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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 year ended 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 333-62773
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
ITC^DeltaCom, Inc. Employee Profit Sharing and 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
ITC^DeltaCom, Inc.
1791 O.G. Skinner Drive
West Point, Georgia 31833
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REQUIRED INFORMATION
Financial Statements and Supplemental Schedule
The following financial statements and supplemental schedule for the ITC^DeltaCom, Inc. Employee Profit Sharing and 401(k) Plan are filed herewith:
ITC^DeltaCom, Inc.
Employee Profit Sharing and
401(k) Plan
Financial Statements and Supplemental Schedule
Years Ended December 31, 2003 and 2002
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Employee Profit Sharing and 401(k) Plan
Contents
Report of Independent Registered Public Accounting Firm | 2 | |
Financial Statements | ||
3 | ||
4 | ||
5-8 | ||
Supplemental Schedule | ||
10-12 |
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Report of Independent Registered Public Accounting Firm
Plan Administrator and Trustee
ITC^DeltaCom, Inc. Employee Profit Sharing and
401(k) Plan
West Point, Georgia
We have audited the accompanying statements of net assets available for benefits of ITC^DeltaCom, Inc. Employee Profit Sharing and 401(k) Plan (Plan) as of December 31, 2003 and 2002, and the related statements of changes in net assets available for benefits for the years then ended. 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 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2003 and 2002, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed 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 our 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.
/s/ BDO Seidman, LLP
Atlanta, Georgia
April 14, 2004
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Employee Profit Sharing and 401(k) Plan
Statements of Net Assets Available for Benefits
December 31, | 2003 | 2002 | ||||
Assets | ||||||
Investments, at fair market value | ||||||
Pooled separate accounts | $ | 18,061,189 | $ | 13,023,126 | ||
Pooled separate account/fixed fund | 822,957 | 680,187 | ||||
ITC^DeltaCom, Inc. common stock | 1,163,182 | 259,204 | ||||
Participant loans | 682,935 | 555,663 | ||||
Total investments | 20,730,263 | 14,518,180 | ||||
Net assets available for benefits | $ | 20,730,263 | $ | 14,518,180 | ||
See accompanying independent auditors’ report and notes to financial statements.
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Employee Profit Sharing and 401(k) Plan
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, | 2003 | 2002 | |||||
Additions | |||||||
Investment Income: | |||||||
Interest income from participant loans | $ | 41,684 | $ | 48,919 | |||
Net appreciation (depreciation) in fair market value of: | |||||||
Pooled separate accounts | 3,525,566 | (2,886,590 | ) | ||||
ITC^DeltaCom, Inc. common stock | 641,134 | (1,497,589 | ) | ||||
Fixed Account | 14,579 | 13,831 | |||||
Total investment income (loss) | 4,222,963 | (4,321,429 | ) | ||||
Contributions: | |||||||
Participant contributions | 3,103,535 | 3,892,900 | |||||
Employer contributions | 858,798 | 2,019,004 | |||||
Rollover contributions | 351,286 | — | |||||
Total contributions | 4,313,619 | 5,911,904 | |||||
Total additions | 8,536,582 | 1,590,475 | |||||
Deductions | |||||||
Benefits paid to participants | 2,295,251 | 2,478,529 | |||||
Administrative fees | 29,248 | 25,353 | |||||
Total deductions | 2,324,499 | 2,503,882 | |||||
Net increase (decrease) | 6,212,083 | (913,407 | ) | ||||
Net assets available for benefits, beginning of year | 14,518,180 | 15,431,587 | |||||
Net assets available for benefits, end of year | $ | 20,730,263 | $ | 14,518,180 | |||
See accompanying independent auditors’ report and notes to financial statements.
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Employee Profit Sharing and 401(k) Plan
Notes to Financial Statements
1. | Description of Plan | The following description of the ITC^DeltaCom, Inc. Employee Profit Sharing and 401(k) Plan (the “Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions. | ||||
a. | General - The Plan is a defined contribution plan covering all employees of ITC^DeltaCom, Inc. (the “Company”), who are age twenty-one or older and have completed 500 hours or six months of service, as defined in the Plan. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended. | |||||
b. | Contributions – Participants may contribute up to 25 percent of pretax annual compensation, as defined in the Plan, subject to limitations of Internal Revenue Code. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans (rollovers). Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan currently offers thirty-four pooled separate accounts, one fixed fund, and ITC^DeltaCom, Inc. common stock as investment options for participants. The Company, at its discretion, may make matching contributions. For the Plan year ended December 31, 2003, the Company matched 50 percent of the first 4 percent of base compensation that a participant contributed to the Plan. Prior to that, for the year ending December 31, 2002, the Company matched 100 percent of the first 2 percent of base compensation that a participant contributed to the Plan and 50 percent of the next 4 percent of base compensation thereafter. The Company may also make additional discretionary profit-sharing contributions, as determined by the Company’s Board of Directors each year. A participant must be an active employee on the last day of the plan year and have completed 1,000 hours of service during the plan year to receive a discretionary profit-sharing contribution. For the years ended December 31, 2003 and 2002, no such profit-sharing contribution was made. Contributions are subject to certain limitations. | |||||
c. | Participant Accounts - Each participant’s account is credited with the participant’s contributions, any Company discretionary matching or profit-sharing contributions, and an allocation of Plan earnings, and charged with an allocation of administrative expenses. Allocations are based on the participant’s account balance, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. |
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ITC^DeltaCom, Inc.
Employee Profit Sharing and 401(k) Plan
Notes to Financial Statements
d. | Vesting - Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company’s contribution portion of their accounts is based on years of continuous service. A participant is 100 percent vested after five years of credited service. Participants vest over a five year period beginning with 40 percent in year two and twenty percent each year thereafter. | |||||
e. | Participant Loans - Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their account balance. The loans are secured by the balance in the participant’s account and bear interest at rates that range from 6.25 percent to 11.50 percent, which are commensurate with local prevailing rates, as determined by the Plan administrator. Principal and interest are paid ratably through payroll deductions. | |||||
f. | Payment of Benefits - On termination of service due to death, disability, retirement or separation from service, a participant may elect to receive the participant’s benefits as either a lump-sum amount equal to the value of the participant’s vested interest in the participant’s account, or in the form of installments. Withdrawals from the Plan may also be made upon circumstances of financial hardship, in accordance with provisions specified in the Plan. | |||||
g. | Forfeitures - Forfeitures by non-vested participants are used to reduce future Company contributions. Forfeitures were not material to the 2003 financial statements. | |||||
h. | Administrative Expenses - In general, the majority of the administrative expenses are paid by the Company. Administrative expenses paid by the Plan are related to the investment of Plan assets. | |||||
2. | Summary of Significant Accounting Policies | Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of accounting. |
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ITC^DeltaCom, Inc.
Employee Profit Sharing and 401(k) Plan
Notes to Financial Statements
Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. | ||||||||
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair market value based on the quoted market prices of the underlying mutual funds in the pooled separate accounts and fixed fund. Investments in the Company’s common stock are stated at fair market value, based on the quoted market price. Participant loans are valued at cost which approximates fair market value. | ||||||||
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. | ||||||||
Payment of Benefits
Benefits are recorded when paid. | ||||||||
3. | Investments | The fair market value of individual investments that represent 5 percent or more of the Plan’s net assets are as follows: |
December 31, | 2003 | 2002 | ||||||
Nationwide Life Insurance Company Pooled Separate Accounts: | ||||||||
Dreyfus S&P 500 Index Fund | $ | 2,059,593 | $ | 1,253,279 | ||||
Fidelity Magellan Fund | 1,907,704 | 1,511,132 | ||||||
Fidelity Puritan Fund | 1,468,504 | 1,054,201 | ||||||
Janus Twenty Fund | 1,152,101 | 930,160 | ||||||
Janus Worldwide Fund | 1,545,508 | 1,240,616 | ||||||
American Century Ultra Fund | 1,424,339 | 1,074,335 | ||||||
Oppenheimer Global Fund | 1,146,923 | * | ||||||
ITC^DeltaCom, Inc. Common Stock | 1,163,182 | 259,204 |
* | Less than 5% |
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ITC^DeltaCom, Inc.
Employee Profit Sharing and 401(k) Plan
Notes to Financial Statements
4. | Related Party Transactions | Certain Plan investments are shares of pooled separate accounts managed by Nationwide Life Insurance Company. Nationwide Life Insurance Company is the custodian as defined by the Plan and, therefore, these transactions qualify as party-in-interest. | ||
The Plan offers ITC^DeltaCom, Inc. common stock as an investment option to participants. ITC^DeltaCom, Inc. is the plan sponsor, as defined by the Plan, and, therefore, these transactions qualify as party-in-interest. | ||||
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 would become 100 percent vested in their employer contributions. | ||
6. | Tax Status | The Internal Revenue Service has determined and informed the Company by a letter dated February 18, 2000 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan’s tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. | ||
7. | Bankruptcy of Plan Sponsor | During the plan year ended December 31, 2002, the Plan sponsor filed for relief under Chapter 11 of the Bankruptcy Code and emerged from bankruptcy in October 2002 with a confirmed amended plan of reorganization. As a result, the value of the Company’s pre-reorganization common stock significantly decreased in value between January 2001 and October 2002. | ||
8. | Subsequent Event | During 2003, the Company acquired BTI Telecom Corp. and its subsidiaries by merger. In connection with the merger, in February 2004, the Company merged the Business Telecom, Inc. 401(k) Plan into the ITC^DeltaCom, Inc. Employee Profit Sharing and 401(k) Plan. |
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SUPPLEMENTAL SCHEDULE
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Employee Profit Sharing and 401(k) Plan
Schedule of Assets Held (at End of Year)
December 31, 2003
(a) | (b) Identity of Issuer | (c) Description of Investment | (d) | (e) Current | |||||
* | Nationwide Life Insurance Company | VK UIF US Real Estate Portfolio – Pooled Separate Account | a | $ | 572,705 | ||||
* | Nationwide Life Insurance Company | Bank of America Indexed Fixed Fund – Pooled Separate Account | a | 822,957 | |||||
* | Nationwide Life Insurance Company | Gartmore Aggressive Fund – Pooled Separate Account | a | 70,773 | |||||
* | Nationwide Life Insurance Company | Gartmore Conservative Fund – Pooled Separate Account | a | 30,729 | |||||
* | Nationwide Life Insurance Company | Gartmore Moderate Aggressive Fund – Pooled Separate Account | a | 103,163 | |||||
* | Nationwide Life Insurance Company | Gartmore Moderate Conservative Fund – Pooled Separate Account | a | 35,444 | |||||
* | Nationwide Life Insurance Company | Gartmore Moderate Fund – Pooled Separate Account | a | 47,340 | |||||
* | Nationwide Life Insurance Company | Dreyfus Premium Core Value Fund – Pooled Separate Account | a | 91,976 | |||||
* | Nationwide Life Insurance Company | Dreyfus S&P 500 Index Fund – Pooled Separate Account | a | 2,059,593 | |||||
* | Nationwide Life Insurance Company | Fidelity Advanced High Yield Fund – Pooled Separate Account | a | 46,705 | |||||
* | Nationwide Life Insurance Company | Fidelity Asset Manager – Pooled Separate Account | a | 243,435 | |||||
* | Nationwide Life Insurance Company | Fidelity VIP Equity Income Portfolio – Pooled Separate Account | a | 929,522 | |||||
* | Nationwide Life Insurance Company | Fidelity Magellan Fund – Pooled Separate Account | a | 1,907,704 |
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ITC^DeltaCom, Inc.
Employee Profit Sharing and 401(k) Plan
Schedule of Assets Held (at End of Year)
December 31, 2003
(a) | (b) Identity of Issuer | (c) Description of Investment | (d) | (e) Current | ||||
* | Nationwide Life Insurance Company | Fidelity Puritan Fund – Pooled Separate Account | a | 1,468,504 | ||||
* | Nationwide Life Insurance Company | Gartmore Money Market Fund – Pooled Separate Account | a | 175,862 | ||||
* | Nationwide Life Insurance Company | Janus Fund – Pooled Separate Account | a | 894,608 | ||||
* | Nationwide Life Insurance Company | Janus Twenty Fund – Pooled Separate Account | a | 1,152,101 | ||||
* | Nationwide Life Insurance Company | Janus Worldwide Fund – Pooled Separate Account | a | 1,545,508 | ||||
* | Nationwide Life Insurance Company | Neuberger & Berman Guardian Fund – Pooled Separate Account | a | 507,366 | ||||
* | Nationwide Life Insurance Company | Neuberger & Berman Genesis Fund – Pooled Separate Account | a | 584,455 | ||||
* | Nationwide Life Insurance Company | Gartmore Nationwide Fund – Pooled Separate Account | a | 76,179 | ||||
* | Nationwide Life Insurance Company | Neuberger & Berman Partners Fund – Pooled Separate Account | a | 300,774 | ||||
* | Nationwide Life Insurance Company | Oppenheimer Bond Fund – Pooled Separate Account | a | 663,956 | ||||
* | Nationwide Life Insurance Company | Oppenheimer Capital Appreciation Fund – Pooled Separate Account | a | 71,891 | ||||
* | Nationwide Life Insurance Company | PIMCO Total Return Fund – Pooled Separate Account | a | 468,556 | ||||
* | Nationwide Life Insurance Company | Oppenheimer Global Fund – Pooled Separate Account | a | 1,146,923 |
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ITC^DeltaCom, Inc.
Employee Profit Sharing and 401(k) Plan
Schedule of Assets Held (at End of Year)
December 31, 2003
(a) | (b) Identity of Issuer | (c) Description of Investment | (d) | (e) Current Value | |||||
* | Nationwide Life Insurance Company | Oppenheimer Stategic Income Fund – Pooled Separate Account | a | 218,500 | |||||
* | Nationwide Life Insurance Company | GVIT Small Company Income Fund – Pooled Separate Account | a | 594,556 | |||||
* | Nationwide Life Insurance Company | American Century Ultra Fund – Pooled Separate Account | a | 1,424,339 | |||||
* | Nationwide Life Insurance Company | Temp Foreign Fund – Pooled Separate Account | a | 281,034 | |||||
* | Nationwide Life Insurance Company | Frank MSF MutShrs Fund – Pooled Separate Account | a | 76,350 | |||||
* | Nationwide Life Insurance Company | Frank Small/Mid Cap Growth Fund – Pooled Separate Account | a | 126,232 | |||||
* | Nationwide Life Insurance Company | American Century Short Term Bond Fund – Pooled Separate Account | a | 95,209 | |||||
* | Nationwide Life Insurance Company | Invesco Small Com Growth Fund – Pooled Separate Account | a | 35,868 | |||||
* | Nationwide Life Insurance Company | CreditSuisse Fixed Income Fund – Pooled Separate Account | a | 13,329 | |||||
* | Participant Loans | 138 loans with interest rates ranging from 6.25% to 11.50% | — | 682,935 | |||||
* | ITC^DeltaCom, Inc. | 162,526 shares, ITC^DeltaCom common stock | a | 1,163,182 | |||||
Total investments: | $ | 20,730,263 | |||||||
* | Party-in-interest |
a - The cost of participant-directed investments is not required to be disclosed.
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Exhibits
The following exhibit is attached to this Annual Report on Form 11-K:
Exhibit Number | Description of Exhibit | |
23. | Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm |
Signatures
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
ITC^DeltaCom, Inc. | ||||
Employee Profit Sharing and 401(k) Plan | ||||
By: | ITC^DeltaCom, Inc. Employee Profit Sharing and 401(k) Plan Administrative Committee (Plan Administrator) | |||
Date: June 28, 2004 | By: | /s/ J. Thomas Mullis | ||
J. Thomas Mullis | ||||
Authorized Signatory |
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Exhibit Index
Exhibit Number | Description of Exhibit | |
23. | Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm |