XNAS:WWVY Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Form 10-Q

 

R QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2012
 
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 þ 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 þ 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 þ
   
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 2, 2012 was 5,793,223.

 

 
 

 

Index to Form 10-Q

 

Part I          Financial Information  
   
Item 1.  Financial Statements (unaudited)  
   
Condensed Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011 (audited) 3
   
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited) 4
   
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2012 and 2011(unaudited) 5
   
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited) 6
   
Notes to Condensed Consolidated Financial Statements 7
   
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
   
Item 3.  Quantitative and Qualitative Disclosures about Market Risk 24
   
Item 4.  Controls and Procedures 24
   
Part II – Other Information  
   
Item 5.   Other Information 25
   
Item 6.   Exhibits 25

 

2
 

 

Part I – Financial Information

Item 1. Financial Statements

WARWICK VALLEY TELEPHONE COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands except share and per share amounts)

   June 30,   December 31, 
   2012   2011 
   (Unaudited)     
Assets          
Current assets          
Cash and cash equivalents  $1,430   $4,575 
Short term investments   260    259 
Accounts receivable - net of allowance for uncollectibles - $613 and $759 in 2012 and 2011, respectively   3,527    2,717 
Other accounts receivable   199    174 
Materials and supplies   794    832 
Prepaid expenses   929    731 
Prepaid income taxes   3,371    2,715 
Deferred Income taxes   405    405 
Total current assets   10,915    12,408 
           
Property, plant and equipment, net   24,949    25,425 
Unamortized debt issuance costs   6    45 
Intangible assets, net   8,446    8,605 
Investments   0    1,979 
Goodwill   9,121    9,121 
Other assets   336    333 
           
Total assets  $53,773   $57,916 
Liabilities and Shareholders' Equity          
Current liabilities          
Short-term borrowings  $7,325   $5,600 
Current maturities of long-term debt   380    1,139 
Accounts payable   1,595    1,715 
Amounts due in connection with business acquisition   2,247    2,377 
Derivative liability in connection with business acquisition   66    131 
Advance billing and payments   382    390 
Customer deposits   45    51 
Accrued taxes   774    521 
Pension and postretirement benefit obligations   622    622 
Other accrued expenses   2,519    3,347 
Total current liabilities   15,955    15,893 
           
Amounts due in connection with business acquisition   484    472 
Deferred income taxes   1,503    1,358 
Pension and postretirement benefit obligations   9,613    9,915 
           
Total liabilities   27,555    27,638 
           
Commitments and contingencies          
           
Puttable common stock, $.01 par value, 272,479 shares issued and outstanding   4,125    4,125 
           
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 6,309,569 and 6,217,839 shares at June 30, 2012 and December 31, 2011, respectively   63    62 
Treasury stock - at cost, 788,825 and 735,391 shares of common stock at June 30, 2012 and December 31, 2011, respectively   (7,049)   (6,262)
Additional paid in capital   7,265    6,191 
Accumulated other comprehensive loss   (4,720)   (4,979)
Retained earnings   26,034    30,641 
           
Total shareholders' equity   22,093    26,153 
           
Total liabilities and shareholders' equity  $53,773   $57,916 

 

Please see accompanying condensed notes, which are an integral part of the condensed consolidated financial statements.

 

3
 

 

WARWICK VALLEY TELEPHONE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

($ in thousands except share and per share amounts)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2012   2011   2012   2011 
                 
Operating revenues                    
Telephone  $3,634   $4,600   $7,441   $9,348 
Unified Communications   3,252    1,211    6,526    2,641 
Total operating revenues   6,886    5,811    13,967    11,989 
                     
Operating expenses                    
Cost of services and products (exclusive of depreciation and amortization expense)   3,434    2,944    6,982    6,191 
Selling, general and administrative expenses   5,603    4,103    11,011    7,588 
Depreciation and amortization   1,296    1,341    2,575    2,738 
Total operating expenses   10,333    8,388    20,568    16,517 
Operating loss   (3,447)   (2,577)   (6,601)   (4,528)
                     
Other income (expense)                    
Interest income (expense)   (112)   2    (169)   59 
Income from equity method investment   3,096    2,198    4,521    5,416 
Other income (expense), net   136    9    131    15 
Total other income (expense)   3,120    2,209    4,483    5,490 
Income (loss) before income taxes   (327)   (368)   (2,118)   962 
                     
Income taxes (benefit)   (99)   (128)   (656)   330 
Net income (loss)   (228)   (240)   (1,462)   632 
                     
Preferred dividends   7    7    13    13 
Income (loss) applicable to common stock  $(235)  $(247)  $(1,475)  $619 
                     
Basic earnings (loss) per share  $(0.04)  $(0.05)  $(0.26)  $0.11 
Basic earnings (loss) per puttable common share  $(0.04)  $0.00   $(0.26)  $0.00 
                     
Diluted earnings (loss) per share  $(0.04)  $(0.05)  $(0.26)  $0.11 
Diluted earnings (loss) per puttable common share  $(0.04)  $0.00   $(0.26)  $0.00 
                     
Weighted average shares of common stock used to calculate earnings per share                    
Basic   5,730,702    5,406,894    5,722,824    5,400,822 
Basic (puttable common)   272,479    0    272,479    0 
Diluted   5,730,702    5,406,894    5,722,824    5,424,287 
Diluted (puttable common)   272,479    0    272,479    0 
Dividends declared per common share  $0.27   $0.26   $0.54   $0.52 

 

Please see accompanying condensed notes, which are an integral part of the condensed consolidated financial statements.

 

4
 

 

WARWICK VALLEY TELEPHONE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

($ in thousands, except share and per share amounts)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2012   2011   2012   2011 
                 
Net income (loss)  $(228)  $(240)  $(1,462)  $632 
                     
Other comprehensive income (loss), net of tax:                    
Unrealized holding gains (loss) arising during the period   -    13    -    8 
Defined benefit pension plans:                    
Amortization of transition obligation   5    4    9    9 
Prior service cost arising during period   (44)   114    (88)   (88)
Net loss arising during period   170    (37)   339    272 
                     
Other comprehensive income (loss)   131    94    260    201 
                     
Comprehensive income (loss)  $(97)  $(146)  $(1,202)  $833 

 

Please see accompanying notes, which are an integral part of the condensed consolidated financial statements.

 

5
 

 

WARWICK VALLEY TELEPHONE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

($ in thousands)

 

   Six Months Ended 
   June 30, 
   2012   2011 
CASH FLOW FROM OPERATING ACTIVITIES          
           
Net Income (loss)  $(1,462)  $632 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization   2,575    2,738 
Allowance for uncollectibles   160    125 
Stock-based compensation expense   398    626 
Deferred income taxes   0    109 
Income from equity investments, net of distributions   1,979    739 
Change in fair value of derivative liability   (65)   0 
Changes in assets and liabilities          
Accounts receivable   (970)   369 
Other accounts receivable   (25)   (100)
Materials and supplies   38    10 
Prepaid income taxes   (656)   (1,283)
Prepaid expenses   (198)   (167)
Other assets   0    (28)
Accounts payable   (121)   294 
Customers' deposits   (6)   (2)
Advance billing and payment   (8)   25 
Accrued taxes   253    (676)
Pension and postretirement benefit obligations   102    8 
Other accrued expenses   (828)   (895)
Net cash provided by operating activities   1,166    2,524 
           
CASH FLOW FROM INVESTING ACTIVITIES          
Capital expenditures   (1,499)   (1,801)
Purchase of intangibles   (405)   (15)
Sale of short-term investments   0    1,176 
Purchase of short-term investments   0    (993)
Net cash used in investing activities   (1,904)   (1,633)
           
CASH FLOW FROM FINANCING ACTIVITIES          
Repayment of long-term debt   (759)   (759)
Amounts due in connection with business acquisition, net   (118)   0 
Proceeds from short term borrowings   1,725    0 
Treasury stock purchases   (111)   (340)
Dividends (Common and Preferred)   (3,144)   (2,860)
Net cash used in financing activities   (2,407)   (3,959)
           
Net change in cash and cash equivalents   (3,145)   (3,068)
           
Cash and cash equivalents at beginning of period   4,575    10,899 
           
Cash and cash equivalents at end of period  $1,430   $7,831 
           
Suplemental disclosure of non-cash investing and financing activities:          
Treasury stock acquired in connection with cashless exercise of stock options  $677   $1,476 

 

Please see accompanying condensed notes, which are an integral part of the condensed consolidated financial statements.

 

6
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations

 

Warwick Valley Telephone Company (the “Company”) is a cloud-based communications company that provides Unified Communications (“UC”) solutions and enterprise hosted Voice over Internet Protocol (“VoIP”) and operates as a regional Incumbent Local Exchange Carrier (“ILEC”) in southern Orange County, New York and northern New Jersey. Through its wholly-owned subsidiaries, the Company delivers cloud-based Unified Communications solutions including Voice over Internet Protocol (“VoIP”), hosted Microsoft Communication Services, fixed mobile convergence and advanced voice applications for a broad customer base including enterprise customers, small and medium-sized businesses and other business customers. The Company’s ILEC operations consist of providing historic local and toll telephone service, Internet high speed broadband service, satellite video service and DIRECTV to residential and business customers.

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q. 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, 2012 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 U.S. GAAP 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 Annual Report on Form 10-K for the year ended December 31, 2011.

 

Reclassifications

 

Certain items in the 2011 segment footnote (see Note 8) have been reclassified in order to conform to the 2012 presentation.

 

NOTE 2: BUSINESS ACQUISITION

 

The following unaudited pro forma consolidated results of operations for the Company for the three and six months ended June 30, 2011 assumes that the purchase of certain assets and assumption of certain liabilities of Alteva, LLC (now Avetla, LLC) on August 5, 2011 occurred instead on January 1, 2011. The unaudited pro forma information presents the combined operating results of the purchased lines of business and the Company with the results prior to the asset purchase date adjusted for amortization of intangibles and depreciation of fixed assets based on the purchase price allocation and the elimination of acquisition related costs.

 

These unaudited pro forma results do not purport to be indicative of the results that would have been obtained if the asset purchase occurred as of January 1, 2011 nor does the unaudited pro forma data intend to be a projection of results that may be obtained in the future.

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2011   2011 
         
Operating revenues  $7,664   $15,408 
           
Net income (loss)  $(68)  $553 
           
Earnings (loss) per common share:          
           
Basic  $(0.01)  $0.10 
           
Diluted  $(0.01)  $0.10 

 

7
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS

 

In December 2011, an accounting standards update regarding balance sheet disclosures of offsetting assets and liabilities was issued. This update requires disclosure on information about offsetting and related arrangements to enable users of an entity’s financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company does not believe this will have a material impact on its disclosures or consolidated financial statements.

 

In July 2012, an accounting standards update regarding “Testing Indefinite-Lived Intangible Assets for Impairment” was issued. This update allows an entity to first assess qualitative factors in determining whether events and circumstances indicate that it is more-likely-than not that an indefinite-lived intangible asset is impaired. If an entity determines that it is not more-likely-than not that the indefinite-lived intangible asset is impaired, then the entity is not required to perform a quantitative impairment test. This update is effective for fiscal years beginning after September 15, 2012. The Company is currently evaluating the effects this new standard may have on its consolidated financial statements.

 

NOTE 4: SHORT-TERM INVESTMENTS

 

The following is a summary of the Company’s short-term investments classified as available for sale at June 30, 2012 and December 31, 2011:

 

       Unrealized   Fair Value 
   Amortized   Gains   Carrying 
   Cost   (Losses)   Value 
June 30, 2012               
Bank certificate of deposit  $260   $0   $260 
                
December 31, 2011               
Bank certificate of deposit  $259   $0   $259 

 

NOTE 5: FAIR VALUE

 

Fair value is the estimated price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company is required by accounting standards to provide the disclosure framework for measuring fair value and expands disclosure about fair value measurements. Fair value measurements are classified and disclosed in one of the following categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.  The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
   
Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.  This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.
   
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity).  The Company’s valuation models are primarily industry standard models. Level 3 instruments include derivative instruments.  The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2.

 

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

 

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and short-term investments) measured at fair value on a recurring basis as of June 30, 2012:

 

   Level 1   Level 2   Level 3   Total 
                 
Short-term investments  $260   $0   $0   $260 

 

8
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

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, 2011:

 

   Level 1   Level 2   Level 3   Total 
                 
Short-term investments  $259   $0   $0   $259 

 

Derivative liability

 

In connection with the Company’s acquisition of substantially all of the assets and assumption of certain liabilities of Alteva, LLC (now Avetla, LLC) on August 5, 2011, the members of Avetla, LLC entered into a Lock-Up and Put Agreement with the Company effective October 21, 2011. The Lock-up and Put Agreement includes a purchase price protection that provides that if the price of the Company’s common stock for the 30 trading days immediately prior to the October 21, 2012 or December 15, 2012 (but excluding the three trading days prior to and after the record date for any cash dividend declared by the Company) ( the “Release Date Price”) is less than $11.74, then the Company will issue to the Avetla, LLC members the aggregate number of shares of the Company’s common stock equal to the difference between $1,600 and the market value of 50% of the aggregate shares on October 21, 2012 or December 15, 2012, or 100% of the aggregate shares if the release Date is less than $11.74 on both dates. The purchase price protection provision is considered to be a derivative instrument and must be valued and recognized at the instrument’s current fair market value as of the date of issuance and adjusted each period the financial statements are presented. The Company employed a binomial pricing model to calculate the fair value of the price protection and recorded the fair value as a current liability on its consolidated balance sheet. Inputs are adjusted each period to reflect changes in the Company’s estimate of value of the underlying common stock.

 

The fair value of the price protection was estimated utilizing the binomial pricing model with the following assumptions as of June 30, 2012 and December 31, 2011:

 

Binomial method  June 30, 2012   December 31, 2011 
Model iterations   100.5    100.5 
Simulated median price  $13.51   $13.45 
Exercise price per share  $11.74   $11.74 
Expected volatility   19.63%   12.03%
Risk free interest rate   0.15%   0.15%
Yield rate   7.99%   7.73%

 

The following table represents the Company’s fair value hierarchy for its financial liabilities measured at fair value on a recurring basis as of June 30, 2012:

 

   Level 1   Level 2   Level 3   Total 
                 
Derivative liability in connection with business acquisition  $0   $0   $66   $66 

 

The following table represents the Company’s fair value hierarchy for its financial liabilities measured at fair value on a recurring basis as of December 31, 2011:

 

   Level 1   Level 2   Level 3   Total 
                 
Derivative liability in connection with business acquisition  $0   $0   $131   $131 

 

The following table represents a summary of changes in the fair value of the Company’s Level 3 derivative liability for the period ended June 30, 2012:

 

Derivative liability balance December 31, 2011  $131 
Decrease in fair value of price protection instrument   (65)
Derivative liability balance June 30, 2012  $66 

 

9
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

NOTE 6: EARNINGS (LOSS) PER SHARE

 

Basic earnings (loss) per share is 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 is 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 exclude 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, 2012 and 2011 is as follows:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2012 (1)   2011 (1)   2012 (1)   2011 
                 
Weighted average shares of common stock used in basic earnings per share   5,458,223    5,406,894    5,450,345    5,400,822 
Effects of puttable common stock   272,479    0    272,479    0 
Effects of stock options   0    0    0    6,290 
Effects of restricted stock   0    0    0    17,175 
    5,730,702    5,406,894    5,722,824    5,424,287 

 

(1) Basic and diluted weighted average shares were the same for the three months and six months ended June 30, 2012 because the effects of the potentially diluted securities were anti-dilutive and they were excluded from the calculation.

 

NOTE 7: GOODWILL AND OTHER INTANGIBLE ASSETS

 

The Unified Communications segment includes $9,121 of goodwill as of June 30, 2012, resulting from the Company’s acquisition of substantially all of the assets and certain liabilities of Alteva, LLC in 2011.

 

Acquired goodwill is tested for impairment annually using a fair value approach. Goodwill is also tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an entity below its carrying value.

 

Intangible assets with finite lives are amortized over their respective estimated useful lives to their estimated residual value. Identifiable intangible assets that are subject to amortization are evaluated for impairment. The components of other intangible assets are as follows:

 

   Estimated  Gross   Accumulated   Net 
   Useful Lives  Value   Amortization   Value 
As of June 30, 2012                  
Customer relationships  8 years  $5,400   $(619)  $4,781 
Trade name  15 years   2,400    (146)   2,254 
Telephone seat licenses  5 years   1,777    (366)   1,411 
Total     $9,577   $(1,131)  $8,446 

 

   Estimated  Gross   Accumulated   Net 
   Useful Lives  Value   Amortization   Value 
As of December 31, 2011                  
Customer relationships  8 years  $5,400   $(281)  $5,119 
Trade name  15 years   2,400    (67)   2,333 
Telephone seat licenses  5 years   1,372    (219)   1,153 
Total     $9,172   $(567)  $8,605 

 

10
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

NOTE 8: SEGMENT INFORMATION

 

Segment Realignment

 

In the first quarter of 2012, the Company realigned its segment reporting (internal and external) and renamed the Online segment Unified Communications. The Company made these changes as a result of its purchase, on August 5, 2011, of substantially all of the assets of and certain liabilities of Alteva, LLC, formerly a cloud-based Unified Communications solutions provider and enterprise hosted Voice over Internet Protocol (“VoIP”) provider. The acquisition is part of the Company’s strategy to transform its operations from one primarily dependent upon its ILEC and related revenues, to operations more focused on developing and implementing a Unified Communications solutions strategy. Accordingly, broadband Internet, dial-up Internet access services and TV services, which previously were included in the Company’s Online segment, became part of the Telephone segment. Concurrently, to align the segments with the Company’s revised management structure and operating model, wholesale carrier services and conference services were moved out of the Telephone segment and into the Unified Communications service segment. The Company believes the new strategy, which realigns the reportable segments, will enable the Company to develop a more sustainable business in the future that will drive earnings growth and provide a better return on our assets.

 

The Company’s segments are strategic business units that offer different products and services and are managed as Telephone and Unified Communications (“UC”) 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, long distance services, wireless, broadband, TV service and directory services. The UC segment provides enterprise hosted VoIP services, wholesale carrier services and conference services.

 

The segment results presented below are not necessarily indicative of the results of operations these segments would have achieved had they operated as stand-alone entities during the periods presented.

 

Segment balance sheet information as of June 30, 2012 and December 31, 2011 is set forth below:

 

   June 30, 2012   December 31, 2011 
Segment assets          
Telephone  $117,602   $116,215 
Unified Communications   22,383    21,543 
Eliminations   (86,212)   (79,842)
Total segment assets  $53,773   $57,916 

 

Segment statement of operations information for the three months ended June 30, 2012 and 2011 is set forth below:

 

   2012   2011 
Segment operating revenues          
Telephone  $3,634   $4,600 
Unified Communications   3,252    1,211 
Total segment operating revenues  $6,886   $5,811 
           
Segment depreciation and amortization          
Telephone  $829   $1,152 
Unified Communications   467    189 
Total segment depreciation and amortization  $1,296   $1,341 
           
Segment operating loss          
Telephone  $(310)  $(335)
Unified Communications   (3,137)   (2,242)
Total segment operating loss   (3,447)   (2,577)
           
Interest income, (expense), net   (112)   2 
Income from equity investment   3,096    2,198 
Other (expenses) income, net   136    9 
(Loss)  before income taxes  $(327)  $(368)

 

Certain regulatory revenue, which includes Universal Service Funds (“USF”) and National Exchange Carrier Association (“NECA”) pool settlements, accounted for 8% and 13% of the Company’s revenues for the three months ended June 30, 2012 and 2011, respectively. Accounts receivable for certain regulatory revenue represented 11% and 13% of consolidated accounts receivable at June 30, 2012 and 2011, respectively.

 

11
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

Segment income statement information for the six months ended June 30, 2012 and 2011 is set forth below:

 

   2012   2011 
Segment operating revenues          
Telephone  $7,441   $9,348 
Unified Communications   6,526    2,641 
Total segment operating revenues  $13,967   $11,989 
           
Segment depreciation and amortization          
Telephone  $1,681   $2,294 
Unified Communications   894    444 
Total segment depreciation and amortization  $2,575   $2,738 
           
Segment operating loss          
Telephone  $(722)  $(422)
Unified Communications   (5,879)   (4,106)
Total segment operating loss   (6,601)   (4,528)
           
Interest income, (expense), net   (169)   59 
Income from equity investment   4,521    5,416 
Other (expenses) income, net   131    15 
Income (loss)  before income taxes  $(2,118)  $962 

 

Certain regulatory revenue, which includes USF and NECA pool settlements, accounts for 8% and 13% of the Company’s revenues for the six months ended June 30, 2012 and 2011, respectively. Accounts receivable for certain regulatory revenue represents 11% and 13% of consolidated accounts receivable at June 30, 2012 and 2011, respectively.

 

NOTE 9: MATERIALS AND SUPPLIES

 

Material and supplies are carried at average cost. As of June 30, 2012 and December 31, 2011, material and supplies consisted of the following:

 

   2012   2011 
Inventory for outside plant  $258   $322 
Inventory for inside plant   313    266 
Inventory for online equipment   77    77 
Inventory for video equipment / DIRECTV   25    68 
Inventory for equipment held for sale or lease   16    16 
Inventory for VoIP telephone equipment   105    83 
   $794   $832 

 

NOTE 10: PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment are carried at cost, consisting of the following as of June 30, 2012 and December 31, 2011:

 

   2012   2011 
Land, buildings and other support equipment  $11,044   $10,908 
Network communications equipment   37,073    36,187 
Telephone plant   30,741    30,571 
Online plant   6,551    6,885 
Plant in service   85,409    84,551 
Plant under construction   867    297 
    86,276    84,848 
Less:  Accumulated depreciation   61,327    59,423 
Property, plant and equipment, net  $24,949   $25,425 

 

12
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

NOTE 11: ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP

 

The Company is a limited partner in the Orange County-Poughkeepsie Limited Partnership (“O-P”) and had an 8.108% equity interest as of June 30, 2012 and 2011, 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 were $13,600 and for 2012 and 2013 the annual cash distribution will be $13,000.  Annual cash distributions are paid in equal quarterly amounts. The 4G Agreement also gives the Company the right (the “Put”) to require one of the O-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, as defined in the 4G Agreement, 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 increased the cellular service costs and operating expenses incurred by the O-P, which caused a subsequent reduction in the O-P’s net income due primarily to the inclusion of sales and marketing expenses. Although the Company’s share of the O-P net income recorded in the Company’s income statement has decreased, the annual cash distributions the Company receives from the O-P will remain unchanged through 2013 pursuant to the terms of the 4G Agreement.

 

Pursuant to the equity method accounting, the Company is required to record the income from the O-P as an increase to the Company’s investment account. The Company is required to apply the cash payments made under the 4G Agreement as a return on its investment when received. Under equity method accounting, the Company currently reports as income its proportionate share of the O-P income, which is less than the guaranteed cash distributions it receives from the O-P. The cash distributions the Company receives from the O-P that are in excess of the Company’s proportionate share of the O-P income is applied to its investment account. As a result of receiving the fixed guaranteed cash distributions from the O-P in excess of the Company’s proportionate share of the O-P income, the investment account was reduced to zero during the quarter ended June 30, 2012. Therefore, the Company will record the greater of the Company’s share of the O-P income or the fixed guaranteed cash distributions that are received from the O-P beginning in the three months ended September 30, 2012, directly to the Company’s statement of operations as other income.

 

The following summarizes the income statement (unaudited) for the six months ended June 30, 2012 and 2011 that the O-P provided to the Company:

 

   2012   2011 (1) 
Net sales  $150,416   $116,165 
Cellular service cost   70,353    32,508 
Operating expenses   41,375    16,868 
Operating income   38,688    66,789 
Other income   6    14 
Net income  $38,694   $66,803 
           
Company share  $3,137   $5,416 

 

(1) The O-P’s income statement for the six months ended June 30, 2011, 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 Amendment 6 to the O-P Limited Partnership Agreement effective May 1, 2011 (“Amendment 6”)

 

The following summarizes the income statement (unaudited) for the three months ended June 30, 2012 and 2011 that O-P provided to the Company:

 

   2012   2011 (1) 
Net sales  $76,180   $67,776 
Cellular service cost   34,305    27,020 
Operating expenses   20,755    13,659 
Operating income   21,120    27,097 
Other income   4    16 
Net income  $21,124   $27,113 
           
Company share  $1,713   $2,198 

 

(1) The O-P’s income statement represents, for the three months ended June 30, 2011, one 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 Amendment 6.

 

13
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

The following summarizes the balance sheet as of June 30, 2012 (unaudited) and December 31, 2011 that O-P provided to the Company:

 

   2012   2011 
Current assets  $20,469   $20,525 
Property, plant and equipment, net   39,472    39,596 
Total assets  $59,941   $60,121 
           
Total liabilities  $33,336   $42,500 
Partners' capital   26,605    17,621 
Total liabilities and partners' capital  $59,941   $60,121 

 

NOTE 12: PENSION AND POSTRETIREMENT OBLIGATIONS

 

The components of net periodic cost (gain) for the six months ended June 30, 2012 and 2011 are as follows:

 

   Pension Benefits   Postretirement Benefits 
   2012   2011   2012   2011 
Service cost  $0   $0   $8   $6 
Interest cost   383    435    108    123 
Expected return on plan assets   (438)   (410)   (86)   (81)
Amortization of transition asset   0    0    14    14 
Amortization of prior service cost   28    28    (165)   (165)
Amortization of net loss   463    436    67    47 
                     
Net periodic benefit cost (gain)  $436   $489   $(54)  $(56)

 

The components of net periodic cost (gain) for the three months ended June 30, 2012 and 2011 are as follows:

 

   Pension Benefits   Postretirement Benefits 
   2012   2011   2012   2011 
Service cost  $0   $0   $4   $3 
Interest cost   192    217    54    61 
Expected return on plan assets   (219)   (205)   (43)   (40)
Amortization of transition asset   0    0    7    7 
Amortizaton of prior service cost   14    14    (83)   (83)
Amortization of net loss   231    218    34    24 
                     
Net periodic benefit cost (gain)  $218   $244   $(27)  $(28)

 

The Company expects to contribute a total of $622 to its pension and postretirement benefit plans in 2012. For the six months ended June 30, 2012, the Company has contributed $280 of this amount to its pension and postretirement benefit plans.

 

14
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

NOTE 13: INCOME TAXES

 

Generally, for interim tax reporting, one overall estimated annual effective tax rate is computed for tax jurisdictions not subject to valuation allowance and applied to the year to date ordinary income loss. The effective tax rate for the three months ended June 30, 2012, and 2011 was 30.3% and 34.8%, respectively, and the effective tax rate for the six months ended June 30, 2012 and 2011 was 31.0% and 34.3%, respectively. The adjusted tax rate for the three and six months ended June 30, 2012 was lower than the U.S. statutory rate primarily due to the net tax benefits.

 

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, 2012 and December 31, 2011, the Company has no liability for unrecognized tax benefits.

 

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense. For the six months ended June 30, 2012 and 2011, no interest expense or penalties were incurred relating to unrecognized tax benefits.

 

The Company and its subsidiaries file a U.S. federal consolidated income tax return. The U.S. federal statute of limitations remains open for the years 2008 and thereafter.

 

NOTE 14: SHAREHOLDERS’ EQUITY

 

A summary of the changes to shareholders’ equity for the six months ended June 30, 2012 and 2011 is provided below:

 

   2012   2011 
Shareholders' equity, beginning of period  $26,153   $36,425 
Net income (loss)   (1,462)   632 
Dividends paid on common stock   (3,131)   (2,847)
Dividends paid on preferred stock   (13)   (13)
Stock and stock option compensation   398    626 
Treasury stock purchases   (789)   (1,476)
Exercise of stock options   677    1,136 
Changes in unrealized gain (loss) on investments   0    8 
Changes in pension and postretirement benefit plans   260    193 
           
Shareholders' equity, end of period  $22,093   $34,684 

 

NOTE 15: STOCK BASED COMPENSATION

 

The Company adopted and, at its 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 increased the total number of shares authorized under the Amended and Restated LTIP from 500,000 shares to 1,100,000 shares of common stock. 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, 2012, 629,469 shares of common stock were available for grant under the Amended and Restated LTIP. The Amended and Restated LTIP permits the issuance by the Company of awards in the form of stock options, stock appreciation rights, restricted stock and restricted stock units and performance shares. The exercise price per share of the 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. Issued restricted stock, stock options and restricted stock units are subject to vesting restrictions.

 

15
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

Restricted Common Stock Awards

 

The following table summarizes the restricted common stock activity with certain eligible participants during the six months ended June 30, 2012:

 

        Grant Date 
  Date Issued   Shares   Fair Value per Share 
          
Restricted stock granted   1/6/2012    14,608   $12.93 
Restricted stock granted   2/24/2012    31,673   $14.38 
Total restricted stock granted       46,281     

 

Stock-based compensation expense for restricted stock awards was $320 and $448 for the six months ended June 30, 2012 and 2011, respectively, and $166 and $333 for the three months ended June 30, 2012 and 2011, 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, 2012 and 2011:

 

   2012   2011 
       Grant Date
Weighted Average
       Grant Date
Weighted Average
 
Unvested Shares  Shares   Price per Share   Shares   Price per Share 
                 
Balance - Beginning of period   68,559   $14.15    47,373   $12.64 
Granted   46,281    13.92    58,676    14.67 
Vested   (31,094)   13.92    (33,986)   13.25 
Forfeited   (148)   13.67    0    0.00 
Balance - End of period   83,598   $14.11    72,063   $13.99 

 

The total fair value of restricted stock vested during the six-month periods ended June 30, 2012 and 2011 was $433 and $451, respectively.

 

Stock Options

 

The following tables summarize stock option activity for the six-month periods ended June 30, 2012 and 2011, along with stock options exercisable at the end of the period:

 

   2012   2011 
Options  Shares   Weighted
Average
Exercise
Price
   Shares   Weighted
Average
Exercise
Price
 
                 
Outstanding - beginning of period   203,864   $14.02    160,733   $11.33 
Stock options granted   144,852    14.38    148,381    14.83 
Exercised   (45,610)   14.85    (103,319)   11.01 
Forfeited   0    0.00    0    0.00 
Outstanding - end of period   303,106   $14.07    205,795   $13.89 
                     
Vested and expected to vest at June 30   303,106         205,795      
Exercisable at June 30   77,990         24,206      

 

16
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

Stock options vest over a three-year period. The following table summarizes information about fixed-price stock options outstanding at June 30, 2012:

 

        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    6.2   $36 
$10.02    4,051    10.02    6.7    13 
$11.20    7,517    11.20    6.8    15 
$12.97    7,000    12.97    7.4    1 
$12.76    333    12.76    7.4    1 
$12.88    22,328    12.88    7.7    7 
$14.70    18,849    14.70    8.7    0 
$14.85    83,010    14.85    8.7    0 
$14.38    144,852    14.38    9.7    0 
                       
      303,106   $14.07    9.1   $73 
                       
Exercisable at June 30, 2012    77,990   $13.07   7.9   $13 

 

Stock-based compensation expense for stock option awards was $78 and $178 for the six months ended June 30, 2012 and 2011, respectively, and $40 and $148 for the three months ended June 30, 2012 and 2011, 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 29, 2012, 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 stock options on June 30, 2012. 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, 2012 and 2011:

 

Options  2012   2011 
         
Expected life (in years)   10    10 
Interest rate   2.70%   3.40%
Volatility   27.10%   32.77%
Dividend yield   7.23%   7.00%
Weighted-average fair value per share at grant date  $1.37   $2.16 

 

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 Company’s former Chief Financial Officer in 2011 in the amount of $345, which are included in the Company’s consolidated statements of income for the three and six month periods ended June 30, 2011:

 

   Three Months   Six Months 
Stock-Based Compensation Expense  2012   2011   2012   2011 
                 
Cost of services and products  $0   $17   $0   $34 
Selling, general and administrative expenses   206    464    398    592 
   $206   $481   $398   $626 

 

As of June 30, 2012, $1,213 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 2.1 years.

 

17
 

 

WARWICK VALLEY TELEPHONE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except share and per share amounts)

 

NOTE 16: SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events occurring after the balance sheet date. Based on this evaluation, the Company has determined that no subsequent events, except for the matters discussed below, have occurred that require disclosure in the condensed consolidated financial statements.

 

On July 19, 2012, the New York State Public Service Commission (“PSC”) approved the Company’s petition to restructure its corporate organization. The Company has been granted the ability to transfer its regulated assets to a newly formed wholly-owned subsidiary named Warwick Valley Telephone Company, LLC, which will operate as a regulated subsidiary. In connection with the corporate restructuring, the Company plans to change its name to WVT Communications Group Inc. and operate as a holding company. The Company has submitted a similar petition with the New Jersey Board of Public Utilities (“BPU”) and anticipates receiving approval of such petition during the third quarter of 2012.

 

During July 2012, the Company drew down $1,350 from its line of credit with Provident Bank for capital expenditures and working capital.

 

On August 2, 2012, the Company entered into a third supplement to its Master Loan Agreement with CoBank ACB (“CoBank”). Under the third supplement to the Master Loan Agreement, this revolving loan facility was increased from $5,000 to $10,000 and matures on August 2, 2013. Under the third supplement, if the Company exercises the O-P Put, then the Company must prepay any amounts outstanding under the revolving loan facility and the revolving loan facility may terminate.

 

Under the third supplement, interest accrues on outstanding indebtedness under the revolving loan facility at an interest rate selected by the Company. The Company may select a variable rate option or a LIBOR plus 4.50% option. The Company is required to also pay an unused line fee of 0.50% per annum. Also under the third supplement, the modified total Leverage Ratio and modified Debt Service Coverage Ratio, as such terms are defined in the Master Loan Agreement, were changed to 2.50x and a new Fixed Charge Coverage Ratio, as such term is defined in the Master Loan Agreement, of not less than 1.00x was added to the Master Loan Agreement.

 

In connection with the closing of the third supplement, the Company drew down $6,095, which was used to repay the outstanding amount under the second supplement of $5,016, the $670 holdback due to Alteva, LLC (now Avetla, LLC) in connection with the Company’s purchase of substantially all of the assets of Alteva, LLC and related closing costs.

 

On August 3, 2012, Ralph Martucci, Jr. resigned as the Company’s Executive Vice President, Chief Financial Officer and Treasurer and Brian H. Callahan was appointed to succeed Mr. Martucci.

 

On August 6, 2012, the Company paid $670 to Avetla, LLC due in connection with the Company’s purchase of substantially all of the assets of Alteva, LLC.

 

18
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects” and words of similar import, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and in the geographic regions in which we operate; industry capacity; our ability to successfully integrate the operations of Alteva; goodwill impairment; demographic changes; technological changes and changes in consumer demand; existing governmental regulations and changes in or our failure to comply with, governmental regulations; legislative proposals relating to the businesses in which we operate; changes to the USF; risks associated with our unfunded pension liability; competition; the loss of any significant ability to attract and retain highly skilled personnel and any other factors that are described in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 and herein. Given these uncertainties, current and prospective investors should be cautioned regarding reliance on such forward-looking statements. Except as required by law, we disclaim any obligation to update any such factors or to publicly announce the results of any revision to any of the forward-looking statements contained herein to reflect future events or developments.

 

Overview

 

We are a cloud-based communications company that provides Unified Communication (“UC”) solutions that unify an organization’s communications systems; enterprise hosted Voice over Internet Protocol (“VoIP”) and operates as a regional Incumbent Local Exchange Carrier (“ILEC”) in southern Orange County, New York and northern New Jersey. Through our Alteva and USA Datanet subsidiaries, we deliver cloud-based UC solutions including enterprise hosted VoIP, hosted Microsoft Communication Services, fixed mobile convergence and advanced voice applications for the desktop. By combining voice service with Microsoft Communications Services products, our customers receive a voice-enabled UC solution that integrates with existing business applications. Alteva’s solutions are designed for the enterprise market of 35 or more users, whereas USA Datanet services organizations with 35 or less users. Our ILEC operations consist of providing our historic local and toll telephone service to residential and business customers, Internet high speed broadband service, and DIRECTV.

 

In the first quarter of 2012, we realigned our segment reporting (internal and external) and renamed our Online segment Unified Communications. We made these changes to take into account the changes in our business resulting from the Alteva transaction. The acquisition is part of our future strategy as we continue to transform our operations from one primarily dependent upon our ILEC business, to one more focused on developing and implementing a UC solutions strategy. Accordingly, Broadband Internet, dial-up Internet access services and TV services, which previously were included in our Online segment, became part of our Telephone segment. Concurrently, to align the segments with our revised management structure and operating model, we moved Wholesale carrier services and Conference services out of the Telephone segment and into our Unified Communications segment. We believe our new strategy, which realigned our reportable segments, will enable us to develop a more sustainable business in the future that will drive earnings growth and a better return on our assets.

 

On July 19, 2012, the New York Public Service Commission approved our petition to restructure our corporate organization. We have been granted the ability to transfer our regulated assets to a newly formed wholly-owned subsidiary named Warwick Valley Telephone Company, LLC, which will operate as a regulated subsidiary. In connection with our corporate restructuring, we plan to change our name to WVT Communications Group Inc. and operate as a holding company. We have submitted a similar petition with the New Jersey Board of Public Utilities and anticipate receiving approval of such petition during the third quarter of 2012. We anticipate completing the reorganization by the end of the third quarter of 2012 and being able to function with the same flexibility for deploying capital as other diversified telecommunications companies.

 

This discussion and analysis provides information about the important aspects of our operations and investments, both at the consolidated and segment levels, and includes discussions of our results of operations, financial position and sources and uses of cash. The presentation of dollar amounts in this discussion is in thousands. This discussion and analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and Notes therein contained in our Annual Report on Form 10-K for the year ended December 31, 2011.

 

19
 

 

Executive Summary

 

Revenues increased $1,075 or 19% to $6,886 for the three months ended June 30, 2012, in comparison to $5,811 for the three months ended June 30, 2011. The increase in revenues resulted from a 169% increase in revenues from our UC segment that was caused by the impact of the Alteva transaction. During the three-month period ended June 30, 2012, we had a net loss of $228, compared to net loss of $240 for the three-month period ended June 30, 2011. This decrease of $12 in net loss was primarily attributable to the increase of $898 or 41% in income from equity method investment due to excess O-P distributions over income from equity to $3,096 for the three-month period ended June 30, 2012 compared to $2,198 for the three-month period ended June 30, 2011. This decrease was offset by the increase in our operating loss of $870 or 34% to $3,447 for the three-month period ended June 30, 2012 from an operating loss of $2,577 for the three-month period ended June 30, 2011.

 

As of June 30, 2012, we had a working capital deficit of $5,040 which was primarily due to short-term borrowings of $7,325 we incurred in connection with the Alteva transaction, capital projects, the settlement of a dispute with a local exchange carrier and $2,207 due in connection with the Alteva transaction. We expect to satisfy these short-term obligations by extending and refinancing our debt and, if necessary, utilizing cash distributions received from the O-P. We believe that our guaranteed payments from the O-P in 2012 and 2013, along with the O-P put, will allow us to refinance our debt on favorable terms.

 

As of June 30, 2012, we no longer offer our landline video service because we determined to exit our landline video service after the expiration of the relevant franchises on that date. As a result of the decision, we have written down the video service inventory by $38.

 

Consistent with the past several years, we have continued to experience overall declines in telephone access lines due to sustained competition and cellular substitution for landline telephone services in our regulated franchise area that has reduced revenue in our Telephone segment. In transforming our ILEC business, we will continue to focus our efforts on identifying and pursuing growth opportunities to increase our ILEC broadband Internet business to offset the reduction in residential access lines.

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2012 AND 2011

 

The following table presents a summary of operating results for our Telephone and UC operating segments for the periods indicated:

 

   Three months ended June 30, 2012   Three months ended June 30, 2011 
      % of Total   Segment   Segment       % of Total   Segment   Segment 
   Revenue   Revenue   Profit (loss)   Margin   Revenue   Revenue   Profit (loss)   Margin 
                                 
Telephone  $3,634    53%  $(310)   (9)%  $4,600    79%  $(335)   (7)%
Unified Communications   3,252    47%   (3,137)   (96)%   1,211    21%   (2,242)   (185)%
                                         
Total  $6,886    100%  $(3,447)   (50)%  $5,811    100%  $(2,577)   (44)%

 

OPERATING RevenueS

 

Operating revenues for the three-month period ended June 30, 2012 increased $1,075 or 19% to $6,886 from $5,811 in the same period in 2011. This increase was due primarily to a 169% increase in revenues from our UC segment resulting from the addition of the operations of Alteva in August of 2011.

 

Revenues for our UC segment increased 169% from $1,211 for the three-month period ended June 30, 2011 to $3,252 for the three-month period ended June 30, 2012. This increase was primarily due to an increase in VoIP revenue of $2,259 as a result of the operations of Alteva.

 

Revenues for our Telephone segment decreased $966, or 21% from $4,600 for the three-month period ended June 30, 2011 to $3,634 for the three-month period ended June 30, 2012. This decrease was primarily due to decreases in network access services of $348, or 18%, and DIRECTV revenue of $289, or 89%. The decrease in DIRECTV revenue was due to the termination of the National Rural Telecommunications Cooperative (“NRTC”) as of August 15, 2011. We no longer bill and collect for the monthly recurring revenue for NRTC and instead we now only receive a commission on DIRECTV sales and reimbursement for installations costs. The decrease in network access services during the second quarter of 2012 was mainly due to lower USF revenues of $218 due to recent FCC reforms of USF funding and lower billing to carriers of $110.

 

20
 

 

OPERATING EXPENSES

 

Operating expenses for the three-month period ended June 30, 2012 increased $1,945 or 23% to $10,333 from $8,388 for the same period in 2011. This increase was primarily due to an increase of 37% in selling, general and administrative expenses associated with the growth of our UC segment and professional fees associated with our reorganization petitions in New York and New Jersey to allow us to operate as a holding company.

 

Cost of Services and Products

 

The cost of services and products increased $490 or 17% to $3,434 from $2,944 for the same period in 2011 primarily as a result of the growth in our UC segment.

 

Cost of services and products for our UC segment increased $1,152 or 102% from $1,129 for the three-month period ended June 30, 2011 to $2,281 for the three-month period ended June 30, 2012. This increase was primarily from the operations of Alteva since its acquisition in August of 2011.

 

Cost of services and products for our Telephone segment decreased $662 or 36% from $1,815 for the three-month period ended June 30, 2011 to $1,153 for the three-month period ended June 30, 2012. This decrease was primarily attributable to decreases in content costs for landline video due to the elimination of channel offerings resulting from exiting our landline video service on June 30, 2012, as well as reclassifying employees into the UC segment.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses increased $1,500 or 37% to $5,603 from $4,103 for the same period in 2011. This increase was primarily from the operations of inclusion of Alteva’s operations since its acquisition in August of 2011 and increased professional fees.

 

Selling, general and administrative expenses for our UC segment increased $1,508 or 71% from $2,134 for the three-month period ended June 30, 2011 to $3,642 for the three-month period ended June 30, 2012. This increase was primarily from the operations of Alteva since its acquisition in August of 2011.

 

Selling, general and administrative expenses for our Telephone segment decreased $8 or 1% from $1,969 for the three-month period ended June 30, 2011 to $1,961 for the three-month period ended June 30, 2012.

 

Depreciation and Amortization Expense

 

Depreciation and amortization expense decreased $45 or 3% to $1,296 from $1,341 for the same period in 2011. This was associated with a decrease of $349 in our Telephone segment primarily due to the full depreciation of central office switches, computer equipment and leasehold improvements, offset by an increase of $304 of amortization of the intangible trade name and customer lists associated with Alteva in our UC segment.

 

TOTAL OTHER INCOME (EXPENSE)

 

Total other income (expense) for the three-month period ended June 30, 2012 increased $911 or 41% to $3,120 from $2,209 in the same quarter of 2011. This increase is due mainly to the increase of 41% or $898 is primarily due to excess O-P distributions over income from equity as a result of the transition of the O-P from a wholesale to a retail business pursuant to the 4G Agreement effective May 2011 and offset, in-part by the accounting treatment under equity method accounting. Although our share of the O-P’s net income decreased, the annual cash distributions we receive from the O-P remained unchanged pursuant to the terms of the 4G Agreement. For more information on the 4G Agreement and the accounting treatment of the distributions we receive from the O-P, see Note 11 to our Condensed Consolidated Financial Statements.

 

21
 

 

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

 

The following table presents a summary of operating results for our Telephone and UC operating segments for the periods indicated:

 

   Six months ended June 30, 2012   Six months ended June 30, 2011 
       % of Total   Segment   Segment       % of Total   Segment   Segment 
   Revenue   Revenue   Profit (loss)   Margin   Revenue   Revenue   Profit (loss)   Margin 
                                 
Telephone  $7,441    53%  $(722)   (10)%  $9,348    78%  $(422)   (5)%
Unified Communications   6,526    47%   (5,879)   (90)%   2,641    22%   (4,106)   (155)%
                                         
Total  $13,967    100%  $(6,601)   (47)%  $11,989    100%  $(4,528)   (38)%

 

OPERATING RevenueS

 

Operating revenues for the six-month period ended June 30, 2012 increased $1,978, or 17% to $13,967 from $11,989 in the same period in 2011. This increase was due primarily to a 147% increase in revenues from our UC segment resulting from the operations of Alteva being included since its acquisition in August of 2011.

 

Revenues for our UC segment increased $3,885, or 147% from $2,641 for the six-month period ended June 30, 2011 to $6,526 for the six-month period ended June 30, 2012. This increase was primarily due to an increase in VoIP revenue of $4,528, or resulting from additional revenue from the operations of Alteva since its acquisition in August of 2011 offset by the decrease in wholesale carrier services of $743, or 73% resulting from lower usage from wholesale customers.

 

Revenues for our Telephone segment decreased $1,907, or 20% from $9,348 for the six-month period ended June 30, 2011 to $7,441 for the six-month period ended June 30, 2012. This decrease was primarily due to lower DIRECTV revenues of $493, 81% as a result of the termination of the National Rural Telecommunications Cooperative (“NRTC”) as of August 15, 2011. We no longer bill and collect for the monthly recurring revenue for NRTC and instead we now only receive a commission on DIRECTV sales and reimbursement for installations costs. Additional decreases were attributable to lower network access services revenue of $779, or 19% mainly due to lower USF revenues of due to recent FCC reforms of USF funding and lower billing to carriers due to a dispute with a local exchange carrier; decrease in long distance revenue of $241, or 26% primarily associated with customers switching to our promotional prices and lower usage; decrease in video revenue of $239, or 86% resulting from our exit of landline video services and a decrease in directory advertising of $72, or 15% mainly due to lower sales of yellow page advertising.

 

OPERATING EXPENSES

 

Operating expenses for the six-month period ended June 30, 2012 increased $4,051 or 25% to $20,568 from $16,517 for the same period in 2011. This increase was primarily due to an increase of 45% in selling, general and administrative expenses associated with the growth of our UC segment and professional fees associated with our reorganization petitions in New York and New Jersey to allow us to operate as a holding company.

 

Cost of Services and Products

 

The cost of services and products increased $791, or 13% to $6,982 from $6,191 for the same period in 2011 primarily as a result of the growth in our UC segment.

 

Cost of services and products for our UC segment increased $2,057, or 83% from $2,474 for the six-month period ended June 30, 2011 to $4,531 for the six-month period ended June 30, 2012. This increase was primarily from the operations of Alteva since its acquisition in August of 2011.

 

Cost of services and products for our Telephone segment decreased $1,266, or 34% from $3,717 for the six-month period ended June 30, 2011 to $2,451 for the six-month period ended June 30, 2012. This decrease was primarily attributable to decreases in content costs for landline video due to the elimination of channel offerings resulting from exiting our landline video service on June 30, 2012, as well as reclassifying employees into the UC segment.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses increased $3,423, or 45% to $11,011 from $7,588 for the same period in 2011. This increase was primarily from the operations of Alteva since its acquisition in August of 2011.

 

Selling, general and administrative expenses for our UC segment increased $3,154, or 82% from $3,829 for the six-month period ended June 30, 2011 to $6,983 for the six-month period ended June 30, 2012. This increase was primarily from the operations of Alteva since its acquisition in August of 2011.

 

22
 

 

Selling, general and administrative expenses for our Telephone segment increased $269, or 7% from $3,759 for the six-month period ended June 30, 2011 to $4,028 for the six-month period ended June 30, 2012. This increase was primarily due to the operations of Alteva since its acquisition in August 2011; professional fees (i) associated with the dispute with a local exchange carrier, (ii) our reorganization petitions with New York and New Jersey that would allow us to operate as a holding company and (iii) increased professional fees associated with the review of our 2011 annual report on Form 10-K and the increase in compensation expenses associated with our growth initiatives, business plan and the transition of our business.

 

Depreciation and Amortization Expense

 

Depreciation and amortization expense decreased $163, or 6% to $2,575 from $2,738 for the same period in 2011. This was associated with a decrease of $613 in our Telephone segment primarily due to the full depreciation of central office switches, computer equipment and leasehold improvements, offset by an increase of $267 of amortization of the intangible trade name and customer lists associated with Alteva in our UC segment.

 

TOTAL OTHER INCOME (EXPENSE)

 

Total other income (expense) for the six-month period ended June 30, 2012 decreased $1,007 or 18% to $4,483 from $5,490 in the same period 2011. This decrease is due mainly to the decrease of 17% or $895 in income from equity method investment as a result of the transition the O-P from a wholesale to a retail business pursuant to the 4G Agreement offset, in-part, by the accounting treatment under the equity method accounting. Although our share of the O-P’s net income decreased, the annual cash distributions we receive from the O-P remained unchanged pursuant to the terms of the 4G Agreement. For more information on the 4G Agreement and the accounting treatment of the distributions we receive from the O-P, see Note 11 to our Condensed Consolidated Financial Statements.

 

LIQUIDITY AND CAPITAL RESOURCES

 

We had $1,690 of cash and cash equivalents and short-term investments available at June 30, 2012 as compared with $4,834 at December 31, 2011. This decrease was primarily related to additional purchases of network equipment and seat licenses, the payment of dividends and increases in operating expenses. Our short-term investments consist primarily of bank certificates of deposit. Our primary source of liquidity continues to be our guaranteed payments from the O-P pursuant to the 4G Agreement. In 2012 and 2013, we will receive aggregate annual cash distributions from the O-P of $13,000.

 

As of June 30, 2012, we had a working capital deficit of $5,040, which was primarily due to short-term borrowings of $7,325 we incurred in connection with the Alteva transaction and capital expenditures. In addition there is $2,207 due in connection with the Alteva transaction in August 2012. We believe this working capital deficiency is short-term in nature and we expect to satisfy these short-term borrowings by extending or refinancing our debt and, if necessary, utilizing cash distributions received from the O-P. We believe that our guaranteed payments from the O-P in 2012 and 2013 will allow us to refinance our debt on favorable terms.

 

As of June 30, 2012, we have drawn down the entire $5,000 principal amount of the revolving loan with CoBank ACB (“CoBank”) to fund a portion of the purchase price of the transaction with Alteva, LLC. The CoBank Revolving Loan was due and payable on August 2, 2012.

 

On August 2, 2012, the Company entered into a third supplement to its Master Loan Agreement with CoBank. Under the third supplement to the Master Loan Agreement, this revolving loan facility was increased from $5,000 to $10,000 and matures on August 2, 2013. Under the third supplement, if the Company exercises the O-P Put, then the Company must prepay any amounts outstanding under the revolving loan facility and the revolving loan facility may terminate.

 

Under the third supplement, interest accrues on outstanding indebtedness under the revolving loan facility at an interest rate selected by the Company. The Company may select a variable rate option or a LIBOR plus 4.50% option. The Company is required to also pay an unused line fee of 0.50% per annum. Also under the third supplement, the modified total Leverage Ratio and modified Debt Service Coverage Ratio, as such terms are defined in the Master Loan Agreement, were changed to 2.50x and a new Fixed Charge Coverage Ratio, as such term is defined in the Master Loan Agreement, of not less than 1.00x was added to the Master Loan Agreement.

 

In connection with the closing of the third supplement, the Company drew down $6,095, which was used to repay the outstanding amount under the second supplement of $5,016, the $670 holdback due to Alteva, LLC (now Avetla, LLC) in connection with the Company’s purchase of substantially all of the assets of Alteva, LLC and related closing costs.

 

Under the terms of the CoBank facility, we are required to comply with certain loan covenants, which include, but are not limited to, the achievement of certain financial ratios as described above and restrictions on dividends, as set forth in the Master Loan Agreement, as well as certain financial reporting requirements. Dividend payments are limited to our level of net income until the facility matures in August 2013. We obtained a waiver that permits us to pay up to $6,480 in dividends during 2012. We have paid $3,144 in dividends through June 30, 2012. As of June 30, 2012, were in compliance with these loan covenants.

 

We have an unsecured $4,000 line of credit with Provident Bank. As of June 30, 2012, $2,325 was outstanding on the line of credit which becomes due and payable on October 28, 2012. Interest is at a variable rate and borrowings are on a demand basis without restrictions. At June 30, 2012, we are in compliance with all loan covenants under this line of credit. During the three months ended June 30, 2012, we drew down $1,725 of this line of credit to pay for the settlement with a wholesale carrier and capital projects. In July 2012, we drew down $1,350 from this line of credit for capital expenditures and working capital.

  

In connection with the Alteva transaction, we agreed to pay up to a total of $2,000 in cash to Alteva, LLC (now Avetla, LLC), in August 2012 and 2013 (or prior to January 1, 2013 depending on certain tax law changes), if certain performance-based conditions are satisfied. We also 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 6, 2012 we paid $670 due in connection with the holdback amount.

 

23
 

 

CASH FROM OPERATING ACTIVITIES

 

Our source of funds continues to be primarily generated from cash distributions from the O-P which differs from the income from equity method investments reported in our statement of income. For the six-month period ended June 30, 2012, we recorded $4,521 of income from the O-P and we received $6,500 in cash distributions. For the six-month period ended June 30, 2011, we recorded $5,416 of income from the O-P and received $6,155 in cash distributions. Pursuant to the terms of the 4G Agreement, we are guaranteed annual cash distributions from the O-P of $13,000 for both 2012 and 2013. The O-P’s cash distributions are made to us on a quarterly basis.

 

CASH FROM INVESTING ACTIVITIES

 

Capital expenditures totaled $1,499 during the six months ended June 30, 2012 as compared to $1,801 for the corresponding period in 2011. The reduction in capital expenditures was primarily a result of planned timing of lower capital expenditures during the first six months of 2012. During the second quarter of 2012, we obtained additional office space for our Alteva operations in Philadelphia, Pennsylvania. These capital expenditures totaled approximately $1,499 during the second quarter of 2012. Intangible asset expenditures totaled $405 during the six months ended June 30, 2012 compared to $15 for the corresponding period in 2011. The increase was primarily due to the purchase of additional seat licenses.

 

CASH FROM FINANCING ACTIVITIES

 

We used $2,407 in financing activities during the six-month period ended June 30, 2012 as compared to $3,959 for the corresponding period in 2011. Dividends declared on our common shares by the Board of Directors were $0.27 per share for the three-months ended June 30, 2012 and were $0.26 for the six-months ended June 30, 2011. The total amount of dividends paid on our common shares by us for each of the six-month periods ended June 30, 2012 and 2011 was $3,131 and $2,847, respectively. We drew down $1,735 from our line of credit with Provident Bank during the six months ended June 30, 2012 primarily for capital projects.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are not subject to any material market risk. We do not hold or issue derivative instruments for any purposes or other financial instruments for trading purposes. Our only asset exposed to market risk is our interest bearing bank account. We had $260 of funds deposited in an interest bearing certificate of deposit with a commercial bank at June 30, 2012. At June 30, 2012, our unsecured line of credit with Provident Bank and the CoBank revolving loan were subject to variable interest rates that exposes us to interest rate risks. During the quarter ended June 30, 2012, there were no material changes to our quantitative disclosures about market risk as presented in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2011.

 

ITEM 4. CONTROLS AND PROCEDURES 

 

Our management, with the participation of our Chief Executive Officer (Principal Executive Officer) and our Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon this evaluation, our Chief Executive Officer (Principal Executive Officer) and our Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) have concluded that our disclosure controls and procedures were effective as of June 30, 2012. There were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

24
 

 

PART II - OTHER INFORMATION

 

ITEM 5. OTHER INFORMATION

 

Shareholders in 401(k) Plan

 

As of June 30, 2012, 0.7% of our outstanding common shares were held by employees in our 401(k) plan. These percentages fluctuate quarterly.

 

ITEM 6. EXHIBITS

 

(31) Rule 13a-14(a)/15d-14(a) Certifications
   
  31.1 Rule 13a-14(a)/15d-14(a) Certification signed by Duane W. Albro, Chief Executive Officer
     
  31.2 Rule 13a-14(a)/15d-14(a) Certification signed by Brian H. Callahan, Executive Vice President, Chief Financial Officer and Treasurer
     
(32) Section 1350 Certifications
   
  32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Duane W. Albro, Chief Executive Officer
     
  32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Brian H. Callahan, Executive Vice President, Chief Financial Officer and Treasurer

 

(101) Interactive Data File
   
* 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

 

 *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.

 

25
 

 

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 9, 2012 By: /s/ Duane W. Albro
    Duane W. Albro
    Chief Executive Officer
    (Principal Executive Officer)

 

Date: August 9, 2012 By: /s/ Brian H. Callahan
    Brian H. Callahan
   

Executive Vice President, Chief Financial Officer

and Treasurer (Principal Financial and Accounting Officer)

 

26
 

 

Index to Exhibits

 

* 31.1   Rule 13a-14(a)/15d-14(a) Certification signed by Duane W. Albro, Chief Executive Officer
     
* 31.2   Rule 13a-14(a)/15d-14(a) Certification signed by Brian H. Callahan, Executive Vice President, Chief Financial Officer and Treasurer
     
* 32.1   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, Chief Executive Officer
     
* 32.2   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Brian H. Callahan, Executive Vice President, Chief Financial Officer and Treasurer
     
* 101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema Document
     
* 101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
     
    XBRL Taxonomy Extension Definition Linkbase Document
     
    XBRL Taxonomy Extension Label Linkbase Document
     
    XBRL Taxonomy Extension Presentation Linkbase Document

 

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.

 

27

 

XNAS:WWVY Quarterly Report 10-Q Filling

XNAS:WWVY Stock - Get Quarterly Report SEC Filing of XNAS:WWVY stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

Content Partners
XNAS:WWVY Quarterly Report 10-Q Filing - 6/30/2012
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Title |  Date |  Author |  Collection |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Company |  Symbol |  Interest |  Popularity

Previous: XNAS:WWVY Quarterly Report 10-Q Filing - 3/31/2012  |  Next: XNAS:WWWW Web.com Group, Inc. Insider Activity 3 Filing - 2/8/2012