ITEM 1. BUSINESS
(a) General development of business is incorporated by reference -
1996 Annual Report to Security Holders - Inside Front Cover
(b) Financial information about industry segments -
Not Applicable
(c) Narrative description of business is incorporated by reference -
1996 Annual Report to Security Holders - Pages 4 - 7
(d) The registrant does not engage in operations in foreign countries.
ITEM 2.
ITEM 2. PROPERTIES
The properties of the Company consist of land, structures, plant and equipment required in providing telephone, CATV, wireless communications and related telecommunications services. The Company's main office and corporate headquarters is in Edinburg, VA and a service building is located outside the town limits of Edinburg, VA. Additionally, the Company owns and operates nine local telephone exchanges (switching units) housed in brick/concrete buildings. One of these is the main attended central office co-located with the main office in Edinburg, Virginia. The unattended central offices and outside plant are located at:
(a) Basye, VA (b) Bergton, VA (c) Fort Valley, VA (d) Mount Jackson, VA (e) New Market, VA (f) Strasburg, VA (g) Toms Brook, VA (h) Woodstock, VA
The Company owns long distance facilities outside of its local franchised area as follows:
(a) Hagerstown, MD (b) Harrisonburg, VA (c) Martinsburg, WV PAGE
PART I (Continued)
ITEM 2. PROPERTIES (Continued)
(d) Stephens City, VA (e) Weyers Cave, VA (f) Winchester, VA
CATV reception equipment is located at the service building, outside the town limits of Edinburg, Virginia and at Basye, Virginia.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders for the three months ended December 31, 1996.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
(a) Common stock price ranges are incorporated by reference -
1996 Annual Report to Security Holders Market Information - Inside Front Cover
(b) Number of equity security holders are incorporated by reference -
1996 Annual Report to Security Holders Five-Year Summary of Selected Financial Data - Page 3
(c) Frequency and amount of cash dividends are incorporated by reference -
1996 Annual Report to Security Holders Market and Dividend Information - Inside Front Cover
Additionally, the terms of a mortgage agreement require the maintenance of defined amounts of the subsidiary's equity and working capital after payment of dividends. Accordingly, approximately $11,200,000 of retained earnings was available for payment of dividends at December 31, 1996.
For additional information, see Note 3 in the Consolidated Financial Statements of the 1996 Annual Report to Security Holders, which is incorporated as a part of this report.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Five-Year Summary of Selected Financial Data is incorporated by reference -
1996 Annual Report to Security Holders Five-Year Summary of Selected Financial Data - Page 3
PAGE
PART II (Continued)
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of operations, liquidity, and capital resources are incorporated by reference -
1996 Annual Report to Security Holders Management's Discussion and Analysis of Financial Condition and Results of Operations - Pages 8-9
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements included in the 1996 Annual Report to Security Holders are incorporated by reference as identified in Part IV, Item 14, on Pages 10-17. and 7.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PAGE
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and executive officers is incorporated by reference -
Proxy Statement, Dated March 28, 1997 - Pages 1 - 5
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated by reference -
Proxy Statement, Dated March 28, 1997 - Page 4
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person, director or officer owned over 5 percent of the common stock as of March 1, 1997.
(b) Security ownership by management is incorporated by reference -
Proxy Statement, Dated March 28, 1997 Stock Ownership - Page 4
(c) Contractual arrangements -
The Company knows of no contractual arrangements which may, at a subsequent date, result in change of control of the Company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no relationships or transactions to disclose other than services provided by Directors which are incorporated by reference -
Proxy Statement, Dated March 28, 1997 Directors - Page 3
PAGE
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. Document List
The following documents are filed as part of this Form 10-K. Financial statements are incorporated by reference and are found on the pages noted.
Page Reference Annual Report 1. Financial Statements
The following consolidated financial statements of Shenandoah Telecommunications are included in Part II, Item 8
Auditor's Report 1996, 1995, and 1994 Financial Statements 17
Consolidated Balance Sheets at December 31, 1996, 1995, and 1994 10 & 11
Consolidated Statements of Income for the Years Ending December 31, 1996, 1995, and 1994 12
Consolidated Statement of Retained Earnings Years Ended December 31, 1996, 1995, and 1994 12
Consolidated Statements of Cash Flow for the Years Ending December 31, 1996, 1995, and 1994 13
Notes to Consolidated Financial Statements 14-17
PAGE
PART IV (Continued)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (Continued)
Page Reference Annual Report
2. Financial Statement Schedules
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the accompanying financial statements or notes thereto.
3. Exhibits
Exhibit No.
99. Proxy Statement, prepared by Registrant for 1996 Annual Stockholders Meeting - Filed Herewith
13. Annual Report to Security Holders - Filed Herewith
21. List of Subsidiaries - Filed Herewith
27. Financial Data Schedule
B. Reports on Form 8-K
On October 11, 1996, reported the September 30, 1996 acquisition, for cash, of the Shenandoah County, Virginia cable television systems of FrontierVision Operating Partners, L.P., of Denver, Colorado for approximately $7,864,171.
PAGE
PART IV (Continued)
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
SHENANDOAH TELECOMMUNICATIONS COMPANY
March 28, 1997 By CHRISTOPHER E. FRENCH, PRESIDENT Christopher E. French, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
President & Chief Executive CHRISTOPHER E. FRENCH Officer March 28, 1997 Christopher E. French
LAURENCE F. PAXTON Principal Financial March 28, 1997 Laurence F. Paxton Accounting Officer
DICK D. BOWMAN Treasurer & Director March 28, 1997 Dick D. Bowman
DOUGLAS C. ARTHUR Director March 28, 1997 Douglas C. Arthur
KEN L. BURCH Director March 28, 1997 Ken L. Burch
HAROLD MORRISON Director March 28, 1997 Harold Morrison
NOEL M. BORDEN Director March 28, 1997 Noel M. Borden
JAMES E. ZERKEL II Director March 28, 1997 James E. Zerkel II PAGE
EXHIBIT 99. PROXY STATEMENT SHENANDOAH TELECOMMUNICATIONS COMPANY 124 South Main Street Edinburg, Virginia
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 22, 1997
March 28, 1997
TO THE STOCKHOLDERS OF SHENANDOAH TELECOMMUNICATIONS COMPANY:
The annual meeting of stockholders of Shenandoah Telecommunications Company will be held in the Social Hall of the Edinburg Fire Department, Stoney Creek Boulevard, Edinburg, Virginia, on Tuesday, April 22, 1997, at 11:00 a.m. for the following purposes:
1. To elect nine directors to serve for the ensuing year; and
2. To transact such other business as may properly come before the meeting or any adjournment thereof.
Only stockholders of record at the close of business March 26, 1997, will be entitled to vote at the meeting.
Lunch will be provided.
By Order of the Board of Directors
Harold Morrison, Jr. Secretary
IMPORTANT
YOU ARE URGED TO COMPLETE, SIGN, AND RETURN THE ENCLOSED PROXY CARD IN THE SELF-ADDRESSED STAMPED (FOR U. S. MAILING) ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING IN PERSON, YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
SEE PROXY STATEMENT ON THE FOLLOWING PAGES PAGE
PROXY STATEMENT
P. O. Box 459 Edinburg, VA 22824 March 28, 1997
TO THE STOCKHOLDERS OF SHENANDOAH TELECOMMUNICATIONS COMPANY:
Your proxy in the enclosed form is solicited by the management of the Company for use at the Annual Meeting of Stockholders to be held in the Social Hall of the Edinburg Fire Department, Stoney Creek Boulevard, Edinburg, Virginia, on Tuesday, April 22, 1997, at 11:00 a.m., and any adjournment thereof.
The mailing address of the Company's executive offices is P. O. Box 459, Edinburg, Virginia 22824.
The Company has 8,000,000 authorized shares of common stock, of which 3,760,760 shares were outstanding on March 26, 1997. This proxy statement and the Company's annual report, including financial statements for 1996, are being mailed on or about March 28, 1997, to approximately 3,409 stockholders of record on March 26, 1997. Only stockholders of record on that date are entitled to vote. Each outstanding share will entitle the holder to one vote at the Annual Meeting. No director, officer, or other party owns as much as five percent of the outstanding shares of the common stock of the Company. The Company intends to solicit proxies by the use of the mail, in person, and by telephone. The cost of soliciting proxies will be paid by the Company.
Executed proxies may be revoked at any time prior to exercise. Proxies will be voted as indicated by the stockholders.
THE ELECTION OF DIRECTORS
At the meeting, nine directors (constituting the entire Board of Directors of the Company) are to be elected for the ensuing year.
The proxy holders will vote the proxies received by them (unless contrary instructions are noted on the proxies) for the election as directors of the following nominees, all of whom are now members of and constitute the Company's Board of Directors. If any such nominees should be unavailable, the proxy holders will vote for substitute nominees in their discretion. Stockholders may withhold the authority to vote for the election of directors or one or more of the nominees. Directors will be elected by a plurality of the votes cast. Abstentions and shares held in street name that are not voted in the election of directors will not be included in determining the number of votes cast.
On February 17, 1997, Douglas C. Arthur was elected by the Board to fill the vacancy created by the death of Philip M. Grabill, Jr.
PAGE
PAGE
Standing Audit, Nominating, and Compensation Committees of the Board of Directors
1. Audit Committee - The Finance Committee of the Board of Directors, consisted of the following directors: Dick D. Bowman (Chairman), Grover M. Holler, Jr., and Noel M. Borden. It performed a function similar to that of an Audit Committee. This committee is responsible for the employment of outside auditors and for receiving and reviewing the auditor's report. During 1996 there were two meetings of the Finance Committee. Additional business of the committee was conducted in connection with the regular Board meetings.
2. Nominating Committee - The Board of Directors does not have a standing Nominating Committee.
3. Compensation Committee - The Personnel Committee of the Board of Directors, consisted of the following directors: Noel M. Borden (Chairman), Harold Morrison, Jr., and Philip M. Grabill, Jr. James E. Zerkel II has been named to this committee to replace Mr. Grabill. This committee performed a function similar to that of a Compensation Committee. It is responsible for the wages, salaries, and benefit programs for all employees. During 1996 there were three meetings of this committee.
Attendance of Board Members at Board and Committee Meetings
During 1996, the Board of Directors held 13 meetings. All of the directors attended at least 75 percent of the aggregate of: (1) the total number of meetings of the Board of Directors; and (2) the total number of meetings held by all committees of the Board on which they served.
Certain Transactions
In 1996, the Company received services from Mr. Morrison's company in the amount of $24,239 and from Mr. Zerkel's company in the amount of $20,145. Management believes that each of the companies provides these services to the Company on terms comparable to those available to the Company from other similar companies. No other director is an officer, director, employee, or owner of a significant supplier or customer of the Company.
PAGE
PAGE
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 6. Acquisition
On September 30, 1996, the Company acquired for cash the Shenandoah County cable television assets of FrontierVision Operating Partners, LP for approximately $7,600,000. These assets were integrated into the Company's existing cable television operations. The excess of the total acquisition cost over the fair value of the net assets acquired of approximately $5,600,000 is being amortized over 15 years by the straight-line method.
The acquisition has been accounted for as a purchase and results of operations since the date of acquisition are included in the 1996 consolidated financial statements.
The unaudited consolidated results of operations on a pro forma basis as though the cable television system had been acquired as of the beginning of each year is as follows:
1996 1995
Revenue $ 26,583,913 $ 23,559,774 Net income 4,462,084 5,924,752 Net income per share 1.19 1.58
The above amounts reflect adjustments for amortization of goodwill, additional depreciation on revalued purchased assets, and imputed interest on borrowed funds.
The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated as of the above dates, nor are they necessarily indicative of future operating results. PAGE
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 7. Stock Incentive Plan
On April 16, 1996, the stockholders approved a Company Stock Incentive Plan providing for the grant of incentive compensation to employees in the form of stock options, stock appreciation rights, and stock awards. The Plan authorized the issuance of up to 240,000 shares of common stock over a ten-year period.
Options granted under the Plan may be incentive stock options or nonqualified stock options. The option price will be fixed at the time the option is granted, but the price cannot be less than the fair market value at the date of the grant.
As of December 31, 1996, no options have been granted under the Plan.
Note 8. Major Customer
The Company has one customer that accounts for greater than 10% of its revenue, primarily consisting of carrier access charges for long distance service, as follows:
Percent of Operating Year Revenue
1996 16% 1995 19 1994 21
Note 9. Reclassification
Certain amounts on the 1995 and 1994 financial statements have been reclassified, with no effect on net income or stockholders' equity, to conform with the classifications adopted in 1996.
PAGE
EXHIBIT 21. LIST OF SUBSIDIARIES
The following are all subsidiaries of Shenandoah Telecommunications Company:
- Shenandoah Telephone Company
- ShenTel Service Company
- Shenandoah Cable Television Company
- Shenandoah Long Distance Company
- Shenandoah Valley Leasing Company
- Shenandoah Mobile Company
- Shenandoah Network Company
- Shenandoah Personal Communications Company