SOURCE: Warwick Valley Telephone Company

November 14, 2008 15:58 ET

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

WARWICK, NY--(Marketwire - November 14, 2008) - Warwick Valley Telephone Company ("WVT Communications") ("the Company") (NASDAQ: WWVY) announced today that its financial results for the third quarter and nine months ended September 30, 2008 showed an improvement in net income for both periods. The Company increased its net income before extraordinary item by 10%, from $1,557 to $1,708 in comparison to the three-month period over the same period in 2007 and by 13% from $3,633 to $4,086 for the nine-month period over the same period in 2007. The increase for the three-month period was primarily attributable to an increase in Universal Service Fund ("USF") revenue received. The increase for the nine-month period was attributable primarily to an improvement in Orange County-Poughkeepsie Limited Partnership ("O-P") income, 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 and higher USF revenue. The Company has determined, in the third quarter of 2008, that it is no longer appropriate to continue the application of Statement of Financial Accounting Standard No. 71 ("SFAS 71"), "Accounting for the Effects of Certain Types of Regulation" for reporting its financial results. Accordingly, the Company has recorded a non-cash extraordinary loss of $73, net of a tax effect of $39, upon discontinuance of the provisions of SFAS 71, as required by the provisions of Statement of Financial Accounting Standard No. 101, "Regulated Enterprises - Accounting for the Discontinuance of the Application of Financial Accounting Standard Board Statement No. 71." As a result net income increased by 5%, from $1,557 to $1,635 in comparison to the three-month period over the same period in 2007 and by 11% from $3,633 to $4,013 for the nine-month period over the same period in 2007.

Operating revenues increased 2% from $6,137 to $6,245 for the three months ended September 30, 2008 as compared to the same period in the prior year and decreased 4% from $17,906 to $17,266 for the nine months ended September 30, 2008 as compared to the same period in the prior year. The increase for the three months was primarily attributable to additional USF revenue received. The decrease for the nine months was due to the following reductions: long distance revenues and Online service revenues decreased due to access line losses attributable to competition and technology substitution, partially offset by an increase in network access revenues due to additional USF revenue and an increase in sales of customer business telephone systems.

Operating expenses decreased 1% from $6,280 to $6,205 for the three months ended September 30, 2008 as compared to the same period in the prior year and decreased 3% from $18,905 to $18,349 for the nine months ended September 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. Depreciation expense also decreased due to some types of broadband equipment that were fully depreciated in 2007. Partially offsetting these lower costs were increases in sales force personnel and cost of services and products.

Commenting on the third quarter results, Duane Albro, the President and CEO, said, "While our greatest challenge continues to be maintaining and growing revenues in an increasing competitive Incumbent Local Exchange Carrier environment, we are proud of our operating profit during the third quarter. Our aggressive ramp up of Competitive Local Exchange Carrier ("CLEC") sales activities is resulting in increased customer contracts. Our launch of DirecTV services as an alternate video service has been successful and we are now reaching video customers that were heretofore not served by us. Both of these initiatives 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 and remain committed to expansion of our CLEC activities through either building or acquisition. 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    Nine Months Ended
                                    September 30,        September 30,
                                --------------------  --------------------
                                   2008       2007       2008      2007
                                ---------  ---------  ---------  ---------

Operating revenues:             $   6,245  $   6,137  $  17,266  $  17,906

Operating expenses:
  Cost of services and products
   (exclusive of depreciation
    and amortization expense)       2,427      1,886      6,776      5,804
  Selling, general and
   administrative expenses          2,672      2,984      8,041      9,103
    Depreciation and
     amortization                   1,106      1,410      3,532      3,998
                                ---------  ---------  ---------  ---------
  Total operating expenses          6,205      6,280     18,349     18,905
                                ---------  ---------  ---------  ---------
  Operating income (loss)              40       (143)    (1,083)      (999)

Other income (expense):
  Interest income (expense),
   net of capitalized interest        (71)      (114)        34       (240)
  Income from equity method
   investments                      2,663      2,626      7,384      6,761
  Other income (expense), net          (8)       (28)       (47)       (18)
                                ---------  ---------  ---------  ---------
  Total other income (expense)      2,584      2,484      7,371      6,503
                                ---------  ---------  ---------  ---------
  Income before income taxes
   and extraordinary item           2,624      2,341      6,288      5,504
Income taxes                          916        784      2,202      1,871
                                ---------  ---------  ---------  ---------
  Income before extraordinary
   item                             1,708      1,557      4,086      3,633
  Extraordinary item, net of
   tax                                (73)         -        (73)         -
                                ---------  ---------  ---------  ---------
  Net Income                        1,635      1,557      4,013      3,633
Preferred dividends                     6          6         19         19
                                ---------  ---------  ---------  ---------
  Income applicable to common
   stock                        $   1,629  $   1,551  $   3,994  $   3,614
                                =========  =========  =========  =========

Basic earnings per common share
  Income before extraordinary
   item                         $    0.32  $    0.29  $    0.76  $    0.68
  Extraordinary item                (0.01)         -      (0.01)         -
                                ---------  ---------  ---------  ---------
  Basic earnings per share      $    0.31  $    0.29  $    0.75  $    0.68
                                =========  =========  =========  =========

Diluted earnings per common
 share
  Income before extraordinary
   item                         $    0.32  $    0.29  $    0.76  $    0.68
  Extraordinary item                (0.01)         -      (0.01)         -
                                ---------  ---------  ---------  ---------
  Diluted earnings per share    $    0.31  $    0.29  $    0.75  $    0.68
                                =========  =========  =========  =========

Weighted average shares of
 common stock used to
 calculate earnings per share
  Basic                         5,351,780  5,351,780  5,351,780  5,351,780
                                =========  =========  =========  =========
  Diluted                       5,357,816  5,351,780  5,353,792  5,351,780
                                =========  =========  =========  =========
Dividends declared per common
 share                          $    0.20  $    0.20  $    0.60  $    0.60
                                =========  =========  =========  =========





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

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

Current assets:
   Cash and cash equivalents                $        5,574  $        5,849
   Accounts receivable - net of allowance
    for uncollectibles - $207 and $214, in
    2008 and 2007, respectively                      2,557           3,067
   Other accounts receivable                           126             152
   Materials and supplies                            1,218           1,591
   Prepaid expenses                                    840             769
   Deferred income taxes                                98             119
                                            --------------  --------------
Total current assets                                10,413          11,547
                                            --------------  --------------

   Property, plant and equipment, net               35,247          35,791
   Unamortized debt issuance costs                      55              65
   Other deferred charges                                -             762
   Investments                                       8,607           8,276
   Other assets                                        210             210
                                            --------------  --------------

   Total assets                             $       54,532  $       56,651
                                            ==============  ==============

Liabilities  and Shareholders' Equity

Current liabilities:
   Accounts payable                         $          771  $          940
   Current maturities of long-term debt              1,519           1,519
   Advance billing and payments                        243             234
   Customer deposits                                   101             116
   Accrued taxes                                       315              80
   Pension and postretirement benefit
    obligations                                        615             929
   Other accrued expenses                            1,530           1,830
                                            --------------  --------------
Total current liabilities                            5,094           5,648
                                            --------------  --------------

   Long-term debt, net of current
    maturities                                       4,556           5,695
   Deferred income taxes                             3,702           3,334
   Long term income taxes payable                        -             640
   Other liabilities and deferred credits               40             591
   Pension and postretirement benefit
    obligations                                      3,891           4,324
                                            --------------  --------------

   Total liabilities                                17,283          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                        3,495           3,487
   Accumulated other comprehensive loss               (836)           (875)
   Retained earnings                                38,778          37,995
                                            --------------  --------------

   Total shareholders' equity                       37,249          36,419
                                            --------------  --------------

   Total liabilities and shareholders'
    equity                                  $       54,532  $       56,651
                                            ==============  ==============

Contact Information

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