SOURCE: Warwick Valley Telephone Company

August 13, 2008 14:21 ET

Warwick Valley Telephone Company Reports Financial Results for Second Quarter Ended June 30, 2008 ($ in Thousands)

WARWICK, NY--(Marketwire - August 13, 2008) - Warwick Valley Telephone Company ("WVT Communications") ("the Company") (NASDAQ: WWVY) announced today that its financial results for the second quarter and six months ended June 30, 2008 showed an improvement in net income for both periods. The Company increased its net income by 20%, from $1,350 to $1,618 in comparison to the three-month period over the same period in 2007 and by 15% from $2,076 to $2,378 for the six-month period over the same period in 2007. This increase was attributable primarily to an improvement in Orange County-Poughkeepsie Limited Partnership ("O-P") income and a one time curtailment gain of $469 before tax for post-retirement benefit costs resulting from the Company's new contracts with its union employees. Without this one time curtailment gain the net income for the three-month period ended June 30, 2008 decreased by 3% from $1,350 to $1,313 in comparison to the three-month period ended June 30, 2007. This decrease was due to increased wages associated with the ramp-up of our sales and sales support force and infrastructure costs focusing on the small and medium-sized business market, the continued loss of access lines due to competition and technology substitution, as well as one time separation costs for management employees.

Operating revenues decreased 9% from $5,878 to $5,377 for the three months ended June 30, 2008 as compared to the same period in the prior year and decreased 6% from $11,769 to $11,021 for the six months ended June 30, 2008 as compared to the same period in the prior year. These decreases were due to the following reductions: network access revenues decreased as the result of lower local switch support revenues received from the Universal Service Fund and declining billable switched minutes; and our long distance revenues and Online service revenues decreased due to losses in our customer base access lines as our customers continue to switch to high speed broadband services for Internet access and the loss of customers switching to our competitors' services which were offset by an increase in other services and sales resulting from the improved sales of customer business telephone systems.

Operating expenses for the three months ended June 30, 2008 decreased 6% from $6,034 to $5,670 for the three months ended June 30, 2008 as compared to the same period in the prior year and decreased 4% from $12,625 to $12,144 for the six months ended June 30, 2008 as compared to the same period in the prior year. These decreases were mainly due to a postretirement curtailment gain resulting from the elimination of benefits of certain union employees as a result of the negotiation of a new union agreement, lower corporate operations expense associated with the reduction of management's portion of its 401K match, lower professional fees and corporate insurance costs, partially offset by an increase in legal fees. Depreciation expense also decreased due to fully depreciated Internet equipment. Partially offsetting the lower costs were increases in plant specific expenses resulting from an increase in trunk line costs for the telephone segment and salaries associated with the addition of employees in the operations department. Customer operations increased due to salaries associated with the addition of employees in the marketing and sales departments and other plant non-specific expense increased as a result of costs associated with the Company's wireless service as well as salaries associated with the addition of employees in the network department.

The Company has a long history in successful deployments of new technology. We were one of the first telephone companies to install digital switching, to offer Internet access as an Internet Service Provider ("ISP"), and to offer video service as an alternative to cable TV companies. We have continued to invest in our operations to gain enhanced operating efficiencies and to enable the introduction of new services to our customers. The Company has continued to deploy capital to upgrade video services and Voice over Internet Protocol to a greater number of our customers.

Commenting on the second quarter results, Duane Albro, the President and CEO, said, "We clearly recognize the benefit we gain from our interest in the O-P wireless partnership and we are diligently working to bring our primary telephone business to profitability. Our aggressive ramp up of sales activities is resulting in increased customer contracts that will drive our top-line revenue. We are also continuing our aggressive expense control to improve our operating margin and enhance our competitiveness. We are firmly committed to creating value for our shareholders by the successful implementation of these initiatives. We also remain committed to expansion of our Competitive Local Exchange Carrier activities through either building or acquiring the capability. WVT Communications continues to demonstrate that it is a great company with great customers and great employees... with a solid plan for growth."

About WVT Communications

WVT Communications is a leading voice, Internet, video and wireless provider servicing consumers and businesses in the lower Hudson Valley of New York and New Jersey. Additional information about the Company is available at www.wvtc.com.

Forward-looking Statements

This press release forward-looking statements as defined be the Private Securities Litigation Reform Act of 1995. These include statements concerning expectations, estimates, and projections about the industry, management beliefs and assumptions of Warwick Valley Telephone Company. ("Warwick," "we," "us," or "our"). Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast. Therefore, our actual results may materially differ from those expressed or forecasted in any such forward-looking statements. When considering these risks, uncertainties and assumptions, you should keep in mind the cautionary statements elsewhere in this report and in any document incorporated herein by reference. New risks and uncertainties arise from time to time and we can not predict those events or how they may affect us. For a more detailed discussion of the risks and uncertainties that may affect Warwick's operating and financial results and its ability to achieve its financial objectives, interested parties should review the "Risk Factors" sections in the Warwick's reports filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2007. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

                     WARWICK VALLEY TELEPHONE COMPANY
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)
           ($ in thousands, except share and per share amounts)

                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                   2008      2007        2008      2007
                                ---------  ---------  ---------  ---------

Operating revenues:
  Local network service         $     758  $     794  $   1,507  $   1,619
  Network access service            1,722      2,066      3,635      4,015
  Long distance services              745        825      1,567      1,735
  Directory advertising               317        331        642        669
  Online services                   1,342      1,440      2,682      2,915
  Other services and sales            493        422        988        816
                                ---------  ---------  ---------  ---------

  Total operating revenues          5,377      5,878     11,021     11,769
                                ---------  ---------  ---------  ---------

Operating expenses:
  Plant specific                    1,262        871      2,576      2,057
  Plant non-specific:
    Depreciation and
     amortization                   1,067      1,294      2,426      2,588
    Other                             820        746      1,583      1,447
  Customer operations               1,051        895      2,181      1,947
  Corporate operations              1,263      1,587      2,561      3,137
  Cost of services and sales          279        294        540        685
  Property, revenue and payroll
   taxes                              397        347        746        764
  Postretirement liability
   curtailment (gains)               (469)         -       (469)         -
                                ---------  ---------  ---------  ---------

  Total operating expenses          5,670      6,034     12,144     12,625
                                ---------  ---------  ---------  ---------

  Operating loss                     (293)      (156)    (1,123)      (856)

Other income (expense):
  Interest income (expense),
   net of capitalized interest        192        (92)       105       (126)
  Income from equity method
   investments                      2,574      2,265      4,721      4,135
  Other income (expense), net          10         28        (39)        10
                                ---------  ---------  ---------  ---------

  Total other income (expense)      2,776      2,201      4,787      4,019
                                ---------  ---------  ---------  ---------

  Income before income taxes        2,483      2,045      3,664      3,163

Income taxes                          865        695      1,286      1,087
                                ---------  ---------  ---------  ---------

  Net income                        1,618      1,350      2,378      2,076

Preferred dividends                     7          7         13         13
                                ---------  ---------  ---------  ---------

  Income applicable to common
   stock                        $   1,611  $   1,343  $   2,365  $   2,063
                                =========  =========  =========  =========

  Basic and diluted earnings
   per share of outstanding
   common stock                 $    0.30  $    0.25  $    0.44  $    0.39
                                =========  =========  =========  =========
  Weighted average shares of
   common stock outstanding     5,351,780  5,351,780  5,351,780  5,351,780
                                =========  =========  =========  =========




                     WARWICK VALLEY TELEPHONE COMPANY
                  CONDENSED CONSOLIDATED BALANCE SHEETS
            ($ in thousands except share and per share amounts)

                                                  June 30,    December 31,
                                                    2008          2007
                                                ------------  ------------
                                                (Unaudited)
Assets

Current assets:
        Cash and cash equivalents               $      5,735  $      5,849
        Accounts receivable - net of allowance
         for uncollectibles - $187 and $214, in
         2008 and 2007, respectively                   2,474         3,067
        Other accounts receivable                        163           152
        Materials and supplies                         1,534         1,591
        Prepaid expenses                                 809           769
        Deferred income taxes                            105           119
                                                ------------  ------------
Total current assets                                  10,820        11,547
                                                ------------  ------------

        Property, plant and equipment, net            35,354        35,791
        Unamortized debt issuance costs                   58            65
        Other deferred charges                           746           762
        Investments                                    8,700         8,276
        Other assets                                     210           210
                                                ------------  ------------

        Total assets                            $     55,888  $     56,651
                                                ============  ============

Liabilities and Shareholders' Equity

Current liabilities:
        Accounts payable                        $      1,147  $        940
        Current maturities of long-term debt           1,519         1,519
        Advance billing and payments                     266           234
        Customer deposits                                104           116
        Accrued taxes                                    682            80
        Pension and post retirement benefit
         obligations                                     929           929
        Other accrued expenses                         1,425         1,830
                                                ------------  ------------
Total current liabilities                              6,072         5,648
                                                ------------  ------------

        Long-term debt, net of current
         maturities                                    4,936         5,695
        Deferred income taxes                          3,741         3,334
        Long term income taxes payable                     -           640
        Other liabilities and deferred credits           591           591
        Pension and post retirement benefit
         obligations                                   3,879         4,324
                                                ------------  ------------

        Total liabilities                             19,219        20,232
                                                ------------  ------------

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 5,985,463 shares                          60            60
        Treasury stock - at cost, 633,683
         common shares                                (4,748)       (4,748)
        Additional paid in capital                     3,487         3,487
        Accumulated other comprehensive loss            (849)         (875)
        Retained earnings                             38,219        37,995
                                                ------------  ------------

        Total shareholders' equity                    36,669        36,419
                                                ------------  ------------

        Total liabilities and shareholders'
         equity                                 $     55,888  $     56,651
                                                ============  ============

Contact Information

  • Contact:
    WVT Communications
    Kenneth H. Volz
    Executive Vice President, Chief Financial Officer and Treasurer
    845-986-8080