SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Shenandoah Telecommunications Company
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
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2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
N/A
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4) Proposed maximum aggregate value of transaction:
N/A
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5) Total fee paid:
N/A
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[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
SHENANDOAH TELECOMMUNICATIONS COMPANY
124 South Main Street
Edinburg, Virginia
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 2003
March 21, 2003
TO THE SHAREHOLDERS OF SHENANDOAH TELECOMMUNICATIONS COMPANY:
The annual meeting of shareholders of Shenandoah Telecommunications
Company will be held in the auditorium of the Company's offices at 500 Mill
Road, Edinburg, Virginia, on Tuesday, April 22, 2003, at 11:00 a.m. for the
following purposes:
1. To elect three Class II Directors to serve until the annual meeting of
shareholders in 2006; and
2. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
Only shareholders of record at the close of business on March 18, 2003
will be entitled to notice of, and to vote at, the annual meeting or any
adjournment or postponement thereof.
Lunch will be provided.
By Order of the Board of Directors
Laurence F. Paxton
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.
PROXY STATEMENT
124 South Main Street
Edinburg, Virginia 22824
March 21, 2003
TO THE SHAREHOLDERS OF SHENANDOAH TELECOMMUNICATIONS COMPANY:
Your proxy in the enclosed form is solicited by the Board of Directors of
the Company for use at the Annual Meeting of Shareholders to be held in the
auditorium of the Company's offices at 500 Mill Road, Edinburg, Virginia, on
Tuesday, April 22, 2003, at 11:00 a.m., and any adjournment or postponement
thereof. The purpose of the Annual Meeting and the matters to be acted upon are
set forth in the accompanying Notice of Annual Meeting of Shareholders.
The Company has 8,000,000 authorized shares of common stock, of which
3,785,913 shares were outstanding on March 18, 2003. This proxy statement and
the Company's Annual Report, including the Company's audited financial
statements for 2002, are being mailed on or about March 21, 2003, to
approximately 3,958 shareholders of record on March 18, 2003. Only shareholders
of record on that date are entitled to notice of, and to vote at, the Annual
Meeting. A list of shareholders entitled to vote at the Annual Meeting will be
open to the examination of any qualified shareholder, for any purpose germane to
the meeting, during ordinary business hours for a period of ten days before the
Annual Meeting at the Company's offices at 124 South Main Street, Edinburg,
Virginia 22824, and by any shareholder at the time and place of the Annual
Meeting during the whole time of the meeting.
Each outstanding share will entitle the holder of such share on the record
date to one vote at the Annual Meeting. The holders of a majority of the shares
of common stock issued and outstanding and entitled to be cast on a matter at
the Annual Meeting, present in person or represented by proxy, will constitute a
quorum at the Annual Meeting for action on that matter. Abstentions and any
broker non-votes, which are described below, will be counted for purposes of
determining the presence of a quorum at the Annual Meeting.
Votes cast in person or by proxy at the Annual Meeting will be tabulated
by the inspector of election appointed for the Annual Meeting. Votes on the
election of directors may be cast for or as abstentions. Votes on any other
matters generally may be cast for, against or as abstentions.
Shares of the Company's common stock represented by an effective proxy, if
such proxy is received in time and not revoked, will be voted at the Annual
Meeting according to the instructions indicated in the proxy. If no instructions
are indicated, the shares will be voted "FOR" the election of each of the Class
II Directors listed on the proxy card.
Discretionary authority is provided in the proxy as to any matters not
specifically referred to in the proxy. The Board of Directors is not aware of
any other matters which are likely to be brought before the Annual Meeting, and
business at the Annual Meeting will be limited to the proposal set forth above
and to matters incidental to that proposal and the Annual Meeting. If any other
matter is properly presented at the Annual Meeting for action, including a
proposal to adjourn or postpone the Annual Meeting to permit the Company to
solicit additional proxies in favor of any proposal, the persons named in the
accompanying proxy will vote on such matter in their own discretion.
-1-
Executed proxies may be revoked at any time prior to exercise. A
shareholder who has given a proxy may revoke it at any time before its exercise
at the Annual Meeting by giving written notice of revocation to the Secretary of
the Company, by properly submitting to the Company a duly executed proxy bearing
a later date, or by voting in person at the Annual Meeting. Unless a proxy is
revoked, the shares represented by such proxy will be voted in the discretion of
the named proxies at the Annual Meeting and any adjournment or postponement of
the meeting. Attendance at the meeting by a shareholder who has submitted a
proxy but does not provide a notice of revocation or request to vote in person
is not sufficient to revoke that proxy. Shareholders should address all written
notices of revocation of proxies and other communications relating to proxies to
the Company at its principal executive offices. The address of the Company's
principal executive offices is 124 South Main Street, Edinburg, Virginia 22824.
The cost of soliciting proxies will be paid by the Company. In addition to
the solicitation of proxies by use of the mails, officers and other employees of
the Company and its subsidiaries may solicit proxies in person, by the use of
the mail and by telephone. None of these individuals will receive compensation
for such services, which will be performed in addition to their regular duties.
The Company also expects to make arrangements with brokerage firms, banks,
custodians, nominees and other fiduciaries to forward proxy solicitation
material for shares held of record by them to the beneficial owners of such
shares. The Company will reimburse such persons for their reasonable
out-of-pocket expenses in forwarding such material.
Broker-dealers who hold their customers' shares in street name may, under
the applicable rules of the exchanges and other self-regulatory organizations of
which the broker-dealers are members, vote the shares of their customers on
routine proposals, which under such rules typically include the election of
directors, when they have not received instructions from the customer. Under
these rules, brokers may not vote shares of their customers on non-routine
matters without instructions from their customers. A broker non-vote occurs with
respect to any proposal when a broker holds shares of a customer in its name and
is not permitted to vote on that proposal without instruction from the
beneficial owner of the shares and no instruction is given. A broker non-vote
will not affect whether any proposal to be acted upon at the Annual Meeting and
referred to in the proxy is approved.
THE ELECTION OF DIRECTORS
Directors Standing for Election
There are currently nine directors (constituting the entire Board of
Directors of the Company), divided into three classes. The current term of Class
II Directors expires at the 2003 Annual Meeting. The Board of Directors proposes
that the nominees described below, all of whom are currently serving as Class II
Directors, be reelected to Class II for a new term of three years and until
their successors are duly elected and qualified.
The proxy holders will vote the proxies received by them (unless contrary
instructions are noted on the proxies) for the election of the three nominees as
directors, all of whom are now members of and constitute the Class II Directors.
If any such nominees should be unavailable, the proxy holders will vote for
substitute nominees in their discretion. Shareholders 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 and, accordingly, will not affect
whether the election of any nominee to the Board of Directors is approved at the
annual meeting. The names and principal occupation of the three nominees, the
Company's six other current directors and the Company's executive officers are
set forth in the following table. The Board of Directors unanimously recommends
a vote "FOR" election of the three nominees for Class II Director.
-2-
BOARD OF DIRECTORS
Year
Elected Principal Occupation and Other Directorships for
Name of Director Director Age Past Five Years
- -------------------------------------------------------------------------------------------------------------------
(1) (2) (3)
Nominees for Election of Directors
Class II (Term expires 2006) - The directors standing for election are:
Noel M. Borden 1972 66 Retired since 2001, and President 1971 - 2001, H. L.
Vice Chairman of the Board Borden Lumber Company (a retail building materials
firm); Chairman of the Board, First National Corporation.
Ken L. Burch 1995 58 Farmer
Grover M. Holler, Jr. 1952 82 President since 1964, Valley View, Inc. (a real estate
developer)
Directors Continuing in Office
Class I (Term expires 2005)
Douglas C. Arthur 1997 60 Attorney-at-Law since 1970, Arthur and Allamong;
Director, First National Corporation; Member,
Shenandoah County School Board.
Harold Morrison, Jr. 1979 73 Chairman of the Board since 1993, Woodstock Garage,
Inc. (an auto sales & repair firm)
Zane Neff 1976 74 Retired since 1998 as Manager, Hugh Saum Company, Inc.
(a hardware and furniture store)
Class III (Term expires 2004)
Dick D. Bowman 1980 74 President since 1986, Bowman Bros., Inc. (a farm
equipment dealer); Director, Shenandoah Valley Electric
Cooperative; Director, The Rockingham Group; Director,
Old Dominion Electric Cooperative.
Christopher E. French 1996 45 President since 1988, Shenandoah Telecommunications Co.
President and its subsidiaries; Director, First National
Corporation.
James E. Zerkel II 1985 58 Vice President since 1970, James E. Zerkel, Inc. (a
hardware firm); Director, Shenandoah Valley Electric
Cooperative.
(1) The directors who are not full-time employees of the Company were
compensated in 2002 for their services on the Board of Directors and one
or more of the boards of directors of the Company's subsidiaries at the
rate of $600 per month plus $600 for each Board of Directors meeting
attended. Through October 7, 2002, additional compensation was paid during
the year to certain non-employee directors who also served in various
administrative capacities as Vice President, Secretary, Assistant
Secretary, and Treasurer, for their services in these capacities, in the
amounts of $1,740, $3,480, $1,740, and $3,480, respectively.
(2) Years shown are when first elected to the Board of Directors of the
Company or the Company's predecessor, Shenandoah Telephone Company. Each
nominee has served continuously since the year he joined the Board of
Directors.
(3) Each director also serves as a director of the Company's subsidiaries.
-3-
Attendance of Board Members at Board and Committee Meetings
During 2002, the Board of Directors held 14 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 such director served.
Standing Audit and Compensation Committees of the Board of Directors
1. Audit Committee - The Audit Committee of the Board consists of Grover M.
Holler, Jr. (Chairman), Douglas C. Arthur, and James E. Zerkel II. During
2002 there were six meetings of the Audit Committee. Among other
responsibilities, the committee is responsible for the employment of
outside auditors and for receiving and reviewing the auditors' report. The
Company believes that each member of the Audit Committee is independent as
defined under the listing standards of the NASDAQ Stock Market.
2. Compensation Committee - The Personnel Committee of the Board of Directors
performs the function of a compensation committee. The Personnel Committee
consists of the following directors: Noel M. Borden (Chairman), Harold
Morrison, Jr., and James E. Zerkel II. The committee is responsible for
the wages, salaries, and benefit programs for all employees. During 2002
there were two meetings of this committee.
The Board of Directors does not have a standing nominating committee.
Candidates for election by the shareholders are nominated by the full Board of
Directors.
STOCK OWNERSHIP
The following table presents information as of February 1, 2003 concerning
the beneficial ownership of the Company's outstanding shares of common stock by
all directors and director nominees, executive officers, and all directors and
executive officers as a group. The Company is not aware that any person not
listed in the following table is the beneficial owner of more than 5% of the
Company's outstanding stock.
Number of Shares
Name and Address Owned (1) Percent of Class
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Douglas C. Arthur 1,612 *
Noel M. Borden 16,077 *
Dick D. Bowman 46,564 1.23
Ken L. Burch 45,172 1.20
Christopher E. French 295,505(2) 7.82
Grover M. Holler, Jr 70,736 1.87
Harold Morrison, Jr 19,828 *
Zane Neff 8,026 *
James E. Zerkel II 4,498 *
David E. Ferguson 3,370(2) *
David K. MacDonald 1,361(2) *
Laurence F. Paxton 2,849(2) *
William L. Pirtle 2,381(2) *
Total shares beneficially owned by
13 directors and officers as a group 517,979 13.69
* Less than 1%.
(1) The information presented regarding beneficial ownership of the Company's
common stock has been presented in accordance with the rules of the SEC
and is not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership of common stock includes
any shares as to which a person, directly or indirectly, has or shares
voting power or investment power and also any shares as to which a person
has the right to acquire such voting or investment power within 60 days
through the exercise of any stock option or other right. Includes shares
held by relatives and in certain trust relationships, which may be deemed
to be beneficially owned by the nominees under the SEC rules; however, the
inclusion of such shares does not constitute an admission of beneficial
ownership. Unless otherwise indicated, each of the stockholders listed has
sole voting and dispositive power with respect to the shares shown as
beneficially owned.
(2) Includes 2,090, 1,450, 1,134, 1,068 and 1,399 shares subject to options
exercisable within 60 days by Christopher French, David Ferguson, David
MacDonald, Laurence Paxton, and William Pirtle, respectively.
-4-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Harold Morrison, Jr. and James E. Zerkel II are members of the Personnel
Committee of the Board of Directors, which performs the function of a
compensation committee. In 2002, the Company paid $120,003 for vehicles and
services purchased from a company of which Mr. Morrison is an executive officer
and paid $3,389 for supplies and services purchased from a company of which Mr.
Zerkel is an executive officer. Management believes that each of the companies
provides these services to the Company on terms comparable to those available to
the Company from other similar companies. No other director of the Company is an
officer, director, employee, or shareholder of a significant supplier or
customer of the Company.
SUMMARY COMPENSATION TABLE
The following Summary Table shows the compensation paid by the Company and
its subsidiaries on an accrual basis during the fiscal years 2002, 2001, and
2000 to, or on behalf of, the Chief Executive Officer and each of the Company's
four other most highly compensated executive officers for fiscal 2002, who are
referred to collectively as the "named executive officers":
Long-Term
Annual Compensation Compensation
-------------------------- ------------
Securities
Name and Principal Fiscal Underlying All Other
Position Year Salary ($) Bonus ($) Options(#) Compensation ($) (1)
- --------------------------------------------------------------------------------------------------------------------
Christopher E. French 2002 $200,873 $34,419 747 $10,554
President 2001 183,792 23,481 615 9,444
2000 168,375 43,342 573 8,938
David E. Ferguson 2002 126,493 13,728 479 9,884
Vice President- 2001 118,938 8,599 434 8,017
Customer Service 2000 111,681 18,123 406 7,703
David K. MacDonald 2002 118,064 13,957 428 8,091
Vice President- 2001 104,031 9,539 341 6,938
Engineering & Construction 2000 87,004 17,725 317 6,379
Laurence F. Paxton 2002 104,251 12,948 389 7,563
Vice President- 2001 95,646 7,201 304 6,651
Finance 2000 88,839 14,855 287 6,401
William L. Pirtle 2002 121,823 13,568 464 7,563
Vice President- 2001 114,144 8,615 398 7,065
Personal Comm. Service 2000 106,387 17,733 391 6,660
(1) Includes amounts contributed by the Company under its 401(k) and Flexible
Benefits Plans, each of which is available to all regular Company
employees.
-5-
OPTION GRANTS TABLE
The following table sets forth information concerning all stock options
granted during fiscal 2002 to the named executive officers:
Individual Grants Potential Realizable Value
----------------------------------------------------- at Assumed Annual Rates of
Percent of Total Exercise Stock Price Appreciation for
Options Options Granted Or Base Option Term (2)
Granted (1) To Employees Price Expiration ------------------------------
Name (Shares) In Fiscal Year Per Share Date 5% (3) 10% (3)
---- -------- -------------- --------- ---- ------ -------
Christopher E. French 747 3.1% $35.18 2/11/2007 $7,261 16,046
David E. Ferguson 479 2.0% 35.18 2/11/2007 4,656 10,289
David K. MacDonald 428 1.8% 35.18 2/11/2007 4,160 9,193
Laurence F. Paxton 389 1.6% 35.18 2/11/2007 3,781 8,356
William L. Pirtle 464 1.9% 35.18 2/11/2007 4,510 9,967
(1) Fifty percent of these options become exercisable on February 11, 2003,
and the remaining fifty percent become exercisable on February 11, 2004.
(2) The potential realizable value is calculated based on the fair market
value on the date of grant, which is equal to the exercise price of the
option, assuming that the shares appreciate in value from the option grant
date compounded annually until the end of the option term at the rate
specified, 5% or 10%, and that the option is exercised and sold on the
last day of the option term for the appreciated share price. Potential
realizable value is net of the option exercise price. The assumed rates of
appreciation are specified in the rules and regulations of the SEC and do
not represent the Company's estimate or projection of future prices of the
shares. There is no assurance provided to any named executive officer or
any other holder of common stock that the actual stock price appreciation
over the term of the applicable options will be at the assumed 5% and 10%
levels or at any other defined level.
(3) In order to realize the potential value set forth, the price per share of
the Company's common stock would be approximately $44.90 and $56.66,
respectively, at the end of the five-year option term.
OPTION EXERCISES AND YEAR END VALUE TABLE
The following table sets forth information concerning all stock options
exercised during fiscal 2002 and unexercised stock options held at the end of
that fiscal year by the named executive officers:
No. of Unexercised Value of Unexercised
Options/ in the Money
FY-End (Shares) Options/FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
---- ----------- -------- ------------- -------------
Christopher E. French 489 14,137 1,409 / 1,055 28,484 / 15,225
David E. Ferguson 0 0 1,355 / 696 30,161 / 10,094
David K. MacDonald 0 0 749 / 599 14,883 / 8,630
Laurence F. Paxton 550 9,499 722 / 541 14,753 / 7,786
William L. Pirtle 0 0 1,297 / 663 28,948 / 9,587
The value of unexercised options is calculated based on the closing price
of the common stock of $48.56 on December 31, 2002 as reported on the NASDAQ
National System.
-6-
RETIREMENT PLAN
The Company maintains a noncontributory defined benefit Retirement Plan
for its employees. The following table illustrates normal retirement benefits
based upon Final Average Compensation and years of credited service. The normal
retirement benefit is equal to the sum of:
(1) 1.14% times Final Average Compensation plus 0.65% times Final
Average Compensation in excess of Covered Compensation (average
annual compensation with respect to which Social Security benefits
would be provided at Social Security retirement age) times years of
service (not greater than 30); and
(2) 0.29% times Final Average Compensation times years of service in
excess of 30 years (such excess service not to exceed 15 years).
Estimated Annual Pension
------------------------------------------------------------------------
Years of Credited Service
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Final Average
Compensation 15 20 25 30 35
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$ 20,000 $ 3,420 $ 4,560 $ 5,700 $ 6,840 $ 7,130
35,000 5,985 7,980 9,975 11,970 12,478
50,000 9,138 12,184 15,230 18,276 19,001
75,000 15,851 21,134 26,418 31,701 32,789
100,000 22,563 30,084 37,605 45,126 46,576
125,000 29,276 39,034 48,793 58,551 60,364
150,000 35,988 47,984 59,980 71,976 74,151
175,000 42,701 56,934 71,168 85,401 87,939
200,000 49,413 65,884 82,355 98,826 101,726
Covered Compensation for those retiring in 2003 is $43,968. Final Average
Compensation equals an employee's average annual compensation for the five
consecutive years of credited service for which compensation was the highest.
The amounts shown as estimated annual pensions were calculated on a
straight-life basis assuming the employee retires in 2003. The Company made the
maximum allowable tax deductible contribution of $340,010 to the Retirement Plan
in 2002, and the Plan remained adequately funded. Christopher French, David
Ferguson, David MacDonald, Laurence Paxton, and William Pirtle had 21 years, 35
years, 7 years, 12 years, and 10 years, respectively, of credited service under
the plan as of January 1, 2003.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors of the Company serves as
a representative of the Board of Directors for general oversight of the
Company's financial accounting and reporting systems, communication with the
independent auditors, and monitoring compliance with applicable laws and
regulations. The Board of Directors has adopted a written charter for the Audit
Committee. The Company's management has primary responsibility for preparing the
Company's financial statements and the Company's financial reporting process.
The Company's auditors are responsible for expressing an opinion on the
conformity of the Company's financial statements with accounting principles
generally accepted in the United States of America. In this context the Audit
Committee hereby reports as follows:
1. The Committee has reviewed and discussed the 2002 financial
statements with management.
2. The Committee has discussed with the independent auditor the matters
required to be discussed by Statement on Auditing Standards No. 61,
as amended by Statement on Auditing Standards No. 90.
3. The Committee has received the independent auditor's disclosures
regarding the auditor's independence from the Company, including the
matters in the written disclosures and the letter required by
Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees.
4. In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors, and the Board of
Directors has approved, that the financial statements be included in
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 for filing with the Securities and Exchange
Commission.
Submitted by the Company's Audit Committee
Grover M. Holler, Jr., Chairman
Douglas C. Arthur
James E. Zerkel II
-7-
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The members of the Personnel Committee of the Board of Directors of the
Company perform the function of a compensation committee. The Committee's
approach to compensation of the Company's executive officers, including the
Chief Executive Officer, is to award a total compensation package consisting of
salary, annual and long-term incentives, and fringe benefit components, which
recognizes that the compensation of executive officers should be established at
levels which are consistent with the Company's objectives and achievements. The
compensation package, and the Committee's approach to setting compensation, is
to provide base salaries at levels that are competitive with amounts paid to
senior executives with comparable qualifications, experience, and
responsibilities. The annual incentive compensation is approved upon achievement
of corporate objectives. The longer-term incentive compensation, consisting of
awards under the Company's Incentive Stock Option Plan, is closely tied to the
Company's success in achieving increases in the Company's stock price, thereby
benefiting all shareholders. The Committee reviews industry compensation
surveys, and compares compensation data from public filings by other publicly
held companies in our industry and market region. In setting the compensation of
the executive officers other than the Chief Executive Officer, the Committee
receives and accords significant weight to the views of the Chief Executive
Officer.
The Committee has recognized the success of the Company's executives in
accomplishing the Company's various strategic objectives, and has taken into
account management's commitment to the long-term success of the Company. The
Company has continued to expand its product and service offerings and has also
continued its expansion beyond its traditional geographic base. The Company has
also continued to focus its efforts on increasing earnings and on providing
superior customer service while controlling operating costs. These actions will
in turn assist the Company in meeting the challenge of achieving growth in an
increasingly competitive telecommunications industry. Based upon its evaluation
of these and other relevant factors, the Committee is satisfied that the
executives have contributed positively to the Company's long-term financial
performance.
The annual base salary of the Chief Executive Officer is determined by the
Committee in recognition of his leadership role in formulating and executing
strategies for responding to the challenges of our industry, and the Committee's
assessment of his past performance and its expectation for his future
contributions in leading the Company. The 2002 base salary was not set in
response to attainment of any specific goals by the Company, although the
Committee took into consideration the Chief Executive Officer's individual
contributions to the Company's performance from continuing operations, reflected
by approximately 35% growth in revenues, 40% growth in operating earnings, his
efforts in negotiating the sale of the Company's cellular partnership interest,
and his overall efforts to successfully manage the Company's profitable
long-term growth.
The annual incentive plan stresses improvement in both financial
performance, as measured by increases in operating net income, and service
provided to the Company's customers, as measured by trouble reports from
customers. Specific target goals are set each year. In 2002, targets were set
for increases in earnings from our continuing operations; reductions in troubles
reported by customers; and, a subjective valuation of overall productivity and
timely and cost effective completion of projects. Performance of these three
factors could range from 0 to 200%, and were weighted by 35%, 35%, and 30%,
respectively. With the increase in the Company's operating income from
continuing operations, and the slight improvement in its service levels, the
Company achieved more than 104% of its combined performance goals for 2002.
Since the combined performance in 2002 was greater than the combined performance
in 2001, the incentive payments made to the Company's president and other
executive officers were in line with their targeted levels, and larger than the
payments made in the previous year.
The long-term incentive plan involves most employees of the Company, and
incentive stock options are currently being granted on a formula related to base
salary. Awards under this plan for the executive officers, as well as all
participating employees, are dependent upon increases in the market price of the
Company's stock.
Submitted by the Company's Personnel Committee:
Noel M. Borden, Chairman
Harold Morrison, Jr.
James E. Zerkel II
-8-
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The following graph compares the performance of the Company's stock to the
NASDAQ U.S. Index and the S&P 500 Integrated Telecommunication Services Index.
The S&P 500 Integrated Telecommunication Services Index consists of Alltel
Corporation; AT&T Corporation; BellSouth Corporation; CenturyTel, Inc.; Qwest
Communications International Inc.; SBC Communications Inc.; Sprint FON Group;
and, Verizon Communications. The graph assumes that the value of the investment
in the Company's stock and each of the indices was $100 at December 31, 1997 and
that all dividends were reinvested. As of October 23, 2000, the Company's stock
became listed on the NASDAQ National Market, and trades under the symbol "SHEN."
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1997 1998 1999 2000 2001 2002
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Shenandoah Telecommunications Company 100 103 186 180 224 281
NASDAQ U.S. Index 100 141 261 157 125 86
S&P Integrated Telecommunication Services Index 100 152 165 106 96 67
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Comparison of Five-Year Cumulative Total Return among
Shenandoah Telecommunications Company,
NASDAQ U.S. Index, and S&P Integrated Telecommunication Services Index
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in Company stock by executive officers and
directors are required to be reported to the Securities and Exchange Commission
pursuant to Section 16(a) of the Securities Exchange Act. Based solely upon a
review of copies of reports of beneficial ownership provided to the Company by
officers and directors or written representations that no other reports were
required, the Company believes that all reports required pursuant to Section
16(a) with respect to the year 2002 were timely filed.
INDEPENDENT PUBLIC ACCOUNTANTS
On March 11, 2002, the Company's Board of Directors voted to engage the
accounting firm of KPMG LLP as the principal accountant to audit the Company's
financial statements for the fiscal year ending December 31, 2002. On March 12,
2001, the Company's Board of Directors voted to engage the accounting firm of
KPMG LLP as the principal accountant to audit the Company's financial statements
for the fiscal year ending December 31, 2001, to replace the firm of McGladrey &
Pullen, LLP, the principal accountant engaged to audit the Company's financial
statements as of December 31, 2000, and for each of the years in the three year
period ended December 31, 2000.
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The Company conducted a competitive proposal process to select the independent
public accountant to audit the Company's financial statements for the fiscal
year ending December 31, 2001. The Company's Audit Committee received bids from
several independent public accounting firms including McGladrey & Pullen, LLP.
After reviewing the proposals, the Company's Audit Committee selected KPMG LLP,
and the Company's Board of Directors approved this selection on March 12, 2001.
McGladrey & Pullen, LLP did not resign or decline to stand for reelection. The
Company decided, following the competitive proposal process, not to retain
McGladrey & Pullen, LLP with respect to the audit of the Company's financial
statements for periods beginning with the fiscal year ending December 31, 2001
and thereafter. McGladrey & Pullen, LLP's reports on the financial statements as
of December 31, 2000, and for each of the years in the three year period ended
December 31, 2000, contained no adverse opinion or disclaimer of opinion and
were not qualified as to uncertainty, audit scope or accounting principles. In
connection with the audits of the three fiscal years ended December 31, 2000 and
through the subsequent interim period preceding the engagement of KPMG LLP,
there were no disagreements with McGladrey & Pullen, LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements if not resolved to their satisfaction
would have caused them to make reference in connection with their reports on the
financial statements to the subject matter of the disagreement.
It is expected that representatives of KPMG LLP will be present at the
annual meeting and will be afforded the opportunity to make a statement, if they
so desire, and to respond to appropriate questions.
Audit Fees
The aggregate fees billed for the audit of the Company's annual
consolidated financial statements for 2002 and the reviews of the financial
statements included in the Company's reports on Form 10-Q for 2002 were
$180,500.
Financial Information Systems Design and Implementation Fees
The Company did not engage its independent public accountants for any
services of this nature.
All Other Fees
The Company was billed $51,665 by the principal accountant for all other
services rendered during the year ended December 31, 2002. Audit related
services consisted of audits of employee benefit plans for $12,200. Tax related
services consisted of tax compliance services for $35,000 and tax planning and
other miscellaneous tax related services for $4,465. The Audit Committee
considered whether the provision of these services is compatible with
maintaining the independence of its independent public accountants.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders to be included in management's proxy statement
and form of proxy relating to next year's annual meeting must be received at the
Company's principal executive offices no later than November 21, 2003. In
addition, in order for any matter to be properly brought before the 2004 annual
meeting, the shareholder must notify the Company in writing no later than
December 22, 2003. The notice shall set forth as to each matter the shareholder
proposes to bring before the annual meeting: (a) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting; (b) the name and record address
of the shareholder proposing such business; (c) the class, series and number of
shares of the Company's stock that are beneficially owned by the shareholder
proposing such business; and (d) any material interest of the shareholder in
such business.
OTHER MATTERS
Management does not intend to bring before the meeting any matters other
than those specifically described above and knows of no matters other than the
foregoing to come before the meeting. If any other matters properly come before
the meeting, it is the intention of the persons named in the accompanying form
of proxy to vote such proxy in accordance with their judgment on such matters,
including any matters dealing with the conduct of the meeting.
FORM 10-K
The Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission is available to shareholders, without charge, upon request
to Mr. Laurence F. Paxton, Vice President-Finance, Shenandoah Telecommunications
Company, P. O. Box 459, Edinburg, VA 22824, or, can be obtained from the
Securities and Exchange Commission website at www.sec.gov.
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Shenandoah Telecommunications Company PROXY
124 South Main Street
Edinburg, VA 22824 This proxy is solicited on behalf of
the Board of Directors
The undersigned hereby appoints Noel M. Borden, Christopher E. French, and
Grover M. Holler, Jr., and each of them, as Proxies with full power of
substitution, to vote all common stock of Shenandoah Telecommunications Company
held of record by the undersigned as of March 18, 2003, at the Annual Meeting of
Shareholders to be held on April 22, 2003, and at any and all adjournments and
postponements thereof.
1. Election of Directors
[_] FOR CLASS II Noel M. Borden, Ken L. Burch, Grover M. Holler, Jr.
To withhold authority to vote for any individual nominee, strike a line
through the nominee's name listed above.
[_] Vote Withheld for all nominees listed above.
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES.
Please mark, sign exactly as name appears below, date, and return this
proxy card promptly, using the enclosed envelope, whether or not you plan to
attend the meeting.
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When signing as attorney, executor,
administrator, trustee, guardian, or agent,
please give full title as such. If a
corporation, please sign in full corporate
name by president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
Dated ___________________, 2003
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I plan to attend the meeting SIGNATURE
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Number of persons attending
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I cannot attend the meeting ADDITIONAL SIGNATURE (if held jointly)
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