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
13