income tax and investment tax credit (15,617) 273,646
Interest charged to construction (29,897) (109,481)
CHANGE IN ASSETS AND LIABILITIES:
(Increase) Decrease in accounts receivable (274,034) (78,493)
(Increase) Decrease in materials and supplies (142,450) (330,931)
(Increase) Decrease in refundable income tax 42,034 0
(Increase) Decrease in prepaid expenses (148,979) (108,792)
(Increase) Decrease in deferred charges 32,222 (24,028)
Increase (Decrease) in accounts payable (10,978) 160,462
Increase (Decrease) in customers' deposits (70,530) (4,056)
Increase (Decrease) in accrued expenses 148,078 (208,365)
Increase (Decrease) in other liabilities 141,744 125,021
Net Cash provided by operating activities 2,903,445 2,335,447
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,730,323) (3,549,757)
Interest charged to construction 29,897 109,481
Change in unamortized debt issuance expense (52,834) 0
Change in other investment (146,194) (44,213)
Net Cash used in investing activities (1,899,454) (3,484,489)
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (Decrease) in Notes Payable (350,000) 750,000
Reduction of long term debt (92,500) (92,500)
Dividends (722,374) (697,896)
Sale of common stock 194,023 167,295
Net Cash used by financing activities (970,851) 126,899
Increase (Decrease) in cash and cash equivalents 33,140 (1,022,143)
Cash and cash equivalents at beginning of year 422,037 1,529,483
Cash and cash equivalents at end of the period $ 455,177 $ 507,340
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
-5-
Item 1. Financial Statements (Continued)
WARWICK VALLEY TELEPHONE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. In the opinion of the management of the Warwick Valley Telephone Company,
the accompanying financial statements contain all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the
Company's financial position as of September 30, 1995 and December 31,
1994, its income for the three-month and nine-month periods ended
September 30, 1995 and 1994 and its cash flow for the nine-month periods
ended September 30, 1995 and 1994.
These financial statements should be read in conjunction with the
financial statements and the notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
The results of operations for any interim period are not necessarily
indicative of the results of operations for a full year.
2. Non-operating income and expenses for the three-month and nine-month
periods ended September 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Interest income $129 $428 $385 $16,974
Interest during construction 5,056 60,155 29,897 109,481
G/L disposition certain property 4,938 6,326 15,848 21,803
Special charges (2,524) (9,403) (24,812) (31,012)
Other non-operating income 78,150 86,100 149,250 255,100
Equity in earnings of affiliated company 90,777 (32,146) 251,695 1,757
$176,526 $111,460 $422,263 $374,103
</TABLE>
- 6 -
WARWICK VALLEY TELEPHONE COMPANY
________________
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1995 - The
Company's net income from all sources increased $379,233 (or 28.8%) to
$1,698,094 for the nine-month period ended September 30, 1995, as
compared to the same period in 1994. Operating revenues increased by
$803,660 (or 8.8%) after provision for uncollectibles, to $9,961,274
for the nine-month period ended September 30, 1995 as compared to
$9,157,614 for the corresponding period of 1994. The increase in
operating revenues was caused mainly by increases in network access and
toll revenues, which increased $558,878 in the aggregate during the
period, as compared to the same nine months of 1994.
Operating expenses increased by $281,724 (or 4.3%) to $6,867,208
for the nine-month period ended September 30, 1995 as compared to the
same period in 1994. Increased costs of salaries and benefits
(approximately $169,000) and depreciation ($203,000) were offset by
reductions in areas such as materials for repairs ($20,000), tariff
filing costs ($42,000) and directory costs ($20,000).
Non-operating income and expenses increased by $48,160 from
$374,103 in the nine-month period ended September 30, 1994 to $422,263
in the same period of 1995. A decrease of $108,197 in cellular income
from the Company's subsidiary and the Company's share of the Orange-
Poughkeepsie Cellular Partnership occurred primarily as a result of
roamer fraud losses. At the same time, Warwick Valley Long Distance,
the Company's toll subsidiary, had an increase in earnings of $252,285,
to $248,674 for the 1995 period from a loss of $3,611 during 1994 when
the business was in its start-up phase. Reductions in interest during
construction of $79,584 and in interest income of $16,589 offset part
ot the increase. See Liquidity and Capital Resources below.
RESULTS OF OPERATIONS - Three Months Ended September 30, 1995 - The
Company's net income from all sources increased $97,706 (or 17.7%) to
$648,909 for the three-month period ended September 30, 1995, as
compared to $551,203 for the same period in 1994. Operating revenues
increased by $289,420 (or 9.1%) after provision for uncollectibles, to
$3,480,762 for the three-month period ended September 30, 1995 as
compared to $3,191,342 for the corresponding period of 1994. The
increase in operating revenues was caused mainly by increases in
access, toll and local revenues over the 1994 period.
Operating expenses increased by $206,471 (or 9.7%) to $2,345,005
for the three-month period ended September 30, 1995 as compared to the
same period in 1994. Increased costs of salaries, benefits and
depreciation were offset as noted in Results of Operations - Nine
Months Ended September 30, 1995.
Non-operating income and expenses increased by $65,066 from
$111,460 in the three-month period ended September 30, 1994 to $176,526
in the same period of 1995, largely as a result of the factors listed
above under Results of Operations - Nine Months Ended September 30,
1995. See Liquidity and Capital Resources below.
LIQUIDITY AND CAPITAL RESOURCES - The Company's working capital
increased to $1,586,637 at September 30, 1995 from $1,334,195 at
September 30, 1994, largely as a result of a higher level of
receivables and a lower level of notes payable, offset by a higher
level of other accrued liabilities at September 30, 1995.
-7-
WARWICK VALLEY TELEPHONE COMPANY
_______________
The Company holds a 7.5% limited partnership interest in the cellular
mobile telephone partnership which is licensed to operate as the wire-line
licensee in both Orange and Dutchess Counties, New York. Since the
inception of the partnership, the Company has made capital contributions of
$249,750. No further capital contributions are currently scheduled. A
wholly-owned subsidiary of the Company, Warwick Valley Mobile Telephone
Company (WVMT), resells cellular telephone service to the Company's
subscribers as well as to others. WVMT also sells and installs cellular
telephone sets. The Company has invested approximately $347,000 in WVMT
since its operations began on April 1, 1989.
A second wholly-owned subsidiary, Warwick Valley Long Distance Company,
Inc. (WVLD), began business in December 1993 in New Jersey and in May 1994
in New York. WVLD resells toll service to customers of Warwick Valley
Telephone. WVLD achieved positive retained earnings prior to the end of
1994.
An additional wholly-owned subsidiary, Warwick Valley Networks, Inc.
(WVN), was established during 1994. WVN is a partner in the New York State
Independent Network (NYSINET), which was created by the independent
telephone companies of New York to build and operate its own data
connections network. NYSINET will make it unnecessary for its member
companies to rely on outside companies for these services and may also offer
services to companies who are not members, creating a potential source of
additional revenue. The NYSINET network is expected to be in operation
before the end of 1995.
Another wholly-owned subsidiary, Hometown Online, Inc. (Online) was
created during 1995. Online is the corporate entity through which WVTC
provides connectivity to the Internet as well as local and regional
information services to personal computer users. Service is offered within
WVTC's service area as well as in nearby areas in New York, New Jersey and
Pennsylvania. Online first began offering services in July, 1995. WVTC has
invested approximately $200,000 in Online since its inception.
Potential major changes in legislation and regulation that affect the
structure of future regulation and competition are pending in Congress and
the Federal and State regulatory agencies which have jurisdiction over the
Company. Although final decisions are probably months away, it would appear
that local and regional toll competition will be allowed, starting in
1996. Until the rules governing such competition have been established,
it is difficult to estimate the effect on the Company in the different
markets in which it will compete. The markets most likely to be
affected first are the regional toll areas in both New York and New
Jersey. The competition in those regional toll areas is expected to
have the effect of reducing Warwick's revenues. The extent of such
reduction cannot yet be determined but is expected to be small in New
York where carrier access is the main revenue source. The New York
regional toll rules are expected to be implemented in 1996. The Company
has urged in the ongoing New Jersey proceeding that it be allowed to
realign its local, toll and access rates to prevent a shortfall which
could result from the loss of a significant portion of the regional toll
market. Currently the Company's market share is estimated to be in
excess of 90%. A decision will not be reached in that proceeding for
several months.
PART II - OTHER INFORMATION
Items 1 (Legal Proceedings), 2 (Changes in Securities), 3 (Defaults Upon
Senior Securities) and 4 (Submission of Matters to a Vote of Securities
Holders) are inapplicable.
Item 5. Other Information
On October 25, 1995, the Company reached agreement
with The Warwick Valley Telephone Company Employees' Association (WVTEA)
on a three-year contract, effective November 6, 1995, regarding wages
and working conditions. WVTEA represents non-management clerical and
operator employees. Local 503 of the International Brotherhood of
Electrical Workers represents non-management employees in the plant
department. The Company's contract with Local 503 expires on May 1,
1998.
-8-
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - Not applicable
b) Reports on Form 8-K - Not applicable
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________________ _________________________________________
Herbert Gareiss, Jr., Vice President
(Duly Authorized Officer)
Date ________________ _________________________________________
Philip S. Demarest, Vice-President
Secretary and Treasurer
(Principal Financial and Chief
Accounting Officer)
-9-
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<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-END> SEP-30-1995 DEC-31-1994
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 22,195,890 21,983,437
<OTHER-PROPERTY-AND-INVEST> 920,914 779,806
<TOTAL-CURRENT-ASSETS> 5,246,603 4,690,034
<TOTAL-DEFERRED-CHARGES> 209,025 204,302
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 28,577,518 27,657,579
<COMMON> 2,283,665 2,089,642
<CAPITAL-SURPLUS-PAID-IN> 0 0
<RETAINED-EARNINGS> 12,660,520 11,684,800
<TOTAL-COMMON-STOCKHOLDERS-EQ> 14,944,185 13,774,442
0 0
500,000 500,000
<LONG-TERM-DEBT-NET> 7,157,500 7,250,000
<SHORT-TERM-NOTES> 550,000 900,000
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 120,000 120,000
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,185,833 4,993,137
<TOT-CAPITALIZATION-AND-LIAB> 28,577,518 27,657,579
<GROSS-OPERATING-REVENUE> 9,961,274 12,252,804
<INCOME-TAX-EXPENSE> 548,912 312,507
<OTHER-OPERATING-EXPENSES> 0 0
<TOTAL-OPERATING-EXPENSES> 6,867,208 8,850,222
<OPERATING-INCOME-LOSS> 1,752,773 2,067,052
<OTHER-INCOME-NET> 422,263 326,392
<INCOME-BEFORE-INTEREST-EXPEN> 2,175,036 2,393,444
<TOTAL-INTEREST-EXPENSE> 476,942 643,994
<NET-INCOME> 1,698,094 1,749,450
18,750 25,000
<EARNINGS-AVAILABLE-FOR-COMM> 1,679,344 1,724,450
<COMMON-STOCK-DIVIDENDS> 703,624 1,028,820
<TOTAL-INTEREST-ON-BONDS> 446,299 619,064
<CASH-FLOW-OPERATIONS> 2,903,445 2,818,765
<EPS-PRIMARY> 2.73 2.82
<EPS-DILUTED> 0 0
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