WVT Communications Group Reports Fourth Quarter 2011 Financial Results
(Marketwire Via Acquire Media NewsEdge) WARWICK, NY -- (MARKET WIRE) -- 03/15/12 --
Warwick Valley Telephone Company (NASDAQ: WWVY), referred to as WVT Communications Group or the Company, the parent company of leading cloud communications pioneers, today announced financial results for its fourth quarter and twelve months ended December 31, 2011. Financial results and recent corporate development highlights include:
Industry embraces new branding as a cloud-based communications and applications services provider Cloud communications revenues increased by 226% in 4Q11 from 2010 period Total fourth quarter revenues increased 14% over prior year Backlog of business customers for UC services at record level Fourth quarter net loss of $(1,864,000) or $(0.34) per common share Full year revenues increased 6% over 2010 Full year 2011 net loss of $(2,921,000) or $(0.54) per common share 2011 net income reduced by $2,471,000 in one-time charges, including:
$137,000 in connection with the negotiation of the revised O-P agreement $900,000 for a settlement relating to a billing issue with another carrier $835,000 in fees, expenses and prof. services for Alteva acquisition $599,000 relating to the termination of prior CFO Received $13,600,000 in cash distributions and $7,898,000 of income from Orange County-Poughkeepsie Limited Partnership ("OP") investment since beginning of 2011 Declared 324th consecutive quarterly cash dividend -- $0.27 per common share; Continuing 104 consecutive years of cash dividends paid to shareholders Full year dividend increased by nearly 10% to $1.04 from $0.96 in 2010
"2011 was a transformative year for WVT Communications Group in which significant developments have positioned us as a cloud communications growth company," said Duane W. Albro, the Company's President and Chief Executive Officer. "We are pleased to report that our cloud-based unified communications services increased by 226% in the fourth quarter as compared to the prior year, aided by the acquisition of Alteva in August 2011. For the first time in many years, WVT Communications Group is a growth story. Our shareholders should be additionally pleased in our commitment to continuously pay dividends. Total dividends for 2011, including the quarterly payment of $0.27 per common share to be made on March 30, was $1.05, an increase of nearly 10% from the amount paid for 2010. Representing a growth and income investment, we believe that WVT Communications Group offers a unique and unprecedented value proposition as the first and only cloud communications company that pays a dividend.
"After acquiring Alteva, we have aligned our business lines to accommodate revenue growth and the provision of unparalleled customer service. WVT Communications Group has been substantially rebranded as a best in class cloud-based services provider built around a Microsoft and BroadSoft platform for unified communications and hosted applications to small, medium and large enterprise customers. We ended the year with 22,927 business customers, an increase of 334% from year-end 2010. Furthermore, at December 31, 2011, we had more implementations in our backlog than at any time in our history.
"The Company's consolidated revenues were up 14% year-over-year during the fourth quarter, and increased 6% for the full year. With the growth in unified communications revenues, our top line performance suggests that we are executing on our strategy to solidify our landline business. As our operating businesses further improve, our profitability will be enhanced given our highly scalable model.
"Despite the operating income loss, our net income for the quarter and full year are buffeted by income from an equity investment. Specifically, an earlier investment in the Orange County-Poughkeepsie Limited Partnership ("OP")*, a wireless services partnership, continues to provide us with a substantial return on investment that enables us to continue to pay a dividend to shareholders while providing additional capital to fund our growth initiatives. For all of 2011, we have received $13,600,000 in cash distributions and $7,898,000 of income from the O-P.
"Reflecting on the progress made in 2011 to transition WVT Communications Group into a growing, cloud communications services company, I would like to commend our management and staff for their focused determination and dedication to our mission of providing high quality services to our customers and a return on investment for our shareholders."
*Note regarding accounting treatment for the O-P: In May 2011, the Company entered into the 4G Agreement pertaining to the O-P limited partnership agreement which converted the wholesale partnership into a retail partnership. The conversion will increase the cellular service costs and operating expenses incurred by the O-P, which is expected to cause a subsequent reduction in the O-P's net income 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 is expected to decrease, the annual cash distributions the Company receives from the O-P will remain unchanged pursuant to the terms of the 4G Agreement. As a result, the Company will report lower net income for several reporting periods as compared with trailing periods. Nevertheless, regardless of the O-P's reported net income, pursuant to the 4G Agreement, the Company has and/or will receive from the O-P an annual cash distribution of $13,600,000 in 2011 and annual cash distributions of $13,000,000 in 2012 and 2013.
On the balance sheet, the Company will record as Cash the amount of the guaranteed cash distribution. The difference between the guaranteed cash distribution and the amount recorded for Income from equity method investment on the income statement will be deducted from the balance sheet's Investments line item, which reflects the accumulated amount that has been invested by the Company to acquire its ownership stake in the partnership. As cash distributions are received, deductions will be made to Investments (presently $1.9 million) until the line item is written down to zero, which is expected to occur in mid-2012. At that time, all of the guaranteed cash distribution in each period will be recorded as Income from equity method investment, thus once again enabling the Company's net income to fully benefit from the partnership's contributions. Cash flow for the entire Company, including the full benefit from the partnership distribution, will affect the Cash balance while net income for the Company will directly impact Shareholders' Equity.
Fourth Quarter 2011 Results
Revenues for the three-month period ended December 31, 2011 increased 14% to $7,118,000, as compared to $6,229,000 for the same period of 2010. The increase in revenues of $889,000 is primarily attributable to the consolidation of financial results for the acquisition of Alteva, LLC from August 5, 2011, partially offset by a decline in landline-related services revenues due to subscriber losses from continued wireless/cable substitution and select customer attrition.
Operating expense increased 5% or $504,000 to $10,736,000 for the three months ended December 31, 2011, from $10,232,000 for the three months ended December 31, 2010. The increase in operating expense was primarily attributable to the additional operating expenses of Alteva. The changes in operating expenses include:
Cost of services increased by $1,254,000 in the fourth quarter of 2011 due to higher volume-driven circuit costs and access charges. Selling, general and administrative expenses increased by $1,940,000 or 62% due mainly to additional compensation and benefits of $1,594,000 for the Company's growing workforce and higher professional fees of $327,000, which includes expenses associated with Alteva. Depreciation and amortization expense decreased by $407,000 (net), primarily associated with the decrease in fixed assets in 2010 related to the Company's landline video business and includes amortization of $348,000 for customer lists and trade name associated with the Alteva acquisition.
Total other income for the three-month period ended December 31, 2011 decreased $2,541,000 or 72% to $990,000 from $3,531,000 for the same period in 2010. This decrease is due mainly to a decrease in equity method investments of $2,318,000 from lower earnings from the O-P as a result of the transition of the O-P from a wholesale business to a retail business pursuant to the 4G Agreement and corresponding accounting treatment that went into effect in May 2011.
For the three-month period ended December 31, 2011, WVT Communications Group had a net loss of $(1,864,000) compared to net loss of $(235,000) for the three-month period ended December 31, 2010. This decrease of $1,629,000 was primarily attributable to the increase in operating expenses and lower earnings associated with the O-P due to the 4G amendment and corresponding accounting treatment.
Basic and diluted loss per share was $(0.34) for the fourth quarter of 2011, as compared with basic and diluted loss per share of $(0.05) in the same period of the prior fiscal year. There were basic and diluted shares outstanding of 5,435,849 for the three months ended December 31, 2011, and 5,369,749 for the fourth quarter of 2010. The increase in outstanding shares is primarily attributable to the issuance of a total of 272,479 shares of common stock with certain lock-up conditions to the members of Alteva in connection with the acquisition of that company. Basic and diluted weighted average shares were the same for the respective fourth quarter periods because the effects of the potentially diluted securities being anti-dilutive.
Twelve Months 2011 Results
Operating revenues for the twelve-month period ended December 31, 2011 increased by $1,510,000 or 6% to $25,936,000 from $24,426,000 during the same period in 2010. This increase was due primarily to the consolidation of $3,111,000 in revenues from Alteva since its acquisition on August 5, 2011.
Total operating expenses for the year ended December 31, 2011 increased $4,428,000 or 13% to $37,525,000 from $33,097,000 during the same period in 2010. This increase was due primarily to the following:
Cost of services and products increased $2,723,000 or 23% primarily due to an increase of $3,387,000 attributable to the consolidation of Alteva's financial results, increased access expenses from higher customer usage, increased costs for installation of additional VoIP customers, and an increase of $900,000 resulting from a settlement with a long-distance carrier over certain intraLATA switched access charges. Selling, general and administrative expenses increased $4,502,000 or 34% due mainly to an increase of $1,938,000 resulting from the acquisition costs and additional expenses from the acquisition of substantially all of the assets of Alteva, the accelerated compensation expenses associated with the severance agreement for the Company's former Chief Financial Officer and increased product advertising costs and professional fees. Depreciation and amortization expense decreased $514,000 (net) or 9% primarily associated with the decrease in fixed assets in 2010 relating to the Company's landline video business, which was partially offset by an increase of $399,000 associated with assets purchased from Alteva.
Total other income for the year ended December 31, 2011 decreased by $5,089,000 or 40% to $7,783,000 from $12,872,000 for 2010. The lower income level is due mainly to a decrease in equity method investments of $4,680,000 from lower O-P earnings as a result of the transition of the O-P from a wholesale business to a retail business pursuant to the 4G amendment. For the year ended December 31, 2011, WVT Communications Group recorded $7,898,000 of income from the O-P and $13,600,000 in cash distributions.
For the twelve months ended December 31, 2011, WVT Communications Group had a net loss of $(2,921,000) compared to net income of $2,852,000 for the same period of 2010. The decrease in net income was primarily attributable to the increase in operating expenses from the Alteva acquisition and lower earnings associated with the Company's investment in the O-P due to the 4G amendment and corresponding accounting treatment that went into effect in May 2011.
Basic and diluted loss per share was $(0.54) for the full year 2011, as compared with basic and diluted earnings per share of $0.53, and $0.52, respectively, in the prior fiscal year. There were basic and diluted shares outstanding of 5,413,144 for the twelve-month period of 2011, and 5,363,543 and 5,407,994, respectively, for 2010. The increase in outstanding shares is primarily attributable to the issuance of a total of 272,479 shares of common stock with certain lock-up conditions to the members of Alteva in connection with the acquisition of that company. Basic and diluted weighted average shares were the same for the full year 2011 because the effects of the potentially diluted securities being anti-dilutive.
Balance Sheet and Subsequent Events
WVT Communications Group had $4,834,000 of cash and cash equivalents, cash held in escrow and short-term investments available at December 31, 2011 as compared with $13,535,000 at December 31, 2010. This decrease was primarily related to the Alteva acquisition, reductions of accrued expenses, income taxes, and the additional purchase of network equipment.
As previously disclosed on February 21, 2012, the Board of Directors of WVT Communications Group declared a regular quarterly dividend of $0.27 per share on the Company's Common Shares. The dividend is payable on March 30, 2012 to shareholders of record as of March 20, 2012. In addition, the Board of Directors declared the regular quarterly dividend of $1.25 per share on the outstanding 5,000 shares of the Company's 5% Preferred Shares to be paid on March 30, 2012 to shareholders of record as of March 20, 2012. Dividends distributed by the Company are paid using the cash distributions from the O-P.
The Company will conduct a conference call to discuss fourth quarter and twelve month results today at 4:30 p.m. eastern. The conference call will be hosted by Duane W. Albro, President and CEO of WVT Communications Group. Investors and other interested parties can listen to the call by dialing the participant numbers of 877-317-6789 (toll free) or 412-317-6789, no access code required, approximately 10 minutes prior to the start of the conference call. The conference call will also be webcast live on the WVT Communications Group website at www.wvtcg.com.
A replay of this conference call will also be available by dialing 877-344-7529 (toll free) or 412-317-0088, access code: 10011309, beginning today at 6:30 p.m. through March 30, and via the investor relations section of the Company's website.
WVT Communications Group is a world technology leader in providing cloud-based Unified Communications (UC) solutions for small, medium and enterprise businesses. The Company has maintained a tradition of paying dividends to shareholders for 104 consecutive years. Founded in 1902, the company has continued to adapt and remain on the forefront of technology, chiseling its position among the most stable and respected communications vendors on the globe. Moving forward, it is forging the new model that communications providers, large and small, are striving to emulate. WVT Communications Group is merging new innovations, such as those from Alteva and USA Datanet, with proven technology from industry leaders like Microsoft, Cisco, BroadSoft, Panasonic, and Polycom to build the ideal hosting architecture for communications.
Through its USA Datanet (targeting businesses under 35 employees), Alteva (targeting businesses over 35 employees and those with branch offices), and Warwick Valley Telephone (a highly respected traditional telecom provider turned premier regional broadband company) businesses, WVT Communications Group is enabling businesses of any size to communicate more efficiently with hassle-free communications tools. By overlaying a UC division on its stabile, regional broadband company, WVT Communications Group has positioned itself in front of its peer legacy telecom companies and created an evolutionary change in its strategy. With this, the company may offer its residential customers a similar suite of UC applications and services for use in a home environment that its business customers can enjoy. Visit www.wvtcg.com or call 855-U-GO-CLOUD.
All trademarks are the properties of their respective owners.
Safe Harbor Statement
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements, without limitation, regarding expectations, beliefs, intentions or strategies regarding the future. WVT intends that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause WVT's 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 WVT operates; industry capacity; demographic changes; technological changes and changes in consumer demand; the successful integration of WVT's acquired businesses; goodwill impairment; resolution of a billing dispute with a long-distance carrier; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; legislative proposals relating to the businesses in which WVT operates; changes to the USF; reduction in cash distributions from the Orange County-Poughkeepsie Limited Partnership; risks associated with our unfunded pension liability; competition; or the loss of any significant ability to attract and retain qualified personnel. Given these uncertainties, current and prospective investors should be cautioned in their reliance on such forward-looking statements. Except as required by law, WVT disclaims 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. A more comprehensive discussion of risks, uncertainties and forward-looking statements may be seen in WVT's Annual Report on Form 10-K and other periodic filings with the U.S. Securities and Exchange Commission.
WARWICK VALLEY TELEPHONE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31,
($ in thousands except share
and per share amounts)
Operating revenues $ 25,936 $ 24,426
Cost of services and products
(exclusive of depreciation and
amortization expense) 14,701 11,978
Selling, general and administrative
expenses 17,558 13,056
Depreciation and amortization 5,266 5,780
Loss on impairment of fixed assets - 2,283
Total operating expenses 37,525 33,097
Operating loss (11,589) (8,671)
Other income (expense):
Interest income (expense), net of
capitalized interest (64) 33
Income from equity method investment 7,898 12,578
Bargain purchase gain on acquisition - -
Other income (expense), net (51) 261
Total other income, net 7,783 12,872
Income (loss) before income taxes (3,806) 4,201
Income taxes (benefit) (885) 1,349
Net income (loss) (2,921) 2,852
Preferred dividends 25 25
Net income (loss) applicable to common
stock $ (2,946) $ 2,827
Basic earnings (loss) per common share $ (0.54) $ 0.53
Basic earnings (loss) per puttable
common share $ (0.54) $ -
Diluted earnings (loss) per common share $ (0.54) $ 0.52
Diluted earnings (loss) per puttable
common share $ (0.54) $ -
Weighted average shares of common stock
used to calculate earnings (loss) per
Basic (common) 5,413,144 5,363,543
Basic (puttable common) 186 -
Diluted (common) 5,413,144 5,407,994
Diluted (puttable common) 186 -
Dividends declared per common share $ 1.04 $ 0.96
WARWICK VALLEY TELEPHONE COMPANY
CONSOLDIDATED BALANCE SHEET
($ in thousands, except share
and per share amounts)
Cash and cash equivalents $ 4,575 $ 10,899
Short term investments 259 2,636
Accounts receivable - net of allowance
for uncollectibles - $759 and $350 in
2011 and 2010, respectively 2,717 2,451
Other accounts receivable 174 94
Materials and supplies 832 986
Prepaid expenses 731 538
Prepaid income taxes 2,715 -
Deferred income taxes 405 -
Total current assets 12,408 17,604
Property, plant and equipment, net 25,425 27,258
Unamortized debt issuance costs 45 21
Intangibles, net 8,605 217
Investments 1,979 7,681
Goodwill 9,121 -
Other assets 333 294
Total assets $ 57,916 $ 53,075
LIABILITIES AND SHAREHOLDERS' EQUITY
Short term borrowings $ 5,600 $ -
Current maturities of long-term debt 1,139 1,519
Accounts payable 1,715 1,174
Amounts due in connection with business
acquisition 2,377 -
Derivative liability in connection with
business acquisition 131 -
Advance billing and payments 390 397
Customer deposits 51 56
Deferred income taxes - 38
Accrued taxes 521 1,041
Pension and post retirement benefit
obligations 622 529
Other accrued expenses 3,347 2,262
Total current liabilities 15,893 7,016
Long-term debt, net of current
maturities - 1,139
Amounts due in connection with business
acquisition 472 -
Deferred income taxes 1,358 1,941
Pension and postretirement benefit
obligations 9,915 6,554
Total liabilities 27,638 16,650
Commitments and contingencies
Puttable common stock, $.01 par value,
272,479 and 0 shares issued and
outstanding at December 31, 2011 and
2010, respectively 4,125 -
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
6,490,318 and 6,054,741 shares at
December 31, 2011 and 2010,
respectively 62 60
Treasury stock - at cost, 735,391 and
635,189 common shares at December 31,
2011 and 2010, respectively (6,262) (4,770)
Additional paid in capital 6,191 4,063
Accumulated other comprehensive loss (4,979) (2,784)
Retained earnings 30,641 39,356
Total shareholders' equity 26,153 36,425
Total liabilities and shareholders' equity $ 57,916 $ 53,075
Duane W. Albro
WVT Communications Group
President & CEO
Darrow Associates, Inc.
MRB Public Relations
(732) 758-1100, ext. 108
Source: Warwick Valley Telephone Company
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