11-K 1 l09081ae11vk.txt WARWICK VALLEY TELECOM UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K [X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 1, 2003 to December 31, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________to _____________ Commission File Number, 0-11174 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN (Full title of the Plan) WARWICK VALLEY TELEPHONE COMPANY 47 Main Street P.O. Box 592 Warwick, New York 10990 (Address of principal executive office) (Name of Issuer and address of principal executive office) WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2003 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS Report of Independent Registered Public Accounting Firm 3 Report of Independent Auditor 4 STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS, 5 as of December 31, 2003 and 2002 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, 6 For the Year Ended December 31, 2003 Notes to Financial Statements 7-10 Schedule of Assets (Held at End of Year) as of December 31, 2003* 11 Signatures 12 Exhibit Index 13 Consent Forms 14-15 Certification 16
* Other schedules required by Section 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. Report of Independent Registered Public Accounting Firm To the Participants and Administrator of Warwick Valley Telephone Company 401(k) Plan In our opinion, the accompanying statement of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of Warwick Valley Telephone Company 401(k) Plan (the "Plan") at December 31, 2003 and the changes in net assets available for benefits for the year then ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. PricewaterhouseCoopers LLP New York, New York September 14, 2004 3 To the Benefits Committee Warwick Valley Telephone Company 401(k) Plan P.O. Box 592 Warwick, New York 10990 INDEPENDENT AUDITOR'S REPORT We have audited the accompanying statement of net assets available for benefits of Warwick Valley Telephone Company 401(k) Plan (the Plan) as of December 31, 2002. This financial statement is the responsibility of the Plan's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Bush & Germain,PC Syracuse, New York September 14, 2004 4 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 2003 AND 2002
2003 2002 ------------ ------------ Cash Equivalents (Money Market Fund) $ 2,524,799 $ 1,925,279 Warwick Valley Telephone Company Stock 5,082,994 5,168,368 Registered Investment Companies 4,837,101 3,658,254 Participant Loan Receivables 244,204 274,890 ------------ ------------ TOTAL ASSETS 12,689,098 11,026,791 ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS $ 12,689,098 $ 11,026,791 ============ ============
The accompanying notes are an integral part of these financial statements. 5 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2003
2003 ------------ ADDITIONS: Additions to net assets attributed to: Net appreciation in fair value of investments $ 1,916,030 Participant loan interest income 16,825 Interest and dividends 222,274 ------------ 2,155,129 ------------ Contributions: Participants' 608,383 Employer's 465,726 ------------ 1,074,109 ------------ TOTAL ADDITIONS 3,229,238 ------------ DEDUCTIONS Deductions from net assets attributed to: Benefits paid to participants 1,566,931 ------------ TOTAL DEDUCTIONS 1,566,931 ------------ NET INCREASE 1,662,307 NET ASSETS AVAILABLE FOR BENEFITS: Beginning of year 11,026,791 ------------ End of year $ 12,689,098 ============
The accompanying notes are an integral part of these financial statements. 6 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF PLAN The following description of the Warwick Valley Telephone Company ("Company") 401(k) Plan ("Plan") provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan covering all eligible employees of the Company who are scheduled to work 1,000 hours per year. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Contributions Each year, participants may contribute up to 100% of pretax annual compensation, as defined in the Plan, subject to certain IRS limitations. Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan currently offers a variety of registered investment companies, as well as the stock of the Company, as investment options for participants. The Company will match 100% of each participant's contributions, subject to certain limitations. The matching contributions range from 6% to 9% of the annual compensation of eligible participants. The Plan permits eligible participants, as defined in the Plan, to rollover cash or other property acceptable to the Plan Administrator from another qualified plan in addition to making qualified voluntary participant contributions. Participant Accounts Each participant's account is updated daily to reflect participant and employer activity (contributions, fund transfers, loan repayments, loans and/or withdrawals) and the earnings or losses of the Plan assets in the account. Vesting Participant accounts are fully vested and nonforfeitable at all times. Participant Loans Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their account balance, whichever is less. The loans are secured by the balance in the participant's account and bear interest at prime plus 1%, with prime being the rate published on the first business day of the month in which the loan is requested. The interest rate does not change for the duration of the loan. Principal and interest is paid ratably through weekly payroll deductions. Payment of Benefits On termination of service due to disability or retirement, a participant may elect to receive either a lump-sum amount equal to the value of the participant's vested interest in his or her account, or equal periodic payments. For termination of service due to death, a participant's beneficiary may receive the value of the vested interest in the participant's account as a lump-sum distribution. If a participant has any portion of their account invested in Warwick Valley Telephone Company Stock, he or she may take the stock as an "in-kind" distribution or take the stock as cash. "In-kind" distribution means the participant will receive a stock certificate for the whole shares in his or her account. Fractional shares will be paid in cash. If the participant wishes to take the stock portion of their account as a cash distribution, the Company will buy the stock at the bid price on the day the withdrawal is processed. Withdrawals Participants may make withdrawals under the hardship provisions of the Plan while still employed by the Company. 7 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN NOTES TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying financial statements of the Plan have been prepared on the accrual method of accounting. Contributions due from the Company are recorded on the accrual basis and are remitted weekly. Benefits are recorded when paid. Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires the plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Risks and Uncertainties The Plan provides participants with various investment options: money market and fixed income securities, bonds, and equity funds, as well as the stock of Warwick Valley Telephone Company. All investment securities are exposed to some type of risk, including, but not limited to, exposure to changes in interest rates, market fluctuations, economic conditions, and currency devaluation. Due to the level of risk associated with certain investment securities, it is possible that changes in near term risk factors could materially affect participants' account balances and the amounts reported in the Statement of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits. Investment Valuation and Income Recognition The Plan's investments are stated at fair value. Shares of registered investment companies are valued at net asset value and the Company's common stock is valued at quoted market prices. The Company's common stock is traded on the NASDAQ. On October 13, 2003 the Company executed a three-for-one stock split of its Common Shares. Also a par value equal to one cent per share was established for the Common Shares. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest and dividends include distributions from the investments in registered investment companies, interest from the money market fund and dividends from the Company stock. Plan Expenses Expenses related to the administration of the Plan have been paid by the Company. These costs represent professional services and amounted to $46,902 for the year ending December 31, 2003. 8 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN NOTES TO FINANCIAL STATEMENT 3. INVESTMENTS The fair value of investments as of December 31, 2003 and 2002 are as follows:
12/31/03 12/31/02 ------------ ------------ Schwab Money Market Fund $ 2,524,799* $ 1,925,279* Warwick Valley Telephone Company Common Stock 5,082,994* 5,168,368* Clipper Fund 188,752 0 Fidelity Magellan Fund 833,747* 850,824* Fidelity Growth and Income Fund 837,761* 695,507* Fidelity Puritan Fund 246,250 197,403 Fremont Bond Fund 431,224 278,934 Vanguard Wellington Fund 407,160 292,262 Jensen Portfolio Fund 410,364 0 Vanguard U.S. Growth Fund 0 255,411 Weitz Value Fund 729,326* 515,671 Invesco Dynamics Fund 68,224 16,984 Oppenheimer Int'l Growth Fund 0 18,496 Pilgrim GNMA Income Fund 246,014 286,977 State Street Research Aurora Fund 438,279 249,785 ------------ ------------ TOTAL INVESTMENTS $ 12,444,894 $ 10,751,901 ============ ============
*Individual investments representing 5% or more of the Plan's net assets. The Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value during the year ending December 31, 2003 as follows: Registered Investment Companies $ 710,846 Warwick Valley Telephone Company Common Stock 1,205,184 ---------- $1,916,030 ==========
4. FEDERAL INCOME TAX STATUS The Internal Revenue Service has determined and informed the Company by a letter dated March 19, 2002 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Management and the Plan's legal counsel represent that the Plan continues to be designed and operated in accordance with applicable requirements of the IRC and ERISA. Accordingly, the Plan is exempt from paying income taxes. 5. PLAN TERMINATION Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will continue to have a nonforfeitable interest in their Plan account. 9 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN NOTES TO FINANCIAL STATEMENT 6. RELATED PARTY TRANSACTIONS Certain expenses of administration and servicing of the Plan, including payroll related expenses of administrative and clerical personnel and fees of the trustee are paid by the Company without charge to the Plan. The Plan has certain investments that qualify as party-in-interest investments. These would consist of the Plan's investments in the Warwick Valley Telephone Company Common Stock and the Schwab Money Market Fund, as the Charles Schwab Trust Company is the trustee for the Plan. 10 WARWICK VALLEY TELEPHONE COMPANY 401(k) PLAN SCHEDULE OF ASSETS (HELD AT END OF YEAR) DECEMBER 31, 2003 EIN: 14-1160510 PN: 006
MARKET IDENTITY OF ISSUE DESCRIPTION COST VALUE ----------------- ----------- ---- ----------- *Schwab Money Market Fund Cash Equivalent ** $ 2,524,799 *Warwick Valley Telephone Company Common Stock ** 5,082,994 Clipper Fund Registered Investment Company ** 188,752 Fidelity Magellan Fund Registered Investment Company ** 833,747 Fidelity Growth and Income Fund Registered Investment Company ** 837,761 Fidelity Puritan Fund Registered Investment Company ** 246,250 Fremont Bond Fund Registered Investment Company ** 431,224 Vanguard Wellington Fund Registered Investment Company ** 407,160 Jensen Portfolio Fund Registered Investment Company ** 410,364 Weitz Value Fund Registered Investment Company ** 729,326 Invesco Dynamics Fund Registered Investment Company ** 68,224 Pilgrim GNMA Income Fund Registered Investment Company ** 246,014 State Street Research Aurora Fund Registered Investment Company ** 438,279 ----------- ** 4,837,101 ----------- TOTAL INVESTMENTS 12,444,894 Participant loans (rates 5.75%-10.50%) (Maturities range from 2003-2007) 244,204 ----------- TOTAL ASSETS $12,689,098 ===========
* Denotes party-in-interest. ** Cost not required for participant-directed investments. The accompanying notes to financial statements are an integral part of this schedule. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Warwick Valley Telephone Company, the Plan Sponsor, has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. Warwick Valley Telephone Company 401(k) Plan By: /s/ Zigmund Nowicki ------------------- Plan Administrator Date: December 22, 2004 12 EXHIBIT INDEX
Exhibit Number Exhibit -------------- ------- 23 Consent of Independent Registered Public Accounting Firm 23.1 Consent of Independent Public Accountants (Filed herewith) (Bush & Germain) 32 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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