SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q/A
(Amendment No.1)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from _____________________ to _____________________
Commission File Number: 0-9881
SHENANDOAH TELECOMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1162807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Shentel Way
P.O. Box 459,
Edinburg, Virginia 22824
(Address of principal executive offices) (Zip Code)
(540) 984-4141
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. |X| YES |_| NO
Indicate by check mark whether the registration is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). |X| YES |_| NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 28, 2004
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Common Stock, No Par Value 7,618,152 Shares
Explanatory Note
The undersigned registrant hereby files Amendment No. 1 to amend the following
items of its Form 10-Q for the quarter ended September 30, 2004:
1.) Item 4, "Controls and Procedures," and
2.) Item 6, "Exhibits" to reissue the certifications required by
Sections 302 and 906 of the Sarbanes-Oxley Act of 2002
PART I. FINANCIAL INFORMATION
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of its President and Chief Executive
Officer, who is our principal executive officer, and its Executive Vice
President and Chief Financial Officer, who is our principal financial officer,
conducted an evaluation of our disclosure controls and procedures, as defined by
Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on this
evaluation, the Company's principal executive officer and its principal
financial officer concluded that the Company's disclosure controls and
procedures were effective as of September 30, 2004.
During the third fiscal quarter of 2004, there were changes in the Company's
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, its internal control over financial
reporting as follows:
1. The Company dedicated significant resources during the second
quarter of 2004 in preparing for the conversion of its new PCS point
of sale system. The conversion will involve a change from a
stand-alone, Company-hosted system, to a system hosted by Sprint
that is integrated into the Sprint PCS billing system. Through this
integration, the Company has eliminated several points of multiple
data entry, thereby reducing the risk of error, and enhancing
internal control, while improving the sales process. The new system
was placed in service during mid-July 2004.
2. In connection with the requirements imposed under Section 404 of the
Sarbanes-Oxley Act of 2002, we have retained an outside consulting
firm to assist us in reviewing, documenting, and improving our
internal control processes and have engaged Goodman and Company, a
regional accounting firm to assist in the testing of these controls.
On an ongoing basis, the Company contracted with Goodman and Company
to perform internal audit functions.
Under our agreements with Sprint, Sprint provides us with billing, collections,
customer care, certain network operations and other back office services for the
PCS operation. As a result, Sprint remits to the Company approximately 64% of
the Company's total revenues based on the results of the 2004 third quarter,
while approximately 40% of the expenses reflected in the Company's consolidated
financial statements relate to charges by or through Sprint for expenses such as
billing, collections and customer care, roaming expense, long-distance, and
travel. Due to this relationship, the Company necessarily relies on Sprint to
provide accurate, timely and sufficient data and information to properly record
our revenues, expenses and accounts receivable, which underlie a substantial
portion of our periodic financial statements and other financial disclosures.
Information provided by Sprint includes reports regarding the subscriber
accounts receivable in our markets. Sprint provides us monthly accounts
receivable, billing and cash receipts information on a market level, rather than
a subscriber level. We review these various reports to identify discrepancies or
errors. However, under our agreements with Sprint, we are entitled to only a
portion of the receipts, net of items such as taxes, government surcharges,
certain allocable write-offs and the 8% of revenue retained by Sprint. Because
of our reliance on Sprint for financial information, we must depend on Sprint to
design adequate internal controls with respect to the processes established to
provide this data and information to the Company and Sprint's other PCS
affiliate network partners. To address this issue, Sprint engages independent
auditors to perform a periodic evaluation of these controls and to provide a
"Report on Controls Placed in Operation and Tests of Operating Effectiveness for
Affiliates" under guidance provided in Statement of Auditing Standards No. 70
("SAS 70 reports"). The report is provided to the Company on semi-annual basis
and covers a twelve-month period. The current recent report covers the period
from April 1, 2003 to March 31, 2004. The most recent report indicated there
were no material issues which would adversely affect the information used to
support the recording of the revenues and expenses provided by Sprint related to
the Company's relationship with them.
The Company has made significant progress in documenting its internal controls.
To date, while deficiencies have been identified and remediated, no material
weaknesses have been identified.
PART II. OTHER INFORMATION
ITEM 6. Exhibits
(a) The following exhibits are filed with this Quarterly Report on Form
10-Q:
31 Certifications pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934.
32 Certifications pursuant to Rule 13a-14(b) under the Securities
Exchange Act of 1934 and 18 U.S.C. 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHENANDOAH TELECOMMUNICATIONS COMPANY
(Registrant)
February 22, 2005 /S/ EARLE A. MACKENZIE
----------------------
Earle A. MacKenzie
Executive Vice President and
Chief Financial Officer