SHENANDOAH TELECOMMUNICATIONS COMPANY
124 South Main Street
Edinburg, Virginia
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 20, 1999
March 26, 1999
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 20, 1999, at 11:00 a.m.
for the following purposes:
1. To elect three Class I Directors to serve until the 2002 Annual
Stockholders' Meeting;
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 23, 1999,
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.
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PROXY STATEMENT
P. O. Box 459
Edinburg, VA 22824
March 26, 1999
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 20, 1999, 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
3,755,760 shares were outstanding on March 23, 1999. This proxy statement and
the Company's annual report, including financial statements for 1998, are being
mailed on or about March 26, 1999, to approximately 3,700 stockholders of record
on March 23, 1999. 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 beneficially 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. Executed but unmarked proxies
will be voted "FOR" the election of the three nominees for Class I Directors.
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
I Directors expires at the 1999 Annual Meeting. The Board of Directors proposes
that the nominees described below, all of whom are currently serving as Class I
Directors, be re-elected to Class I 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 I
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. The names and principal
occupation of the three nominees, six current directors and executive officers
are indicated in the following table, and the number and percentage of shares of
Common Stock beneficially owned by each as of the Record Date is also shown.
<PAGE>
BOARD OF DIRECTORS
Year
Elected Principal Occupation and Other
Name of Director Director Age Directorships for Past Five Years
- -------------------------- ----------- ----- ----------------------------------
(1) (2) (3)
Nominees for Election of Directors
Class I (Terms expires 2002) - The directors standing for election are:
Douglas C. Arthur 1997 56 Attorney-at-Law; Dir.,
First National Corp.
Harold Morrison, Jr. 1979 69 Chairman of the Board, Woodstock
Secretary of the Co. Garage, Inc. (an auto sales &
repair firm); Dir., First Virginia
Bank-BR
Zane Neff 1976 70 Retired Manager, Hugh Saum Co.,
Asst. Secretary of the Co. Inc. (a hardware and furniture
store); Dir., Crestar Bank
Directors Continuing in Office
Class II (Terms expires 2000)
Noel M. Borden 1972 62 Pres., H. L. Borden Lumber Co. (a
Vice President retail building materials firm);
Chairman of the Board, First
National Corp.
Ken L. Burch 1995 54 Farmer
Grover M. Holler, Jr. 1952 78 Pres., Valley View, Inc. (a real
estate developer)
Class III (Terms expires 2001)
Dick D. Bowman 1980 70 Pres., Bowman Bros., Inc.; Dir.,
Treasurer of the Co. Shen. Valley Elec. Coop.; Dir.,
The Rockingham Group; Dir., Old
Dominion Electric Coop.
Christopher E. French 1996 41 Pres., Shenandoah
President Telecommunications Co. & its
Subsidiaries; Dir., First National
Corp.
James E. Zerkel II 1985 54 Vice Pres., James E. Zerkel, Inc.
(a hardware firm); Dir., Shen.
Valley Elec. Coop.; Member,
Shenandoah County Industrial
Development Auth.
(1) The directors who are not full-time employees of the Company were
compensated in 1998 for their services on the Board and one or more of the
Boards of the Company's subsidiaries at the rate of $385 per month plus
$385 for each Board meeting attended. Additional compensation was paid to
certain non-employee directors who also serve as Vice President, Secretary,
Assistant Secretary, and Treasurer, for their services in these capacities,
in the amounts of $1,420, $2,960, $1,420, and $2,960, respectively.
(2) Years shown are when first elected to the Board of the Company or the
Company's predecessor, Shenandoah Telephone Company. Each nominee has
served continuously since the year he joined the Board.
(3) Each director also serves as a director of one or more of the Company's
subsidiaries.
Attendance of Board Members at Board and Committee Meetings
During 1998, 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 they served.
<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 1998
there was one meeting 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. James E. Zerkel. 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 1998 there
were two meetings of this committee.
CERTAIN TRANSACTIONS
In 1998, the Company purchased vehicles and received services from Mr.
Morrison's company in the amount of $147,965.31; and, purchased supplies and
received services from Mr. Zerkel's company in the amount of $9,649. 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.
STOCK OWNERSHIP
The following table presents information relating to the beneficial
ownership of the Company's outstanding shares of common stock by all directors,
executive officers, and all directors and officers as a group.
No. of Shares
Name and Address Owned as of 2-1-99 Percent of Class
- -------------------------------------------------------------------------------
(1) (2)
Douglas C. Arthur 1,440 *
Strasburg, VA 22657
Noel M. Borden 18,546 *
Strasburg, VA 22657
Dick D. Bowman 45,364 1.21
Edinburg, VA 22824
Ken L. Burch 45,172 1.20
Quicksburg, VA 22847
Christopher E. French 139,527 3.72
Woodstock, VA 22664
Grover M. Holler, Jr 70,736 1.88
Edinburg, VA 22824
Harold Morrison, Jr 21,028 *
Woodstock, VA 22664
Zane Neff 7,716 *
Edinburg, VA 22824
James E. Zerkel II 4,498 *
Mt. Jackson, VA 22842
David E. Ferguson 1,036 *
Edinburg, VA 22824
William L. Pirtle 305 *
Woodstock, VA 22664
Total shares beneficially owned by
14 directors and officers as a group 366,332 9.75
(1) Includes shares held by relatives and in certain trust relationships, which
may be deemed to be beneficially owned by the nominees under the rules and
regulations of the Securities and Exchange Commission; however, the
inclusion of such shares does not constitute an admission of beneficial
ownership.
(2) Asterisk indicates less than 1%.
SUMMARY COMPENSATION TABLE
The following Summary Table is furnished as to the salary and incentive
payment paid by the Company and its subsidiaries on an accrual basis during the
fiscal years 1996, 1997, and 1998 to, or on behalf of, the chief executive
officer and each of the other executive officers who earn more than $100,000 per
year.
Long-Term
Annual Compensation Compensation
Name and Principal Incentive Other
Position Year Salary($) Payment($) Options(#)Compensation
($)(1)
Christopher E. French 1998 $148,318 $ 38,041 489 $ 7,849
President 1997 136,491 12,405 471 7,291
1996 130,612 11,013 -- 6,778
David E. Ferguson 1998 101,204 16,232 361 7,096
Vice President- 1997 94,141 5,981 352 6,647
Customer Service 1996 91,270 6,134 -- 5,807
William L. Pirtle 1998 96,990 15,991 329 6,196
Vice President- 1997 84,904 5,981 307 5,773
Personal Comm. Service 1996 86,035 6,134 -- 5,325
(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.
OPTION GRANTS TABLE
Option Grants in Last Fiscal Year
Individual Grants
----------------- Potential
Realizable Value
at Assumed Annual
Options Granted To Or Base Appreciation For
Granted Employees Price Expiration Option Term
Name (Shares) Year Per Share Date 5%(1) 10%(1)
---- -------- ---------- --------- --------- ------ ------
Christopher E. French 489 3.1% $20.59 2/09/2003 $2,782 $6,147
David E. Ferguson 361 2.3% 20.59 2/09/2003 2,054 4,538
William L. Pirtle 329 2.1% 20.59 2/09/2003 1,872 4,136
(1) In order to realize the potential value set forth, the price per share of
the Company's common stock would be approximately $26.28 and $33.16,
respectively, at the end of the five-year option term.
OPTION EXERCISES AND YEAR END VALUE TABLE
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Value
No. of Value of
Unexercised Unexercised
Options/ in the Money
FY-End (Shares) Options/FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
---- --------------- -------- ------------- -------------
Christopher E. French 0 0 235 / 725 0 / 0
David E. Ferguson 0 0 176 / 537 0 / 0
William L. Pirtle 0 0 153 / 483 0 / 0
Average reported price for transactions reported to the Company during 1998 was
$19.94.
<PAGE>
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
-------------------------
Final Average
Compensation 15 20 25 30 35
--------------------------------------------------------------------
$ 20,000 $ 3,420 $ 4,560 $ 5,700 $ 6,840 $ 7,130
35,000 6,174 8,232 10,290 12,348 12,856
50,000 10,202 13,602 17,003 20,403 21,128
75,000 16,914 22,552 28,190 33,828 34,916
100,000 23,627 31,502 39,378 47,253 48,703
125,000 30,339 40,452 50,565 60,678 62,491
150,000 37,052 49,402 61,753 74,103 76,278
160,000 39,737 52,982 66,228 79,473 81,793
Covered Compensation for those retiring in 1999 is $33,060. 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 1999. The Company did not
make a contribution to the Retirement Plan in 1998, as the Plan was adequately
funded. Christopher French, David Ferguson, and William Pirtle had 17 years, 31
years and 6 years, respectively, of credited service under the plan as of
January 1, 1999.
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
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 input 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
<PAGE>
on providing superior customer service while controlling operating costs. These
actions in turn will 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 1998 base salary was not set in
response to attainment of any specific goals by the Company, although the
Committee took into consideration his individual contributions to the Company's
performance, reflected by the 25% increase in operating income and net income.
The annual incentive plan stresses improvement in both financial
performance, as measured by increases in 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 1998, as a result of its large increase in
earnings and significant improvement in service, the Company reached over 165
percent of its combined goals. These improvements resulted in increases to
incentive payments made to the Company's president and other executive officers.
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. Rewards under this plan for the executive officers, as well as all
participating employees, is 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
FIVE-YEAR STOCKHOLDER RETURN COMPARISON
The Securities and Exchange Commission requires that the Company include
in its Proxy Statement a line graph presentation comparing cumulative, five-year
stockholder returns on an indexed basis with a performance indicator of the
overall stock market and either a nationally recognized industry standard or an
index of peer companies selected by the Company. The broad market index used in
the graph is the NASDAQ Market Index. The S&P Telephone Index consists of the
regional Bell Operating Companies, GTE, ALLTEL, and Frontier Corporation.
The Company's stock is not listed on any national exchange or NASDAQ; therefore,
for purposes of the following graph, the value of the Company's stock, including
the price at which dividends are assumed to have been reinvested, has been
determined based upon the average of the prices of transactions in the Company's
stock that were reported to the Company in each fiscal year.
<PAGE>
Comparison of Five-Year Cumulative Total Return* among Shenandoah
Telecommunications Company, NASDAQ Market Index, and S&P Telephone Index
1993 1994 1995 1996 1997 1998
Shenandoah 100.00 95.52 103.00 107.13 103.02 102.32
NASDAQ Stock Market 100.00 97.75 138.26 170.01 208.58 293.21
S&P Telephone Index 100.00 95.87 144.42 145.86 203.68 299.21
Assumes $100 invested December 31, 1993 in Shenandoah Telecommunications Company
stock, NASDAQ Market Index, and S&P Telephone Index
*Total return assumes reinvestment of dividends
EMPLOYMENT OF AUDITORS
The Board of Directors, on the recommendation of the Audit Committee,
has appointed the firm of McGladrey and Pullen, LLP as auditors to make an
examination of the accounts of the Company for the 1999 fiscal year. It is not
expected that representatives of the firm will be present at the annual meeting.
PROPOSALS OF SECURITY HOLDERS
Proposals of security holders 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 not later than November
27, 1999.
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 stockholders, without charge, upon request
to Mr. Laurence F. Paxton, Vice President-Finance, Shenandoah Telecommunications
Company, P. O. Box 459, Edinburg, VA 22824.
<PAGE>
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 23, 1999, at the Annual Meeting of
Stockholders to be held on April 20, 1999, and at any and all adjournments
thereof.
1. Election of Directors
FOR CLASS I Douglas C. Arthur, Harold Morrison, Jr., and Zane Neff
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.
The Board of Directors unanimously recommends a vote "FOR" election of
directors.
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
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.
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 __________________________, 1999
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I plan to attend the meeting SIGNATURE
Number of persons attending
I cannot attend the meeting ADDITIONAL SIGNATURE (if held jointly)
