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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-556
ROSEVILLE COMMUNICATIONS COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 68-0365195
- ----------------------------------------------------- --------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 Vernon Street, Roseville, California 95678
---------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (916) 786-6141
--------------
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock - Without Par Value
(Title of class)
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.
Yes X No _____
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. []
The aggregate market value of voting stock held by non-affiliates (and on the
assumption that all shares held by registrant's employee benefit plans,
directors and officers may be deemed shares held by affiliates), was
$514,424,800 as of March 8, 2001. As of March 8, 2001, 15,493,557 shares of the
registrant's Common Stock were outstanding.
Documents INCORPORATED BY REFERENCE
Incorporated by reference into Part III hereof are portions of the registrant's
definitive proxy statement issued in connection with the annual meeting of
registrant's shareholders to be held May 18, 2001.
TABLE OF CONTENTS
ITEM NO. PAGE
PART I
1. Business................................................ 3
2. Properties.............................................. 5
3. Legal Proceedings....................................... 6
4. Submission of Matters to a Vote of Security Holders..... 9
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters...................................... 12
6. Selected Financial Data................................ 12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 14
7A. Quantitative and Qualitative Disclosures About Market Risk. 23
8. Financial Statements and Supplementary Data................ 24
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 53
PART III
10. Directors and Executive Officers of the Registrant......... 53
11. Executive Compensation..................................... 53
12. Security Ownership of Certain Beneficial Owners and
Management................................................. 53
13. Certain Relationships and Related Transactions............. 53
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................... 53
SIGNATURES .......................................................... 80
PART I
Item 1. Business
Roseville Communications Company (the "Company") was incorporated in 1995 under
the laws of the State of California as a holding company. The Company's
wholly-owned subsidiaries include Roseville Telephone Company ("Roseville
Telephone"), Roseville Directory Company ("RCS Directories"), Roseville Long
Distance Company ("Roseville Long Distance"), RCS Internet Services ("RCS
Internet"), Roseville PCS, Inc. ("Roseville PCS") and Roseville Alternative
Company ("Roseville Alternative"). Additionally, the Company maintains a
significant ownership interest in and is the manager of a wireless company
through Roseville PCS described more fully below.
Substantially all of the Company's revenues are from communications and related
services. Approximately 11%, 11% and 13% of the Company's total operating
revenues in 2000, 1999 and 1998, respectively, were derived from access charges
and charges for other services to Pacific Bell, a wholly owned subsidiary of SBC
Communications Inc. ("Pacific Bell"), pursuant to certain agreements as
described below. No other customer accounted for more than 10% of consolidated
operating revenues during these years.
The Company has formed various subsidiaries for the purposes of pursuing new
businesses in the communications industry. The Company currently generates a
majority of its revenues from services subject to regulation by the California
Public Utilities Commission ("P.U.C.") and the Federal Communications Commission
("F.C.C."), but expects that its proportionate share of revenues from
nonregulated businesses will be greater in future years as a result of its entry
into new businesses and the impact of competition on its regulated operations.
The table that follows reflects the percentage of total operating revenues of
the Company contributed by various sources.
% of Total Operating Revenues
Revenues 2000 1999 1998
- -------------------------------------------- ---- ---- ----
Revenues subject to regulation 75% 80% 80%
Other revenues 25% 20% 20%
---- ---- ----
Total operating revenues 100% 100% 100%
Telephone Operations
The Company's principal regulated operating subsidiary, Roseville Telephone, is
engaged in the business of furnishing communications services, mainly local and
toll telephone service and network access services, in a territory covering
approximately 83 square miles in Placer and Sacramento Counties, California.
Toll service to points outside Roseville Telephone's service area is furnished
through connection in Roseville with facilities of Pacific Bell, AT&T and other
interexchange carriers. The City of Roseville, which is centrally located in
Roseville Telephone's service area, is 18 miles northeast of Sacramento. During
2000, Roseville Telephone experienced a significant increase in competition as
evidenced by the execution of multiple interconnection agreements with
competitors.
For many years, including the year ended December 31, 2000, the area served by
Roseville Telephone has experienced significant residential, commercial and
industrial development. Roseville Telephone continues to be engaged in the
expansion of its facilities and operations to meet current and anticipated
service demand increases and to maintain modern and efficient service. Roseville
Telephone uses public streets and highways in the conduct of its public utility
telephone business under a non-exclusive perpetual franchise granted by Section
7901 of the California Public Utilities Code.
Revenues subject to regulation, which include local service, network access
service and toll service revenues, constituted approximately 75% of the
Company's total operating revenues in 2000. Other Roseville Telephone revenues
consist primarily of directory advertising services, billing and collection
services, nonregulated sales and services and other miscellaneous revenues.
Nonregulated revenues are derived from the sale, lease and maintenance of
telecommunications equipment, payphone services, alarm monitoring services and
network access services.
Total revenues from telephone services are affected by rates authorized by
various regulatory agencies. Intrastate service rates are subject to regulation
by the P.U.C. Roseville Telephone also had agreements with Pacific Bell relating
to extended area service settlements that expired on December 31, 2000. With
respect to intrastate toll calls, interexchange carriers are assessed access
charges based on tariffs filed by Roseville Telephone. With respect to
interstate services, Roseville Telephone has filed its own tariff with the
F.C.C. for all elements of access services except carrier common line charges,
for which Roseville Telephone concurs with tariffs filed by the National
Exchange Carrier Association. Extensive cost separation studies are utilized to
determine both the final settlements and access charges. Additionally, as
discussed in "Item 3 - Legal Proceedings", in December 1996, the P.U.C. issued a
decision regarding Roseville Telephone's authorized revenue levels and
regulatory framework. Roseville Telephone's future operations may be impacted by
several proceedings pending before the F.C.C. and the P.U.C. which are
considering the manner in which certain local exchange services presently
provided solely by Roseville Telephone should be opened to competition. See
"Item 3 - Legal Proceedings" and "Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations" for further discussion
regarding Roseville revenues subject to regulation and the competitive
environment in which Roseville Telephone operates.
In addition to its regulatory authority with respect to Roseville Telephone's
rates, the P.U.C. also has the power, among other things, to establish the terms
and conditions of service, to prescribe uniform systems of accounts to be kept
by public utilities and to regulate the mortgaging or disposition of public
utility properties.
In February 1996, Congress passed the Telecommunications Act of 1996 (the "Act")
which significantly changed the regulatory environment for telecommunications
companies. See "Item 3 - Legal Proceedings" and "Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
further discussion regarding the impact of the Act.
RCS Digital Services, a Competitive Local Exchange Carrier ("CLEC") operating as
a non-regulated division of Roseville Telephone, offers local service, network
access service and toll service to customers outside Roseville Telephone's
service area.
PCS Operations
Roseville PCS is the manager of and has an approximate 97.6% interest in West
Coast PCS LLC (d.b.a. "RCS Wireless"), which was formed together with another
entity not controlled by the Company for the purpose of providing wireless
personal communications services ("PCS"). During 1997, RCS Wireless purchased
from the F.C.C. licenses to offer PCS services in four Basic Trading Areas
located in central California including Sacramento, Stockton, Modesto and Yuba
City. Each license represents the cities of 10 megahertz of broadband spectrum
which offers digital wireless technology capable of providing both voice and
data transmission. RCS Wireless commenced deployment of the network
infrastructure in 1998 and commenced the provision of wireless
telecommunications services with telephone, paging and voicemail capabilities in
June 1999.
Other Operations
In February 1997, RCS Directories commenced operations to produce, publish and
distribute Roseville Telephone's directory including the sale of yellow pages
advertising previously provided by an unaffiliated company. RCS Directories is
also engaged in the business of producing, publishing and distributing
directories in other Northern California communities outside of Roseville
Telephone's service area.
In September 1997, Roseville Long Distance commenced the provision of long
distance services using a fiber-optic network owned by another exchange carrier,
providing international, interstate and intrastate long distance service,
calling card and 800 services.
In August 1999, RCS Internet commenced the provision of high speed internet
access utilizing 100 percent digital subscriber line (DSL) technology.
Investment in Sacramento-Valley Limited Partnership
Roseville Telephone and Roseville Alternative, with an approximate 24% equity
interest, were limited partners of Sacramento-Valley Limited Partnership
("SVLP"), a California limited partnership formed for the construction and
operation of a cellular telephone system in Northern California and Nevada. On
November 3, 2000, the Company sold its limited partnership interest in SVLP for
approximately $236.2 million to concentrate on its wireless services provided by
RCS Wireless.
The Company's equity in the earnings of SVLP constituted approximately 4%, 19%
and 21% of the Company's income before income taxes in 2000, 1999 and 1998
respectively.
Employees
At December 31, 2000, the Company had 731 employees, none of whom is represented
by a union.
Item 2. Properties
The Company owns central office buildings and related equipment in Roseville,
Citrus Heights, Granite Bay, and other locations in Sacramento and Placer
Counties. The Company's 68,000 square foot principal business office and
administrative headquarters and 214,000 square foot operations facility are
located in Roseville. Other land is held for future expansion. The Company has
appropriate easements, rights of way and other arrangements for the
accommodation of its pole lines, underground conduits, aerial and underground
cables and wires, and PCS antennas.
In addition to land and structures, the Company's property consists of equipment
required in providing communication services. This includes central office
equipment, customer premises equipment and connections, radio and PCS antennas,
towers, pole lines, aerial and underground cable and wire facilities, vehicles,
furniture and fixtures and other equipment. The Company also owns certain other
communications equipment held as inventory for sale or lease.
In addition to plant and equipment that the Company wholly-owns, the Company
utilizes poles, towers and cable and conduit systems wholly-owned by, or
jointly-owned with, other entities and leases space on facilities wholly or
jointly-owned by the Company to other entities. These arrangements are in
accordance with written agreements customary in the industry.
Item 3. Legal Proceedings
Except for the proceedings described below, the Company is not aware of any
material pending legal proceedings, other than ordinary routine litigation
incidental to its business, to which it is a party or to which any of its
property is subject.
As appears in Item 1, above, Roseville Telephone is subject to regulation by the
F.C.C. and P.U.C. In the past, there have been various proceedings before these
agencies to which Roseville Telephone has been a party. Reference is made to
Item 1 for further information regarding the nature of the jurisdiction of the
F.C.C. and P.U.C. over the business and operations of Roseville Telephone.
In 1993, the P.U.C. issued a report to the Governor of the State of California
entitled "Enhancing California's Competitive Strength: A Strategy For
Telecommunications Infrastructure" in which it proposes to open markets to
competition and aggressively streamline regulation to accelerate the pace of
innovation in the telecommunications marketplace. In conjunction with these
proceedings, the P.U.C. issued an order in 1995 to consider the goals and
definition of universal telephone service in a changing telecommunications
environment, including examination of subsidy support mechanisms and issues of
"carrier of last resort" and "franchise" obligations. In 1995, the P.U.C. issued
an order to develop and adopt rules for local exchange competition. Roseville
Telephone anticipates that additional proceedings will be held to refine further
the rules for local service competition in its territory, the effects of which
on Roseville Telephone cannot yet be determined.
In 1993, the P.U.C. also opened an investigation and rulemaking proceeding to
establish rules necessary to provide nondiscriminatory access by competing
service providers to the network capabilities of local exchange carriers
necessary to ensure fair competition in accordance with the mandate of the
Public Utilities Code. These proceedings continue through the present and may
broaden the scope of competition in the provision of intrastate services, the
effects of which on Roseville Telephone cannot presently be determined.
In 1996, the P.U.C. issued a decision in connection with Roseville Telephone's
general rate proceeding which authorized Roseville Telephone to implement a New
Regulatory Framework ("NRF") for services furnished within the State of
California in order to accommodate market and regulatory movement toward
competition and greater pricing flexibility. In accordance with the requirements
of its general rate case decision, Roseville Telephone filed an application for
review of its New Regulatory Framework ("NRF") in 1999. This proceeding
considered modifications to the NRF structure, including potential changes to
the current monitoring and reporting requirements, the earnings sharing
mechanism, promotional and pricing flexibility, and related matters. In
addition, the P.U.C. Office of Ratepayer Advocates ("ORA") undertook a
verification audit of Roseville Telephone's non-regulated and affiliated
transactions pursuant to the general rate case and other P.U.C. orders. The ORA
audit report was considered in the NRF proceeding. A proposed decision was
issued in December 2000. The proposed decision, if adopted by the P.U.C., would
suspend the sharing mechanism beginning in 2001 and require Roseville Telephone
to amend its intrastate shareable earnings filing for 1999. Management expects
the proposed decision to be adopted during 2001; however the ultimate outcome of
the proposed decision cannot yet be determined.
In 1999, Pacific Bell expressed interest in withdrawing from the designated
carrier plan ("DCP") for Roseville Telephone's toll traffic and to enter into a
new, permanent compensation arrangement for extended area service ("EAS"). The
DCP is a compensation arrangement between Roseville Telephone and Pacific Bell
for certain intraLATA toll services. Pacific Bell also paid Roseville Telephone
$11.5 million per year for EAS pursuant to a Settlement Transition Agreement. In
November 2000, the P.U.C. authorized Pacific Bell to terminate its annual
payments to Roseville Telephone, authorized replacement funding on an interim
basis using the current reserve in a California High Cost Fund, and denied
permanent replacement funding at that time pending further proceedings to be
held during 2001 and 2002. These proceedings will determine the extent to which
recovery of all, none, or a portion of the $11.5 million annual payments should
come from Roseville Telephone's ratepayers or other regulatory recovery
mechanisms. The results of these proceedings and their potential effects on
Roseville Telephone cannot yet be determined. In addition, Roseville Telephone
and Pacific Bell have agreed to allow the current DCP arrangement to expire
without renewal in December 2001.
There are a number of regulatory proceedings occurring at the federal level that
may have a material impact on Roseville Telephone. These regulatory proceedings
include, but are not limited to, consideration of changes to the jurisdictional
separations process, the interstate universal service fund, access charge reform
and the regulation of local exchange carriers. In addition, the F.C.C.
periodically establishes the authorized rate of return for interstate access
services. Since 1991, the F.C.C. has established an 11.25% rate of return for
interstate access services. However, in 1998 the F.C.C. released a notice
initiating a prescription proceeding and notice of proposed rulemaking to
represcribe the authorized rate of return for interstate access services
provided by incumbent local exchange carriers ("ILEC's"). Further, the FCC is
considering comments on a proposal submitted by a number of parties in October
2000 which sets forth an interstate access reform and universal service support
proposal for ILECs subject to rate-of-return regulation (rate-of-return or
non-price cap carriers). The outcome of these proceedings can not be determined
at this time.
Roseville Telephone's operations may also be impacted by the Telecommunications
Act of 1996 (the "Act"). Beginning in 1996, the F.C.C. adopted orders
implementing the Act's provisions to open local exchange service markets to
competition. The F.C.C. rules outline pricing methodologies for the states to
follow when setting rates for resale, interconnection and unbundled network
elements. In 1997, the United States Court of Appeals for the Eighth Circuit
found that the F.C.C. exceeded its jurisdiction in connection with some of its
orders implementing the Act. In early 1999, the United States Supreme Court
reversed the Eighth Circuit's determinations that the F.C.C. lacked authority to
implement the Act by adopting local pricing standards or to bar incumbent local
exchange carriers from separating already-combined unbundled network elements
("UNEs") before offering them to competitors. The Supreme Court also reinstated
the agency's "pick-and-choose" rules. However, the Supreme Court invalidated the
F.C.C.'s original list of UNEs, saying the F.C.C. had failed to determine that
those elements were necessary for competitors to offer service. The F.C.C. has
opened a proceeding to review this issue in light of the Supreme Court's order,
and in 1999, adopted an order identifying UNEs that ILECs must make available to
competitors. In 2000, the United States Court of Appeals for the Eighth Circuit
vacated the FCC's Total Element Long Run Incremental Cost ("TELRIC") pricing
standard for determining the price that ILECs can charge to CLECs seeking use of
unbundled network elements. The Supreme Court decision also remanded the
reasonableness of TELRIC pricing back to the Eighth Circuit for determination.
In addition, the Circuit's decision also vacated, among other things, the FCC's
rules which define "avoided retail costs" for purposes of determining wholesale
rates, the FCC's proxy prices, the FCC's rules which addressed the
identification of additional network elements to be unbundled, and the FCC's
superior quality and additional combinations rules. In January 2001, the United
States granted a petition for writ of certiorari to review the Eighth Circuit's
opinion with respect to (1) whether the appeals court erred in holding that the
Act "forecloses the cost methodology adopted by the FCC, which is based on the
efficient replacement cost of existing technology" for determining what new
entrants must pay ILECs for interconnection; (2) whether the appeals court erred
in holding that neither the constitution nor the Act requires an ILEC's
"historical costs" to be taken into account in setting the rates it can charge
for access to network elements; and (3) whether the Act prohibits regulators
from requiring that incumbents "combine certain previously uncombined network
elements" when the new entrant requests the combination and offers to pay for
the extra work. Given the Act's recent enactment, the Eighth Circuit's decision
vacating portions of the F.C.C.'s interconnection orders, the Supreme Court's
order reversing much of the Eighth Circuit's decision on interconnection
pricing, the recent actions taken by the F.C.C. to promulgate rules and
regulations on access charge and universal service reform, and the various
on-going legal challenges considering the validity of these F.C.C. orders, it is
not yet possible to determine fully the impact of the Act and related F.C.C.
regulations on Roseville Telephone's operations.
In 1997, the F.C.C. adopted orders on access charge reform and a new universal
service program. The F.C.C.'s order on access charge reform generally removed
from minute-of-use access charges costs that are not incurred on a
per-minute-of-use basis. The F.C.C. also adopted changes to its interstate rate
structure for transport services which are designed to move the charges for
these services to more cost-based levels. The F.C.C.'s order on universal
service reformed the existing system of universal service in a manner that will
permit local telephone markets to move to a competitive arena. In 1999, the
United States Court of Appeals for the Fifth Circuit issued an opinion
addressing challenges to the F.C.C.'s universal service order. The Court
rejected challenges on technical issues such as the F.C.C.'s use of models in
determining universal service. The Court ruled, however, that the F.C.C. can't
use intrastate revenues in determining a carriers' universal service
contribution and rejected the so-called flowback method of collecting universal
service contributions through access charges. To implement the Fifth Circuit's
decision, the F.C.C. adopted an order in 1999 making revisions to its rules,
requiring, among other things, that incumbent LECs recover their universal
service contributions either through interstate access charges or interstate
end-user charges based on interstate and international end-user
telecommunications revenues only. In October, 1999, the Commission adopted two
orders in connection with universal service reform. In the first order, the
F.C.C. completed development of the cost model to be used as a basis for federal
universal service support. In the second order, the F.C.C. adopted a methodology
based on the results of the cost model to calculate the level of support for
non-rural carriers serving high-cost areas. In addition, the F.C.C. held that
the amount of support provided to carriers on a per-line basis by the
forward-looking mechanism will be no less than the amount of support provided to
the carrier by the present mechanism but that federal universal service support
will be portable among all eligible telecommunications carriers. If a competitor
acquires a subscriber line from an incumbent receiving support, the competitor
will receive the incumbent's federal universal service support for that line.
The regulatory proceedings occurring at the state and federal levels described
above may broaden the scope of competition in the provision of regulated
services and change the rates and rate structure for regulated services
furnished by Roseville Telephone, the effects of which on Roseville Telephone
cannot yet be determined.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
EXECUTIVE OFFICERS of the registrant
The names, ages and positions of the executive officers of the Company and its
subsidiaries as of March 8, 2001 are as follows:
Name Age Principle occupation and business experience for past
five years
- ---- --- -------------------------------------------------------
Thomas E. Doyle 72 Chairman of the Board of Directors (since August 2000);
Vice Chairman (1998 to 2000); Vice President
(1972 - 2000) and Secretary-Treasurer (1965 -2000)
of the Company
Brian H. Strom 58 President and Chief Executive Officer of the Company
(since 1993)
Michael D. Campbell 52 Executive Vice President and Chief Financial Officer of
the Company (since April 1996) and Treasurer
(since 2000); Vice President and Chief Financial
Officer (1994 to 1996)
Jay B. Kinder 56 Executive Vice President and Chief Operating Officer -
Roseville Telephone Company (since December 2000); Vice
President, Customer Services (1996 to 2000); Director
of Marketing and Planning (1993 to 1996)
Bill M. DeMuth 51 Vice President and Chief Technical Officer of the
Company (since October 2000); Executive Director,
Network Services - Roseville Telephone Company (1998 to
October 2000); Director, Network Services (1997 to
1998); Manager, Network Maintenance and Planning
(1994 to 1997)
David Marsh 52 Vice President and Chief Information Officer of the
Company(since December 2000); President and Chief
Executive Officer RnetEC, Inc (1999 to 2000); Chief
Information Officer - Pierce Leahy (1994 to 1999)
Robert M. Burger 44 Vice President and Chief Operating Officer - RCS
Wireless (since June 2000); General Manager (1998 to
2000); Chief Financial Officer, Fourth Communications
Network, Inc. (1997 to 1998); Vice President Finance
and Business Communications, Fourth Communications
Network, Inc. (1996 to 1997); General Manager - Central
California/Northern Nevada, Nextel Communications (1995
to 1996); Business Operations Manager, Nextel
Communications (1993 to 1995)
Name Age Principle occupation and business experience for past
five years
- ---- --- --------------------------------------------------------
Philip D. Germond 51 Vice President, Customer Services and Marketing -
Roseville Telephone Company (since December 2000); Vice
President, Marketing (1997 to December, 2000); Director
of Marketing and Sales (1996 to 1997); Product and
Services Manager (1989 - 1995)
Fred A. Arcuri 48 Vice President and Chief Operating Officer - RCS
Internet and Vice President RCS Digital Services (since
June 2000); Executive Director of Emerging Businesses
(1999 to 2000); Director of Marketing and Product
Development (1998 to 1999); Product and Service Manager
(1995 to 1998)
Neil J. Doerhoff 49 Secretary of the Company (since August 2000); Financial
Consultant; Corporate Secretary (From 1987 - 2000),
Raley's
Darla J. Yetter 40 Assistant Secretary of the Company (since August 2000);
Assistant to the President and Chief Executive Officer
(1994 to 2000)
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock of the Company trades principally in local transactions without
the benefit of an established public trading market. As a result of the minimal
number of stock transactions, the Company's information with respect to price
per share is derived from reports provided by the Company's Retirement
Supplement Plan, the Employee Stock Ownership Plan (collectively, the "Plans")
and disclosure, in limited circumstances, of third party transactions.
Transactions in the Company's common stock were effected by the Plans at
approximately $30 per share during the first quarter of 1999, $31 per share
during the second quarter of 1999, $32 per share during the third quarter of
1999 and $33 per share during the fourth quarter of 1999. Transactions in the
Company's common stock were effected by the Plans at $34 per share during the
first quarter of 2000, $37 per share during the second quarter of 2000, $38 per
share during the third and fourth quarters of 2000 and $40 per share thereafter.
The Company's approximate number of shareholders was 8,522 as of March 8,
2001.
The Company paid cash dividends on its common stock of $.25 per share for each
quarter of 1999 and 2000.
Item 6. Selected Financial Data
2000 1999 1998 1997 1996
----- ---- ---- ---- ----
(amounts in thousands, except per share amounts)
Total operating revenues $143,316 $140,801 $126,682 $114,888 $105,566
Gain on sale of investment in
cellular partnership $201,294 - - - -
Net income $125,793 $ 31,750 $ 25,049 $ 22,971 $ 21,461
Basic earnings per share(1) $ 8.06 $ 2.01 $ 1.58 $ 1.45 $ 1.36
Diluted earnings per share(1) $ 8.05 $ 2.01 $ 1.58 $ 1.45 $ 1.36
Extraordinary loss, net of tax $(10,932) $ - $ - $ - $ -
Cumulative effect of change
in accounting principle,
net of tax $ (3,273) $ - $ - $ - $ -
Extraordinary loss, net of
tax, basic and
diluted earnings per share $ (0.70) $ - $ - $ - $ -
Cumulative effect of change
in accounting principle,
net of tax, basic and
diluted earnings per share $ (0.21) $ - $ - $ - $ -
Pro forma amounts assuming the accounting change is applied retroactively:
Income before extraordinary
loss and cumulative effect
of change in accounting
principle $ 139,998 $ 31,926 $ 24,749 $ 22,373 $ 20,594
Net income $ 129,066 $ 31,926 $ 24,749 $ 22,373 $ 20,594
Basic earnings per share:
Income before extraordinary
loss and cumulative effect
of change in accounting
principle $ 8.97 $ 2.02 $ 1.56 $ 1.41 $ 1.30
Net income $ 8.27 $ 2.02 $ 1.56 $ 1.41 $ 1.30
Diluted earnings per share:
Income before extraordinary
loss and cumulative effect
of change in accounting
principle $ 8.96 $ 2.02 $ 1.56 $ 1.41 $ 1.30
Net income $ 8.26 $ 2.02 $ 1.56 $ 1.41 $ 1.30
Cash dividends per share(2) $ 1.00 $ 1.00 $ .85 $ 0.63 $ 0.57
Property, plant and
equipment, at cost $ 469,389 $383,896 $328,437 $297,057 $275,563
Total assets $ 528,942 $333,187 $315,877 $276,297 $267,881
Long-term debt $ 44,285 $ 46,428 $ 48,571 $ 22,322 $ 28,036
Shares of common stock used to calculate:
Basic earnings per share(1) 15,610 15,815 15,815 15,815 15,815
Diluted earnings per
share(1) 15,630 15,822 15,815 15,815 15,815
- --------------------------------------------------------------------------------
(1) Shares used in the computation of basic earnings per share are based on the
weighted average number of common shares outstanding. Shares used in the
computation of diluted earnings per share are based on the weighted
average number of common and unvested restricted common shares
outstanding in each period. All other potentially dilutive securities
have been excluded from the computation because their effect is
anti-dilutive.
(2) Cash dividends per share are based on the actual dividends per share, as
declared by the Company's Board of Directors.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Company Overview
Roseville Communications Company (the "Company") is a holding company with
subsidiaries operating in the Telecommunications ("Telecom") and Personal
Communications Services ("PCS") segments.
The Telecom segment is aligned with specific subsidiaries of the Company.
Roseville Telephone Company ("Roseville Telephone"), a wholly-owned subsidiary
of the Company, provides local and toll telephone services, network access
services, billing and collection services, directory advertising services and
certain nonregulated services. Additionally, Roseville Telephone and Roseville
Alternative Company ("Roseville Alternative") owned an approximate 24% limited
partnership interest in Sacramento-Valley Limited Partnership ("SVLP") which
provided cellular telephone service principally in California. Roseville
Directory Company ("RCS Directories"), a wholly-owned subsidiary of the Company,
produces, publishes and distributes Roseville Telephone's directory including
the sale of yellow pages advertising. RCS Directories is also engaged in the
business of producing, publishing and distributing directories in other Northern
California communities outside of Roseville Telephone's service area. The
Company's wholly-owned subsidiary, Roseville Long Distance Company ("Roseville
Long Distance"), is engaged in the provision of long distance services. The
Company's wholly-owned subsidiary, RCS Internet Services ("RCS Internet"), is
engaged in the provision of high speed internet services.
The PCS segment consists of the Company's wholly-owned subsidiary, Roseville
PCS, Inc., which is the manager of and has an approximate 97.6% interest in West
Coast PCS LLC (d.b.a. "RCS Wireless"), which was formed together with another
entity not controlled by the Company for the purpose of providing PCS.
The Company expects that the sources of its revenues and its cost structure will
be different in future periods as a result of its entry into new communications
markets.
Sale of SVLP
On November 3, 2000, Roseville Telephone and Roseville Alternative sold their
collective 24% interest in SVLP to Verizon Wireless for approximately $236.2
million, resulting in a gain of $201.3 million. As of December 31, 2000 the
Company had a $5.5 million receivable from Verizon Wireless, which originated
prior to the sale. Subsequently, the Company received $5.1 million and
anticipates receiving the balance during 2001.
The Company believes that the sale of the limited partnership interest furthers
its strategy to focus resources on expansion of the Company's own wireless
operation, RCS Wireless, and other of the Company's emerging business
operations.
Extraordinary Loss
As described in Note 2 to the Consolidated Financial Statements of the Company,
Roseville Telephone discontinued applying Statement of Financial Accounting
Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of
Regulation," in December 2000. Management determined that, as a result of a
significant increase in competition within Roseville Telephone's traditional
service area and anticipated changes in its regulatory framework, the
application of SFAS No. 71 was no longer appropriate for Roseville Telephone. As
a result of the discontinuation of SFAS No. 71 accounting by Roseville
Telephone, the Company recorded an extraordinary non-cash charge of $10.9
million, which is net of related tax benefits of $7.6 million, in December 2000.
Cumulative Effect of a Change in Accounting Principle
During the fourth quarter of 2000, the Company changed its method of accounting,
retroactive to January 1, 2000, for up-front fees associated with
telecommunications service activation in accordance with the guidance contained
in the Securities Exchange Commission ("SEC") Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"), which was issued by
the SEC in December 1999. Previously, the Company had recognized such up-front
fees as revenues upon activation of service. Under the new accounting method,
the Company now recognizes up-front fees associated with service activation over
the expected duration of the customer relationships. The cumulative effect of
the change on prior years resulted in a charge to 2000 income of $3.3 million
(net of income taxes of $2.3 million). The effect of the change on the year
ended December 31, 2000 was to decrease operating revenue by $853 thousand. For
the year ended December 31, 2000, the Company recognized $2.4 million of revenue
relating to activation revenue previously deferred in connection with the
cumulative effect adjustment, as of January 1, 2000.
Revenue Overview
The Telecom segment derives its revenue from services subject to regulation,
long distance services, directory advertising services, internet services and
the sale of non-regulated products and services.
Revenues from services subject to regulation, which include local service,
network access service and toll service revenues generated by Roseville
Telephone, constituted approximately 75%, 80% and 80% of the Company's total
operating revenues in 2000, 1999 and 1998, respectively. Revenues subject to
regulation are derived from various sources, including billings to business and
residential subscribers for basic exchange services, extended area service
charges; surcharges mandated by the California Public Utilities Commission
("P.U.C."); billings to Pacific Bell, a wholly-owned subsidiary of SBC
Communications Inc., ("Pacific Bell"), long distance carriers, competitive
access providers and subscribers for network access services; interstate
settlement revenues from the National Exchange Carrier Association; and support
payments from the Universal Service Fund and a California High Cost Fund.
Total revenues from telephone services are affected by rates authorized by
various regulatory agencies. Intrastate service rates are subject to regulation
by the P.U.C. Roseville Telephone also had agreements with Pacific Bell relating
to extended area service settlements that expired on December 31, 2000.
Interstate service rates are subject to regulation by the Federal Communications
Commission ("F.C.C."). With respect to intrastate toll calls, interexchange
carriers are assessed access charges based on tariffs filed by Roseville
Telephone. With respect to interstate services, Roseville Telephone has filed
its own tariff with the F.C.C. for all elements of access services except
carrier common line charges, for which Roseville Telephone concurs with tariffs
filed by the National Exchange Carrier Association.
Interstate access charges and carrier common line revenues are based on
extensive cost separation studies which utilize estimated cost information and
projected demand usage. During the two-year monitoring period ended December 31,
2000 ("Monitoring Period"), the Company experienced significant increases in
internet traffic. The F.C.C. currently requires that the costs of internet
traffic be assigned to the intrastate jurisdiction for separation purposes;
accordingly, the increase in internet traffic caused a reduction in costs
allocated to the Company's interstate jurisdiction. Additionally, the Company
has experienced an increase in its interstate access traffic in excess of the
forecasted demand utilized in its cost studies for the Monitoring Period
resulting from the 1999 introduction of Digital Subscriber Line ("DSL") service.
Based on the results of the Company's preliminary cost studies for the
Monitoring Period, the Company believes that its interstate earnings were above
those authorized by the FCC. Accordingly, in the fourth quarter of 2000 the
Company recorded an additional liability to various telecommunications entities
aggregating $8.1 million through a charge to operating revenues. Therefore, as
of December 31, 2000, the Company had an aggregate liability to these
telecommunications entities of $10.8 million relating to its estimated
interstate sharing obligation.
Roseville Telephone bills Pacific Bell various charges for certain local service
and network access service revenues pursuant to certain agreements described
below. Of the Company's total operating revenues in 2000, 1999 and 1998, 11%,
11% and 13%, respectively, were recorded under these agreements. In 1999,
Pacific Bell expressed interest in withdrawing from the designated carrier plan
("DCP") for Roseville Telephone's toll traffic and to enter into a new,
permanent compensation arrangement for extended area service ("EAS"). The DCP is
a compensation arrangement between Roseville Telephone and Pacific Bell for
certain intraLATA toll services. Pacific Bell also paid Roseville Telephone
$11.5 million per year for EAS pursuant to a Settlement Transition Agreement. In
November 2000, the P.U.C. authorized Pacific Bell to terminate its annual EAS
payments to Roseville Telephone, authorized replacement funding on an interim
basis using the current reserve in the California High Cost Fund-B, and denied
permanent replacement funding at this time pending further proceedings to be
held during 2001 and 2002. These proceedings will determine the extent to which
recovery of all, none, or a portion of the $11.5 million annual EAS payments
should come from Roseville Telephone's ratepayers or other regulatory recovery
mechanisms. The results of these proceedings and their potential effects on
Roseville Telephone cannot yet be determined. In addition, Roseville Telephone
and Pacific Bell have agreed to allow the current DCP arrangement to expire
without renewal in December 2001.
In December 1996, the P.U.C. issued a decision in connection with Roseville
Telephone's general rate proceeding, which authorized Roseville Telephone to
implement a New Regulatory Framework ("NRF") for services furnished within the
State of California in order to accommodate market and regulatory movement
toward competition and greater pricing flexibility. Under the NRF, Roseville
Telephone is subject to ongoing monitoring and reporting requirements, including
a sharing mechanism whereby Roseville Telephone may be required to share
earnings with customers based on its earned annual rate-of-return. In April
1999, the P.U.C. issued a decision modifying the rate case decision by
increasing the Company's rates to correct certain legal and factual errors in
the original rate case decision. This modification resulted in 1) a one-time
increase to revenues subject to regulation for the year ended December 31, 1999
of $958 thousand retroactive to 1997 and 2) an annual increase of approximately
$328 thousand to revenues subject to regulation.
In accordance with the requirements of its general rate case order, Roseville
Telephone filed an application for review of its NRF in 1999. This proceeding
considered modifications to the NRF structure, including potential changes to
the current monitoring and reporting requirements, the earnings sharing
mechanism, promotional and pricing flexibility, and related matters. In
addition, the P.U.C. Office of Ratepayer Advocates ("ORA") undertook a
verification audit of Roseville Telephone's non-regulated and affiliated
transactions pursuant to the general rate case and other P.U.C. orders. The
ORA's audit report was considered in the NRF proceeding. A proposed decision was
issued in December 2000. The proposed decision, if adopted by the P.U.C., would,
among other things, suspend the sharing mechanism beginning in 2001 and require
Roseville Telephone to amend its intrastate shareable earnings filing for 1999.
In accordance with the provisions of the proposed decision, the Company recorded
an additional liability in the fourth quarter of 2000 aggregating $3.2 million
through a charge to operating revenues. Therefore, as of December 31, 2000, the
Company had an aggregate liability of $5.5 million relating to its estimated
intrastate sharing obligation.
The PCS segment derives its revenue from the provision of wireless digital
personnel communication services and the sale of related communications
equipment.
2000 versus 1999
Net income for 2000 was $125.8 million, or $8.06 per share, compared with net
income of $31.7 million, or $2.01 per share, for 1999. The increase in net
income and earnings per share for 2000 was due principally to the gain of $201.3
million from the sale of the Company's limited partnership interest in SVLP.
This gain was offset by a one-time non-cash extraordinary loss relating to the
discontinuance of SFAS No. 71. of $10.9 million, net of taxes, and the
cumulative effect of a change in accounting principle of $3.3 million, net of
taxes. There was also a modest increase in operating revenues of $2.5 million,
offset by an increase of $21.7 million in operating expenses due principally to
the Company's aggressive expansion into new telecommunications markets including
wireless, internet, broadband and data services.
Operating Revenues:
Revenues subject to regulation, which include local and network access services,
decreased in the aggregate by $5.1 million, or 5%, compared to 1999. This
decrease was due to reductions to operating revenues of $11.3 million relating
to the Company's estimated interstate and intrastate sharing obligations noted
above, and one-time positive adjustments of $1.4 million recorded in 1999
relating to interstate access settlements and the rate case modification noted
above. Revenue subject to regulation also decreased due to the implementation of
SAB 101, as discussed both above and below. These decreases in local and network
access service revenues were partially offset by the combined effects of 1)
access lines growth of 2%, 2) increases in custom calling, voice mail and other
enhanced network services, 3) increased network access revenues due to expanded
demand for data services and larger minutes-of-use volumes and 4) the
introduction of DSL services in August 1999.
Directory advertising revenues increased $55 thousand, or less than 1%, compared
to 1999 due to a modest increase in advertising sales relating to independent
directories published outside of Roseville Telephone's service area. Revenues
from non-regulated sales and services increased by $1.6 million, or 26%,
compared to 1999 due primarily to the effects of several large equipment sales.
Other operating revenues primarily consist of wireless PCS, internet services,
long distance services, billing and collection services and other miscellaneous
services. Other operating revenues increased $5.9 million, or 63%, compared to
1999 due primarily to an increase in the market penetration of long distance
services and the introduction of wireless and internet services in June and
August of 1999, respectively.
Operating Expenses:
Total operating expenses increased $21.7 million, or 22%, compared to 1999. Cost
of services and products increased $9.1 million, or 24%, during 2000 due
primarily to an increase in tower rents related to the continuing expansion of
the coverage area of RCS Wireless, transport costs associated with long distance
services, and modem and transport costs related to internet services.
Customer operations expense increased $7.2 million, or 42%, during 2000 due
primarily to marketing and advertising costs associated with wireless services
and increased labor costs relating to customer support activities associated
with internet services.
General and administrative expenses decreased $1.1 million, or 5%, during 2000.
Increases in various general and administrative costs during 2000 compared to
1999 were offset by costs related to computer upgrades in 1999 which did not
occur in 2000.
Depreciation and amortization increased $6.5 million, or 29%, during 2000 as a
result of an increase in telephone and wireless plant and the amortization of
network software and PCS licenses.
Other Income, Net:
Other income, net, increased $201.4 million, compared to 1999 due principally to
the $201.3 million gain on the sale of the Company's interest in SVLP. Excluding
the gain on the sale of the Company's investment in SVLP, other income, net,
increased $60 thousand, or less than 1%, compared to 1999. Interest income
increased $1.1 million, or 63%, during 2000 as a result of larger average
invested balances. Interest expense increased $758 thousand, or 22%, compared to
1999 due to an increase in the Company's average outstanding balances on its
credit facility during 2000.
Income Taxes:
Income taxes increased $73.9 million compared to 1999 due primarily to the
Company's $201.3 million gain on the sale of its interest in SVLP. The effective
federal and state income tax rate was 40.5% in 2000 compared to 40.1% in 1999.
Extraordinary Loss:
Roseville Telephone discontinued applying SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation," in December 2000 as described above,
which resulted in the recognition of $10.9 million extraordinary loss, net of
tax.
Cumulative Effect of a Change in Accounting Principle:
During the fourth quarter of 2000, the Company changed its method of accounting,
retroactive to January 1, 2000 for up-front fees associated with
telecommunications service activation in accordance with the guidance contained
in SAB 101 which was issued by the SEC in December 1999, as described above.
1999 versus 1998
Net income for 1999 was $31.7 million, or $2.01 per share, compared with net
income of $25.0 million, or $1.58 per share, for 1998. The increase in net
income and earnings per share for 1999 over 1998 was due principally to the
strong economic growth in the Company's local exchange service area, the
introduction of new products and services, the results of various marketing
initiatives and operational and financial efficiencies gained from the Company's
diversification and cost containment initiatives.
Operating Revenues:
Revenues subject to regulation increased $10.7 million, or 11%, compared to
1998. This increase was due to the combined effects of 1) access line growth of
5%, 2) improved penetration in custom calling, voice mail, national directory
assistance and other enhanced network services, 3) increased network access
revenues due to larger minute-of-use volumes and expanded demand for special
access services, 4) a one time increase of $812 thousand to interstate
access settlement revenues relating to 1998 and 5) a one time increase of $958
thousand retroactive to 1997 relating to the modification to Roseville
Telephone's general rate case decision.
Directory advertising revenues increased $1.4 million, or 12%, compared to 1998.
The increase was due to an increase in advertising sales from surrounding areas
relating to Roseville Telephone's directory, the addition of an independent
directory outside of Roseville Telephone's service area, and the publication of
another local exchange carrier's telephone directory. Other revenues increased
$2.2 million or 30% over 1998 due primarily to market penetration of long
distance services and the introduction of PCS services in June 1999.
Operating Expenses:
Operating expenses increased $5.2 million or 6%, compared to 1998. Cost of
services and products increased $2.3 million, or 6%, during 1999 due primarily
to an increase in transport costs associated with long distance services,
increased publishing and distribution costs relating to directory advertising
and start up costs associated with testing and implementing the PCS network.
These increases were partially offset by the adoption of Statement of Position
98-1 as discussed more fully below.
Customer operations expense increased $1.0 million, or 6%, during 1999 due
primarily to increased labor costs related to an increase in personnel and
marketing and customer service costs associated with long distance services, the
Company's PCS operations, and the introduction of internet services.
General and administrative costs increased $248 thousand, or 1%, during 1999 due
primarily to increased labor costs and administrative costs associated with the
introduction of PCS and internet services. These increases were largely offset
by the adoption of Statement of Position 98-1 as discussed more fully below.
Depreciation and amortization expense increased $1.7 million, or 8%, during 1999
as a result of an increased investment in property, plant and equipment.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1, which the
Company was required to adopt in 1999, requires the capitalization of certain
costs incurred in connection with developing or obtaining internal use software.
Prior to adoption of SOP 98-1, the Company expensed all internal use software
related costs as incurred. The effect of adoption SOP 98-1 was an increase in
net income of $3.2 million for 1999.
Other Income, Net:
Other income, net, increased $2.4 million, or 30%, compared to 1998 due
primarily to an increase of $1.2 million in income attributable to the Company's
interest in SVLP. The Company's equity in the earnings of SVLP constituted
approximately 19% and 21% of income before income taxes for 1999 and 1998,
respectively. Interest income increased $443 thousand, or 35%, during 1999 as a
result of larger average invested balances during 1999. Interest expense
increased $748 thousand, or 28%, during 1999 as a result of an increase in the
Company's average outstanding long-term debt balances.
Income Taxes:
Income taxes increased $4.6 million, or 27%, compared to 1998 due primarily to
the increase in income subject to tax. The effective federal and state income
tax rate was 40.1% in 1999 compared to 40.0% in 1998.
Pending Accounting Pronouncement
The Financial Accounting Standards Board has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for the Company in 2001. Management believes the adoption of SFAS No.
133 will not have an impact on the Company's 2001 consolidated financial
statements.
Liquidity and Capital Resources
As reflected in the Consolidated Statements of Cash Flows, net cash provided by
operating activities was $53.1 million, $42.7 million and $41.0 million in 2000,
1999 and 1998, respectively. The increase in operating cash flows for 2000 was
primarily due to the timing of payables and other accrued liabilities. The
Company also experienced a significant increase in cash and cash equivalents as
a result of the sale of its limited partnership interest in SVLP. The Company
used cash flows from operations and existing cash and cash equivalents to fund
1) capital expenditures of $87.2 million pertaining to ongoing plant
construction projects, 2) dividends of $15.6 million, 3) principal payments of
$2.1 million to retire long-term debt and 4) the repurchase of $13.1 million of
common stock.
During 2000, the Company received proceeds in excess of $236 million from the
sale of its partnership interest in SVLP. As of December 31, 2000 the Company
had a $5.5 million receivable from Verizon Wireless, which originated prior to
the sale. Subsequently, the Company received $5.1 million and anticipates
receiving the balance during 2001.
In February 2000, the Board of Directors authorized the repurchase of up to one
million shares of the Company's common stock. The shares are purchased from time
to time in the open market or through privately negotiated transactions subject
to overall financial and market conditions. Through December 31, 2000, the
Company repurchased 328,944 shares of common stock. As a result, the Company has
authorization from the Board of Directors to repurchase an additional 671,056
outstanding shares.
In March 2000, the Company entered into a revolving credit facility for $30
million with a term of three years. In September 2000, the bank amended the
credit facility increasing the borrowing capacity from $30 million to $50
million. Prior to the sale of the Company's interest in SVLP on November 3,
2000, the Company had utilized $40 million of its borrowing capacity. A portion
of the proceeds received from the sale of the Company's interest in SVLP was
used to retire all the Company's indebtedness under the credit facility. As of
December 31, 2000 the Company had $50 million available under the credit
facility.
The Company's most significant use of funds in 2001 is expected to be for 1)
budgeted capital expenditures of approximately $58.8 million, 2) net operating
expenditures of up to $15.0 million relating to RCS Wireless, 3) scheduled
payments of long-term debt of $2.1 million and 4) the purchase by the Company of
shares of its outstanding common stock pursuant to the repurchase program.
In addition to net cash provided by operations and existing cash, cash
equivalents and short-term investments, the Company may consider other sources
of external financing, including short-term borrowings or long term debt, for
the purposes of funding future capital expenditures and potential investments.
Regulatory and Legal Matters
In 1996, Congress passed the Telecommunications Act of 1996 (the "Act") which
significantly changed the regulatory environment for telecommunications
companies. Beginning in 1996, the F.C.C. adopted orders implementing the Act's
provisions to open local exchange service markets to competition. The F.C.C.
rules outline pricing methodologies for the states to follow when setting rates
for resale, interconnection and unbundled network elements. In 1997, the United
States Court of Appeals for the Eighth Circuit found that the F.C.C. exceeded
its jurisdiction in connection with some of its orders implementing the Act. In
early 1999, the United States Supreme Court reversed the Eighth Circuit's
determinations that the F.C.C. lacked authority to implement the Act by adopting
local pricing standards or to bar incumbent local exchange carriers from
separating already-combined unbundled network elements ("UNEs") before offering
them to competitors. The Supreme Court also reinstated the agency's
"pick-and-choose" rules. However, the Supreme Court invalidated the F.C.C.'s
original list of UNEs, saying the F.C.C. had failed to determine that those
elements were necessary for competitors to offer service. The F.C.C. has opened
a proceeding to review this issue in light of the Supreme Court's order, and in
September 1999, adopted an order identifying UNEs that incumbent local exchange
carriers ("ILECs") must make available to competitors. In July 2000, the United
States Court of Appeals for the Eighth Circuit vacated the FCC's Total Element
Long Run Incremental Cost ("TELRIC") pricing standard for determining the price
that ILECs can charge to CLECs seeking use of unbundled network elements. The
Supreme Court decision also remanded the reasonableness of TELRIC pricing back
to the Eighth Circuit for determination. In addition, the Circuit's decision
also vacated, among other things, the FCC's rules which define "avoided retail
costs" for purposes of determining wholesale rates, the FCC's proxy prices, the
FCC's rules which addressed the identification of additional network elements to
be unbundled, and the FCC's superior quality and additional combinations rules.
In January 2001, the United States granted a petition for writ of certiorari to
review the Eighth Circuit's opinion with respect to 1) whether the appeals court
erred in holding that the Act "forecloses the cost methodology adopted by the
FCC, which is based on the efficient replacement cost of existing technology"
for determining what new entrants must pay ILECs for interconnection; 2) whether
the appeals court erred in holding that neither the constitution nor the Act
requires an ILEC's "historical costs" to be taken into account in setting the
rates it can charge for access to network elements; and 3) whether the Act
prohibits regulators from requiring that incumbents "combine certain previously
uncombined network elements" when the new entrant requests the combination and
offers to pay for the extra work. Given the Act's recent enactment, the Eighth
Circuit's decision vacating portions of the F.C.C.'s interconnection orders, the
Supreme Court's order reversing much of the Eighth Circuit's decision on
interconnection pricing, the recent actions taken by the F.C.C. to promulgate
rules and regulations on access charge and universal service reform, and the
various on-going legal challenges considering the validity of these F.C.C.
orders, it is not yet possible to determine fully the impact of the Act and
related F.C.C. regulations on Roseville Telephone's operations.
In 1997, the F.C.C. adopted orders on access charge reform and a new universal
service program. The F.C.C.'s order on access charge reform generally removed
from minute-of-use access charges costs that are not incurred on a
per-minute-of-use basis. The F.C.C. also adopted changes to its interstate rate
structure for transport services which are designed to move the charges for
these services to more cost-based levels. The F.C.C.'s order on universal
service reformed the existing system of universal service in a manner that will
permit local telephone markets to move to a competitive arena In July 1999, the
United States Court of Appeals for the Fifth Circuit issued an opinion
addressing challenges to the F.C.C.'s universal service order. The Court upheld
the F.C.C.'s authority to implement its program for funding telecommunications
services for schools and libraries and rejected challenges on technical issues
such as the F.C.C.'s use of models in determining universal service. The Court
ruled, however, that the F.C.C. can't use intrastate revenues in determining a
carrier's universal service contribution and rejected the so-called flowback
method of collecting universal service contributions through access charges. To
implement the Fifth Circuit's decision, the F.C.C. adopted an order in October
1999, making revisions to its rules, effective in November 1999, requiring,
among other things, that ILECs recover their universal service contributions
either through interstate access charges or interstate end-user charges based on
interstate and international end-user telecommunications revenues only. In
October 1999, the Commission adopted two orders in connection with universal
service reform. In the first order, the F.C.C. completed development of the cost
model to be used as a basis for federal universal service support. In the second
order, the F.C.C. adopted a methodology based on the results of the cost model
to calculate the level of support for non-rural carriers serving high-cost
areas. In addition, the F.C.C. held that the amount of support provided to
carriers on a per-line basis by the forward-looking mechanism will be no less
than the amount of support provided to the carrier by the present mechanism but
that federal universal service support will be portable among all eligible
telecommunications carriers. If a competitor acquires a subscriber line from an
incumbent receiving support, the competitor will receive the incumbent's federal
universal service support for that line.
Given the Act's relatively recent enactment, the ongoing actions of the F.C.C.
to implement the Act, and the various ongoing legal challenges considering the
validity of these F.C.C. orders, it is not yet possible to determine fully the
impact of the Act and related F.C.C. regulations on Roseville Telephone's
operations.
The Company's financial condition and results of operations have been and will
be affected by recent and future proceedings before the P.U.C. and F.C.C.
Pending before the F.C.C. and P.U.C. are proceedings which are considering:
o The rules governing the opening of markets to competition
o The goals and definition of universal telephone service in a changing
environment, including examination of subsidy support mechanisms for
subscribers in high cost areas and issues of "carrier of last resort"
and "franchise" obligations
o Rules that will provide non-discriminatory access by competing
service providers to the network capabilities of local exchange
carriers
o A proposal submitted by a number of parties in October 2000 which
sets forth an interstate access reform and universal service support
proposal for ILECs subject to rate-of-return regulation
(rate-of-return or non-price cap carriers).
The eventual impact on the Company of the effect of all the proceedings
described above cannot presently be determined.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to market risk associated with interest rate movements.
However, the Company's market risk disclosure pursuant to Item 7A is not
material and therefore not required.
Item 8. Financial Statements and Supplementary Data
Page
Report of Independent Auditors ........................................... 25
Consolidated statements of income for each of the three years in the period
ended December 31, 2000 ................................................... 26
Consolidated balance sheets as of December 31, 2000 and 1999 .............. 29
Consolidated statements of shareholders' equity for each of the three years
in the period ended December 31, 2000 ..................................... 31
Consolidated statements of cash flows for each of the three years in the
period ended December 31, 2000 ............................................ 32
Notes to consolidated financial statements ............................... 34
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Roseville Communications Company
We have audited the accompanying consolidated balance sheets of Roseville
Communications Company as of December 31, 2000 and 1999, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The 1999 and 1998 consolidated financial statements of
Sacramento-Valley Limited Partnership (a partnership in which the Company had an
approximate 24% interest through November 3, 2000 - Note 5) have been audited by
other auditors whose reports have been furnished to us; insofar as our opinion
on the 1999 and 1998 consolidated financial statements relates to data included
for Sacramento-Valley Limited Partnership, it is based solely on their reports.
We conducted our audits in accordance with auditing standards generally accepted
in the 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. 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 and the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Roseville Communications Company at
December 31, 2000 and 1999, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States.
As discussed in Note 2 to the consolidated financial statements, in 2000 the
Company discontinued accounting for the operations of its local
telecommunications subsidiary in accordance with Statement of Financial
Accounting Standards No. 71, Accounting for the Effects of Certain Types of
Regulation. As discussed in Note 3 to the consolidated financial statements, in
2000 the Company changed its method of accounting for revenue recognition in
accordance with guidance contained in SEC Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements.
/s/Ernst & Young LLP
Sacramento, California
February 9, 2001
Roseville Communications Company
consolidated statements of income
Years ended December 31, 2000, 1999 and 1998
(amounts in thousands, except per share amounts)
2000 1999 1998
---- ---- ----
Operating revenues:
Local service $ 65,708 $ 68,605 $ 62,728
Network access service 41,357 43,531 38,724
Directory advertising 13,044 12,989 11,593
Nonregulated sales and service 7,931 6,284 6,431
Other 15,276 9,392 7,206
-------- -------- --------
Total operating revenues 143,316 140,801 126,682
Operating expenses:
Cost of services and products 46,662 37,558 35,305
Customer operations and selling 24,350 17,108 16,108
General and administrative 19,686 20,805 20,557
Depreciation and amortization 28,891 22,378 20,684
-------- -------- --------
Total operating expenses 119,589 97,849 92,654
-------- -------- --------
Income from operations 23,727 42,952 34,028
Other income (expense):
Interest income 2,814 1,725 1,282
Interest expense (4,223) (3,465) (2,717)
Equity in earnings of cellular
partnership 10,089 10,129 8,904
Gain on sale of investment in
cellular partnership 201,294 - -
Allowance for funds used during
construction 1,219 1,530 498
Other, net 234 154 (244)
-------- -------- --------
Total other income, net 211,427 10,073 7,723
-------- -------- --------
Income before income taxes,
extraordinary loss and cumulative
effect of change in accounting
principle 235,154 53,025 41,751
Income taxes 95,156 21,275 16,702
-------- -------- --------
Income before extraordinary loss
and cumulative effect of
change in accounting principle 139,998 31,750 25,049
-------- -------- --------
Extraordinary loss, net of $7.6
million tax benefit (10,932) - -
Cumulative effect of change in
accounting principle, net of
$2.3 million tax benefit (3,273) - -
-------- -------- --------
Net income $125,793 $ 31,750 $ 25,049
======== ======== ========
See accompanying notes.
Roseville Communications Company
consolidated statements of income (CONTINUED)
Years ended December 31, 2000, 1999 and 1998
(amounts in thousands, except per share amounts)
2000 1999 1998
---- ---- ----
Basic earnings per share:
Income before extraordinary loss
and cumulative effect of change
in accounting principle $ 8.97 $ 2.01 $ 1.58
Extraordinary loss
net of tax benefit (.70) - -
Cumulative effect of change in
accounting principle, net of tax
benefit (.21) - -
---------- --------- --------
Net income $ 8.06 $ 2.01 $ 1.58
========== ========= ========
Shares of common stock used to
calculate basic earnings per
share 15,610 15,815 15,815
Diluted earnings per share:
Income before extraordinary loss
and cumulative effect of change
in accounting principle $ 8.96 $ 2.01 $ 1.58
Extraordinary loss, net of tax
benefit (.70) - -
Cumulative effect of change in
accounting principle, net of
tax benefit (.21) - -
---------- --------- --------
Net income $ 8.05 $ 2.01 $ 1.58
========= ========= ========
Shares of common stock used to
calculate diluted earnings
per share 15,630 15,822 15,815
Dividends per share $ 1.00 $ 1.00 $ .85
========= ========= ========
Pro forma amounts assuming the accounting change is applied retroactively:
Income before extraordinary loss
and cumulative effect of change
in accounting principle $139,998 $ 31,926 $ 24,749
Net income $129,066 $ 31,926 $ 24,749
Basic earnings per share:
Income before extraordinary loss
and cumulative effect of change $ 8.97 $ 2.02 $ 1.56
in accounting principle
Net income $ 8.27 $ 2.02 $ 1.56
See accompanying notes
Roseville Communications Company
consolidated statements of income (CONTINUED)
Years ended December 31, 2000, 1999 and 1998
(amounts in thousands, except per share amounts)
Diluted earnings per share:
Income before extraordinary loss
and cumulative effect of change $ 8.96 $ 2.02 $ 1.56
in accounting principle
Net income $ 8.26 $ 2.02 $ 1.56
See accompanying notes.
ROSEVILLE COMMUNICATIONS COMPANY
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(amounts in thousands)
ASSETS 2000 1999
------ ---- ----
Current assets:
Cash and cash equivalents $169,955 $ 10,886
Short-term investments 7,435 6,464
Accounts receivable (less allowances of
$142 and $436, respectively) 24,515 20,399
Receivable relating to cellular partnership 5,513 -
Refundable income tax - 330
Inventories 3,696 2,510
Deferred income tax asset 6,613 1,625
Deferred directory costs 4,133 3,930
Prepaid expenses and other current assets 547 251
-------- --------
Total current assets 222,407 46,395
Property, plant and equipment:
In service 445,057 365,047
Under construction 24,332 18,849
-------- --------
469,389 383,896
Less accumulated depreciation 191,408 144,988
-------- --------
277,981 238,908
Investments and other assets:
Long-term Certificate of
Deposit with related party 15,155 -
Cellular partnership - 38,426
PCS licenses, at cost, net 8,287 8,737
LMDS licenses, at cost 4,642 -
Deferred charges and other assets 470 721
-------- --------
28,554 47,884
-------- --------
$528,942 $333,187
======== ========
See accompanying notes.
ROSEVILLE COMMUNICATIONS COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, 2000 and 1999
(amounts in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY 2000 1999
- ------------------------------------ ---- ----
Current liabilities:
Current portion of long-term debt $ 2,143 $ 2,143
Accounts payable and other accrued
liabilities 13,840 6,265
Payables to telecommunications entities 23,346 6,353
Advance billings and customer deposits 1,359 2,014
Accrued income taxes 92,050 -
Accrued pension cost 7,061 5,128
Accrued compensation 3,742 4,253
-------- --------
Total current liabilities 143,541 26,156
Long-term debt 44,285 46,428
Deferred income taxes 6,626 25,629
Other liabilities and deferred credits 7,918 6,118
Minority interest in subsidiary 1,570 1,256
Shareholders' equity:
Common stock, without par value; 100,000
shares authorized, 15,510 shares issued and
outstanding (15,828 shares in 1999) 181,547 189,554
Retained earnings 143,455 38,046
-------- --------
Total shareholders' equity 325,002 227,600
-------- --------
$528,942 $333,187
======== ========
See accompanying notes.
ROSEVILLE COMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 2000, 1999 and 1998
(amounts in thousands)
Common Stock
-------------------
Number of Retained
Shares Amount Earnings Total
------ -------- -------- -------
Balance at December 31, 1997 15,815 $189,171 $ 10,512 $199,683
Cash dividends - - (13,433) (13,443)
Net income - - 25,049 25,049
------ -------- -------- ---------
Balance at December 31, 1998 15,815 189,171 22,118 211,289
Issuance of restricted common
stock 13 383 - 383
Cash dividends - - (15,822) (15,822)
Net income - - 31,750 31,750
------ -------- -------- --------
Balance at December 31, 1999 15,828 189,554 38,046 227,600
Issuance of restricted common
stock 11 373 - 373
Repurchase of common
stock (329) (8,380) (4,744) (13,124)
Cash dividends - - (15,640) (15,640)
Net income - - 125,793 125,793
--------- -------- --------- --------
Balance at December 31, 2000 15,510 $181,547 $143,455 $325,002
========= ======== ========= ========
See accompanying notes.
ROSEVILLE COMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, 1999 and 1998
Increase (Decrease) in Cash and Cash Equivalents
(amounts in thousands)
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income $ 125,793 $ 31,750 $ 25,049
Adjustments to reconcile net
income to net cash provided by
operating activities:
Extraordinary loss, net of
tax benefit 10,932 - -
Cumulative effect of a change
in accounting principle, net
of tax benefit 3,273 - -
Depreciation and amortization 28,891 22,378 20,684
Equity component of allowance
for funds used during
construction (653) (643) (378)
Provision for deferred income
taxes (14,260) 1,495 (650)
Equity in earnings of cellular
partnership (10,089) (10,129) (8,904)
Gain on sale of cellular
partnership (201,294) - -
Provision for doubtful accounts 836 638 942
Other, net (439) 69 (464)
Net changes in:
Receivables (4,953) (4,186) (1,620)
Accrued income taxes 92,380 639 858
Inventories, prepaid expenses
and other current assets (1,482) (826) 400
Payables, accrued liabilities
and other deferred credits 24,165 1,523 5,127
-------- ------- -------
Net cash provided by operating
activities 53,100 42,708 41,044
Cash flows from investing
activities:
Capital expenditures for property,
plant and equipment (87,234) (58,402) (35,209)
Purchase of wireless licenses (4,642) - -
Purchases of held-to-maturity
investments (7,625) (8,022) (7,478)
Maturities of held-to-maturity
investments 6,654 5,800 7,200
Investment in cellular partnership (9,902) - (701)
Return of investment in cellular
partnership 18,046 7,578 6,761
Investment in Certificate of
Deposit (15,000) - -
Proceeds from sale of investment
in cellular partnership 236,153 - -
Return of refundable deposit - - 1,620
See accompanying notes.
ROSEVILLE COMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, 2000, 1999 and 1998
Increase (Decrease) in Cash and Cash Equivalents
(amounts in thousands)
2000 1999 1998
---- ---- ----
Other, net (379) 349 327
-------- ------- -------
Net cash provided by (used in)
investing activities 136,071 (52,697) (27,480)
Cash flows from financing
activities:
Principal payments of long-term
debt $ (2,143) $ (2,143) $ (4,822)
Increase in short-term borrowing 40,000 - -
Repayment of short-term borrowing (40,000) - -
Proceeds of long-term debt - - 40,000
Retirement of long-term debt - - (12,500)
Dividends paid (15,640) (15,822) (13,443)
Repurchase of common stock (13,124) - -
Investment in subsidiary by
minority partner 805 - 681
--------- -------- --------
Net cash provided by (used in)
financing activities (30,102) (17,965) 9,916
--------- -------- --------
Increase (decrease) in cash and
cash equivalents 159,069 (27,954) 23,480
Cash and cash equivalents at
beginning of year 10,886 38,840 15,360
--------- -------- --------
Cash and cash equivalents at
end of year $ 169,955 $ 10,886 $ 38,840
========= ======== ========
See accompanying notes.
ROSEVILLE COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(dollars in thousands, except per share amounts)
1. Summary of significant accounting policies
Business and basis of accounting
Roseville Communications Company (the "Company") is a holding company
with subsidiaries operating in the communications services industry. The
Company's wholly-owned principal operating subsidiary is Roseville
Telephone Company ("Roseville Telephone"). Roseville Directory Company
("RCS Directories"), Roseville Long Distance Company ("Roseville Long
Distance"), RCS Internet Services ("RCS Internet") and Roseville PCS,
Inc. are each wholly-owned subsidiaries of the Company. Roseville PCS,
Inc. is the manager of and has an approximate 97.6% interest in West
Coast PCS LLC (d.b.a. "RCS Wireless").
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States,
which require management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and a majority-owned limited
liability company. All significant intercompany transactions have been
eliminated.
Cash equivalents and investments
The Company invests its excess cash in high-quality debt instruments and
certain other investments. The Company considers highly liquid
investments with maturities of three months or less from the acquisition
date of the instrument to be cash equivalents. Short-term investments at
December 31, 2000 and 1999 consist of high grade commercial paper, U.S.
government agency securities, repurchase agreements and unsecured
corporate notes with maturities ranging from greater than 90 days to
less than one year. Long-term investments at December 31, 2000 consists
of a certificate of deposit with a bank with an original maturity of 18
months. None of the Company's investments have maturities greater than
two years. The Company has no investments in equity securities.
Fair values of financial instruments
As of December 31, 2000 and 1999, the Company's financial instruments
consist of cash, cash equivalents, short-term investments, long-term
investments and long-term debt. Management believes that the carrying
values of cash equivalents and short-term and long-term investments at
December 31, 2000 and 1999, which are at amortized cost, approximated
their fair values at such dates. The aggregate fair value of the
Company's long-term debt (including current maturities) was
approximately $44,739 and $44,534 at December 31, 2000 and 1999,
respectively. Fair values for cash equivalents and short-term
investments were determined by quoted market prices. Fair values for the
long-term investment and long-
1. Summary of significant accounting policies (CONTINUED)
term debt were determined by a discounted cash flow analysis based on
the Company's current incremental interest rates for similar
instruments.
Inventories
Telephone construction inventories consist of materials and supplies,
which are stated at average cost. Equipment and other nonregulated
inventory held for resale are stated at the lower of average cost or net
realizable value.
Property, plant and equipment
Property, plant and equipment is recorded at cost. The cost of additions
and substantial improvements to property, plant and equipment is
capitalized. The cost of maintenance and repairs is charged to operating
expense when incurred. Retirements and other reductions of regulated
telephone plant and equipment with a cost of approximately $2,394, $3,586
and $3,470 in 2000, 1999 and 1998, respectively, were charged against
accumulated depreciation with no gain or loss recognized in accordance
with the composite group remaining life methodology utilized for
telephone plant assets. When property applicable to non-telephone
operations is sold or retired, the asset and related accumulated
depreciation are removed from the accounts and the associated gain or
loss is recognized.
Property, plant and equipment is depreciated using the straight-line
method over their estimated economic lives, which range from 3 to 40
years. Average annual composite depreciation rates were 7.31%, 6.74%, and
6.85% in 2000, 1999 and 1998, respectively. Prior to Roseville
Telephone's discontinuance of Statement of Financial Accounting Standards
("SFAS") No. 71, "Accounting for the Effects of Certain Types of
Regulation" (Note 2)in December 2000, depreciation expense for regulated
operations was computed on a straight-line basis using rates approved by
the California Public Utilities Commission ("P.U.C.").
Directory advertising
Costs of directory production and advertising sales are deferred until
the directory is published. Such costs are amortized to expense and the
related advertising revenues are recognized over the life of the related
directory, normally over the year following the issue date of the
directory.
Regulation
Certain of the Company's rates are subject to regulation by the Federal
Communications Commission ("F.C.C.") and the P.U.C. Pending and future
regulatory actions may have a significant impact on the Company's future
operations and financial position.
Total revenues from telephone services are affected by rates authorized
by various regulatory agencies. Intrastate service rates are subject to
regulation by the P.U.C. Roseville Telephone also had agreements with
Pacific Bell, a wholly-owned subsidiary of SBC Communications Inc.
("Pacific Bell"),relating to extended area service ("EAS")settlements
that expired on December 31, 2000. Interstate service rates are subject
to regulation by the F.C.C. With respect to intrastate toll calls,
interexchange carriers are assessed access charges based on tariffs filed
1. Summary of significant accounting policies (CONTINUED)
by Roseville Telephone. With respect to interstate services, Roseville
Telephone has filed its own tariff with the F.C.C. for all elements of
access services except carrier common line charges, for which Roseville
Telephone concurs with tariffs filed by the National Exchange Carrier
Association.
Interstate access charges and carrier common line revenues are based on
extensive cost separation studies that utilize estimated cost
information and projected demand usage. During the two-year monitoring
period ended December 31, 2000 ("Monitoring Period"), the Company
experienced significant increases in internet traffic. The F.C.C.
currently requires that the costs of internet traffic be assigned to the
intrastate jurisdiction for separation purposes; accordingly, the
increase in internet traffic caused a reduction in costs allocated to
the Company's interstate jurisdiction. Additionally, the Company has
experienced an increase in its interstate access traffic in excess of
the forecasted demand utilized in its cost studies for the Monitoring
Period resulting from the 1999 introduction of Digital Subscriber Line
("DSL") service. Based on the results of the Company's preliminary cost
studies for the Monitoring Period, the Company believes that its
interstate earnings were above those authorized by the F.C.C.
Accordingly, in the fourth quarter of 2000, the Company recorded an
additional liability to various telecommunications entities aggregating
$8.1 million through a charge to operating revenues. Therefore, as of
December 31, 2000, the Company had an aggregate liability to these
telecommunications entities of $10.8 million relating to its estimated
interstate sharing obligation.
Roseville Telephone bills Pacific Bell various charges for certain local
service and network access service revenues pursuant to certain
agreements described below. Of the Company's total revenues in 2000,
1999 and 1998, 11%, 11% and 13%, respectively, were recorded under these
agreements. In 1999, Pacific Bell expressed interest in withdrawing from
the designated carrier plan ("DCP") for Roseville Telephone's toll
traffic and to enter into a new, permanent compensation arrangement for
EAS The DCP is a compensation arrangement between Roseville Telephone
and Pacific Bell for certain intraLATA toll services. Pacific Bell also
paid Roseville Telephone $11,500 per year for EAS pursuant to a
Settlement Transition Agreement. In November 2000, the P.U.C. authorized
Pacific Bell to terminate its annual EAS payments to Roseville
Telephone, authorized replacement funding on an interim basis using the
current reserve in the California High Cost Fund-B, and denied permanent
replacement funding at this time pending further proceedings to be held
during 2001 and 2002. These proceedings will determine whether recovery
of all, none, or a portion of the $11,500 annual payments, should come
from Roseville Telephone's ratepayers or other regulatory recovery
mechanisms. The results of these proceedings and their potential effects
on Roseville Telephone cannot yet be determined. In addition, Roseville
Telephone and Pacific Bell have agreed to allow the current DCP
arrangement to expire without renewal in December 2001.
In December 1996, the P.U.C. issued a decision in connection with
Roseville Telephone's general rate proceeding, which authorized
Roseville Telephone to implement a New Regulatory Framework ("NRF") for
services furnished within the State of California in order to
accommodate market and regulatory movement toward competition and
greater pricing flexibility. Under the NRF, Roseville Telephone is
subject to ongoing monitoring and reporting requirements, including a
sharing mechanism whereby Roseville Telephone may be required to share
earnings with
1. Summary of significant accounting policies (CONTINUED)
customers based on its earned annual rate-of-return. In April 1999, the
P.U.C. issued a decision modifying the rate case decision by increasing
the Company's rates to correct certain legal and factual errors in the
original rate case decision. This modification resulted in (1) a
one-time increase to revenues subject to regulation for the year ended
December 31, 1999 of $958 retroactive to 1997 and (2) an annual
increase of approximately $328 to revenues subject to regulation.
In accordance with the requirements of its general rate case order,
Roseville Telephone filed an application for review of its NRF in 1999.
This proceeding considered modifications to the NRF structure, including
potential changes to the current monitoring and reporting requirements,
the earnings sharing mechanism, promotional and pricing flexibility, and
related matters. In addition, the P.U.C. Office of Ratepayer Advocates
("ORA") undertook a verification audit of Roseville Telephone's
non-regulated and affiliated transactions pursuant to the general rate
case and other P.U.C. orders. The ORA audit report was considered in the
NRF proceeding. A proposed decision was issued in December 2000. The
proposed decision, if adopted by the P.U.C., would, among other things,
suspend the sharing mechanism beginning in 2001 and require Roseville
Telephone to amend its intrastate shareable earnings filing for 1999. In
accordance with the provisions of the proposed decision, the Company
recorded an additional liability aggregating $3,200 through a charge to
operating revenues in the fourth quarter of 2000. Therefore, as of
December 31, 2000, the Company had a aggregate liability of $5,500
relating to its estimated intrastate sharing obligation.
Intangible Assets
Amortization of wireless licenses is computed on a straight-line basis
over twenty years.
Stock compensation
The company has elected to account for stock-based awards to
employees and others in accordance with Accounting Principles Board
Option No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25"), and related interpretations. The pro forma disclosures
required by SFAS No. 123, "Accounting for Stock-Based Compensation,"
are included in Note 10.
Advertising costs
The costs of advertising are expensed as incurred. Advertising expense
was $2,387, $1,351 and $887 in 2000, 1999 and 1998, respectively.
Income taxes
The Company accounts for income taxes using the liability method, which
requires deferred tax assets and liabilities to be recorded for the
expected future tax consequences of events that have been included in
the financial statements and tax returns. Additionally, the liability
method requires adjustments of deferred tax assets and liabilities for
changes in tax laws or rates and requires recognition of a regulatory
asset or liability when it is probable that deferred taxes would be
reflected in future rates of regulated companies.
1. Summary of significant accounting policies (CONTINUED)
Per share amounts
Shares used in the computation of basic earnings per share of common
stock are based on the weighted average number of common shares
outstanding. Shares used in the computation of diluted earnings per share
are based on the weighted average number of common and unvested
restricted common shares outstanding in each period. All other
potentially dilutive securities have been excluded from the computation
because their effect is anti-dilutive. Cash dividends per share is based
on the actual dividends per share, as declared by the Company's Board of
Directors.
Statements of cash flows information
During 2000, 1999 and 1998, the Company made payments for interest and
income taxes as follows:
2000 1999 1998
---- ---- ----
Interest (net of amounts capitalized) $ 3,507 $ 2,552 $ 2,536
Income taxes $17,070 $19,141 $16,494
Concentrations of credit risk, and significant customer
Substantially all of the Company's revenues were from communications and
related services provided in the Northern California area. The Company
performs ongoing credit evaluations of its customers' financial condition
and management believes that an adequate allowance for doubtful accounts
has been provided.
Approximately 11%, 11% and 13% of the Company's consolidated operating
revenues in 2000, 1999 and 1998, respectively, were derived from access
charges and other charges to Pacific Bell. No other customers accounted
for more than 10% of consolidated operating revenues in these years.
Pending accounting pronouncement
The Financial Accounting Standards Board has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for fiscal years beginning after June 15, 2000. SFAS No. 133
standardized the accounting for derivatives and hedging activities and
requires that all derivatives be recognized in the statement of
financial position as either assets or liabilities at fair value.
Changes in the fair value of derivatives that do not meet the hedge
accounting criteria are to be reported in earnings. The Company is
required to adopt SFAS No. 133 in 2001; however, management believes it
will not have an impact on the Company's 2001 consolidated financial
statements.
Reclassifications
Certain amounts in the 1999 and 1998 consolidated financial statements
have been reclassified to conform with the presentation of the 2000
consolidated financial statements.
2. Discontinuance of Regulatory Accounting
In December 2000, management determined that, as a result of a
significant increase in competition within Roseville Telephone's
traditional service area and anticipated changes in its regulatory
framework (Note 1), the application of SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation," was no longer appropriate for
Roseville Telephone. As a result of the discontinuation of SFAS No. 71
accounting by Roseville Telephone, the Company recorded an extraordinary
non-cash charge of $10,932, which is net of related tax benefits of
$7,631, in December 2000.
The components of this charge are as follows:
Change in plant-related balances $19,573
Elimination of regulatory assets and liabilities, net $(1,010)
Total pre-tax charge $18,563
Total after-tax charge $10,932
The change in plant-related balances primarily represents an increase in
accumulated depreciation of $19,573 for the removal of an embedded
regulatory asset resulting from the use of regulatory lives for
depreciation of property, plant and equipment, which have typically been
longer than the respective estimated economic lives. The following is a
comparison of new depreciation lives to those prescribed by regulators
for selected plant categories:
Average Lives in Years
----------------------
Plant Category Regulator Estimated
-------------- Prescribed Economic
---------- ---------
Buildings 38 35
Digital switches 13-16 10
Digital circuits 9 9
DSL equipment 9 3
Fiber optic cable 25 20
Conduit 45 40
Metallic cable 17 15
The discontinuance of SFAS No. 71 accounting by Roseville Telephone also
required the Company to eliminate from its consolidated balance sheet at
December 31, 2000 the effects of any other actions of regulators that
had been recognized by Roseville Telephone as assets and liabilities
pursuant to SFAS No. 71, but would not have been recognized as assets
and liabilities by non-regulated enterprises in general. As of December
31, 2000, prior to the discontinuance of SFAS No. 71 accounting,
Roseville Telephone had recorded a net regulatory liability of $1,010,
the majority of which related to the regulatory treatment of certain
pension costs. Also included in Roseville Telephone's regulatory asset
and liability elimination adjustment are certain insignificant income
tax-related regulatory assets and liabilities.
Additionally, concurrent with its discontinuation of SFAS No. 71
accounting, Roseville Telephone began accounting for interest on funds
borrowed to finance construction projects as an increase in property,
plant and equipment and a reduction of interest expense. Previously,
under the provisions of SFAS No. 71, Roseville Telephone accounted for
the capitalization of both interest and equity costs allowed by
2. Discontinuance of Regulatory Accounting (continued)
regulators during periods of construction as other income and an
addition to the cost of plant constructed.
The discontinuation of SFAS No. 71 accounting by Roseville Telephone
had no effect on the accounting for any of the Company's other
subsidiaries.
3. Revenue Recognition
The Company recognizes revenues as earned. Certain revenues derived
principally from local telephone, dedicated network access, data
communications and wireless services are billed in advance and
recognized in subsequent periods when the services are provided.
Revenues derived from other telecommunications services, principally
network access, long distance, billing and collection services, internet
access service, DSL, wireless personal communications services ("PCS")
and alarm monitoring services, are recognized monthly as services are
provided. Incremental direct costs of telecommunications service
activation are charged to expense in the period in which they are
incurred. Directory publication revenues and costs related to producing,
publishing and distributing directories are recognized using the
"amortization" method, under which revenues and expenses are recognized
over the life of the directory, generally one year from the date of
publication. For all other operations, revenue is recognized when
products are delivered or services are rendered to customers.
During the fourth quarter of 2000, the Company changed its method of
accounting, retroactive to January 1, 2000, for up-front fees associated
with telecommunications service activation in accordance with the
guidance contained in SEC Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements." Previously, the Company had
recognized such up-front fees as revenues upon activation of service.
Under the new accounting method, the Company now recognizes up-front fees
associated with service activation over the expected duration of the
customer relationships, which presently ranges from one to five years,
using the straight-line method. The cumulative effect of the change on
prior years resulted in a charge to income of $3,273 (net of income taxes
of $2,250), which is included in net income for the year ended December
31, 2000. The effect of the change on the year ended December 31, 2000
was to decrease income before extraordinary items and the cumulative
effect of the accounting change by $508($0.03 per share). For the year
ended December 31, 2000, the Company recognized $2,380 of revenue that
was included in the cumulative effect adjustment as of January 1, 2000.
The effect of that revenue was to increase income by $1,417 (net of
income taxes of $963) for the year. The pro forma amounts presented in
the consolidated statements of income were calculated assuming the
accounting change was made retroactively to prior periods.
4. CASH EQUIVALENTS AND INVESTMENTS
Management determines the appropriate classification of securities at
the time of purchase and reevaluates such designation as of each balance
sheet date. At December 31, 2000 and 1999, all securities are designated
as held-to-maturity as management has the positive intent and ability to
hold the securities until maturity. Held-to-maturity securities are
stated at cost, adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization and accretion, as well as any
interest on the securities, is included in interest income.
4. CASH EQUIVALENTS AND INVESTMENTS (CONTINUED)
Following is a summary of the Company's investments (included in cash,
cash equivalents, short-term investments and long-term investments) as
of December 31, 2000 and 1999 at amortized cost, which approximates fair
value:
2000 1999
-------- ------
Commercial paper $104,447 $3,488
Money market mutual funds 61,808 -
Certificate of deposit 15,155 -
Repurchase agreements 1,635 190
U.S. government agency securities - 2,726
Other unsecured corporate notes - 250
-------- ------
Total investments $183,045 $6,654
======== ======
5. INVESTMENT IN SACRAMENTO-VALLEY LIMITED PARTNERSHIP ("SVLP")
Roseville Telephone and Roseville Alternative, with an approximate 24%
equity interest, were limited partners of SVLP, a limited partnership
formed for the operation of a cellular telephone system principally in
California. The Company accounted for its investment in SVLP using the
equity method.
Summarized balance sheet information for SVLP as of December 31, 2000
and 1999 is as follows:
Unaudited
---------
2000 1999
---- ----
Current assets $ 35,515 $ 44,240
Noncurrent assets, primarily cellular plant $ 184,409 $161,672
Current liabilities $ 45,209 $ 34,043
Noncurrent liabilities $ 46,432 $ 201
Summarized income statement information for SVLP for the years ended
December 31, 2000, 1999 and 1998 is as follows:
Unaudited
2000 1999 1998
---- ---- ----
Net revenues $ 227,333 $215,105 $195,624
Costs and
expenses, net 183,070 169,407 158,829
--------- -------- --------
Net Income $ 44,263 $ 45,698 $ 36,795
========= ========= =========
During 2000 the Company settled its litigation with the general partner
of SVLP, which was ongoing as of December 31, 1999. The settlement of
this litigation had no effect on the Company's consolidated financial
position and results of operations for 2000.
On November 3, 2000, Roseville Telephone and Roseville Alternative sold
their collective 24.2% interest in SVLP to Verizon Wireless for
approximately $236,150, resulting in a gain of $201,294. As of December
31, 2000, the Company had a $5,513 receivable from Verizon Wireless,
5. INVESTMENT IN SACRAMENTO-VALLEY LIMITED PARTNERSHIP ("SVLP") (CONTINUED)
which originated prior to the sale. Subsequently, the Company received
$5,100 from Verizon Wireless and anticipates receiving the balance
during 2001.
The following table reflects certain unaudited pro forma consolidated
financial information for each of the two years in the period ended
December 31, 2000 as if the sale of the Company's investment in SVLP had
occurred prior to January 1, 1999. Such unaudited pro forma consolidated
financial information excludes any income that could have been earned or
expenses that could have been avoided based upon management's use of the
proceeds from this transaction.
2000 1999
---- ----
Statement of operations data:
Operating revenues $ 143,316 $ 140,801
Income before extraordinary loss
and cumulative effect of change
in accounting principle $ 14,512 $ 25,685
Net income (loss) $ (53) $ 25,685
Basic earnings per share $ - $ 1.62
Diluted earnings per share $ - $ 1.62
6. LONG TERM DEBT
Long-term debt outstanding as of December 31, 2000 and 1999 consisted of
the following:
2000 1999
---- ----
Unsecured Series A Senior Notes, with interest
payable semiannually at a fixed rate of 6.3%;
principal payments are due in equal annual
installments of approximately $3,636, commencing
in December 2003 and ending in December 2013
$ 40,000 $ 40,000
Unsecured term loan with a bank, with interest
payable quarterly at a fixed rate of 6.22%;
principal payments are due in equal quarterly
installments of approximately $536, through
December 2003
6,428 8,571
-------- --------
Total long-term debt 46,428 48,571
Less current portion 2,143 2,143
-------- --------
Total long-term debt, net of current portion $ 44,285 $ 46,428
======== ========
At December 31, 2000, the aggregate maturity requirements for the years
2001 through 2002 are $2,143 in each year, $5,779 in 2003 and $3,636 in
2004 and 2005.
Certain of the aforementioned credit arrangements contain various
positive and negative covenants with respect to cash flow coverage,
tangible net worth and leverage ratio. These provisions could restrict
the payment of dividends in certain circumstances; however, the entire
6. LONG TERM DEBT (CONTINUED)
amount of retained earnings at December 31, 2000 and 1999 was
unrestricted.
In March 2000, the Company entered into a revolving credit facility for
$30,000 with a term of three years. In September 2000, the bank amended
the credit facility, increasing the borrowing capacity from $30,000 to
$50,000. Prior to the sale of the Company's interest in SVLP on November
3, 2000, the Company had utilized $40,000 of said borrowing capacity. A
portion of the proceeds received from the sale of the Company's interest
in SVLP was used to retire all of the Company's indebtedness under the
credit facility. As of December 31, 2000, the Company had $50,000
available borrowing capacity under the credit facility.
7. INCOME TAXES
Income tax expense consists of the following components:
2000 1999 1998
---- ---- ----
Current expense:
Federal $ 87,013 $ 15,267 $ 13,400
State 22,403 4,513 3,952
--------- --------- ---------
Total current expense 109,416 19,780 17,352
Deferred expense (benefit):
Federal (11,978) 1,526 (271)
State (2,282) (31) (379)
--------- --------- ---------
Total deferred expense (14,260) 1,495 (650)
--------- --------- ---------
Total income tax expense $ 95,156 $ 21,275 $ 16,702
========= ========= =========
Income tax expense differs from that computed by using the statutory
federal tax rate (35% in all years presented) due to the following:
2000 1999 1998
---- ---- ----
Computed at statutory rates $ 82,304 $ 18,559 $ 14,613
Increase (decrease):
State taxes, net of federal benefit 13,079 2,913 2,322
Other, net (227) (197) (233)
-------- -------- --------
Income tax expense $ 95,156 $ 21,275 $ 16,702
======== ======== ========
Effective federal and state tax rate 40.5% 40.1% 40.0%
======== ======== ========
7. INCOME TAXES (CONTINUED)
The significant components of the Company's deferred income tax assets
and liabilities were as follows at December 31, 2000 and 1999:
Deferred Income Taxes
----------------------
2000 1999
---- ----
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
Property, plant and
equipment-primarily due to
depreciation differences $ - $ 18,339 $ - $ 24,801
Differences in the timing of
recognition of revenues 10,778 - 2,403 -
Cellular partnership - - - 6,757
State franchise taxes 6,613 - 1,625 -
Other, net 4,802 3,867 3,745 219
------- -------- -------- --------
Total 22,193 22,206 7,773 31,777
Less current portion 6,613 - 1,625 -
------- -------- -------- --------
Total deferred income taxes $15,580 $ 22,206 $ 6,148 $ 31,777
======= ======== ======== ========
Net long-term deferred
income tax liability $ 6,626 $ 25,629
======== ========
8. PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company sponsors a noncontributory defined benefit pension plan
covering substantially all employees. Benefits are based on years of
service and the employee's average compensation during the five highest
consecutive years of the last ten years of credited service. The
Company's funding policy is to contribute annually an actuarially
determined amount consistent with applicable federal income tax
regulations. Contributions are intended to provide for benefits
attributed to service to date. Plan assets are primarily invested in
collective trust accounts, government and government agency obligations,
publicly traded stocks and bonds and mortgage-related securities.
Net periodic pension cost for 2000, 1999 and 1998 includes the following
components:
8. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
2000 1999 1998
---- ---- ----
Service cost-benefits earned during the
period $ 3,561 $ 3,750 $ 3,248
Interest cost on projected benefit
obligation 5,722 5,298 4,850
Expected return on plan assets (6,418) (5,964) (5,216)
Amortization of transition obligation 154 265 265
-------- -------- --------
Net pension cost $ 3,019 $ 3,349 $ 3,147
======== ======== ========
The following table sets forth the change in benefit obligation, change
in plan assets and funded status as of December 31, 2000 and 1999:
2000 1999
---- ----
Change in benefit obligation:
Benefit obligation at beginning of year $ 73,949 $ 75,813
Service cost 3,561 3,750
Interest cost 5,722 5,298
Plan amendments 123 -
Actuarial losses (gain) 3,178 (8,423)
Benefits paid (2,675) (2,489)
-------- --------
Benefit obligation at end of year $ 83,858 $ 73,949
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year $ 76,723 $ 71,223
Actual return on plan assets 2,799 6,657
Company contribution 1,087 1,332
Benefits paid (2,675) (2,489)
-------- --------
Fair value of plan assets at end of year $ 77,934 $ 76,723
======== ========
Funded status:
Funded status of plan at end of year $ (5,924) $ 2,774
Unrecognized actuarial loss (2,613) (9,520)
Unrecognized prior service cost 101 (24)
Unrecognized net transition obligation 1,375 1,642
-------- --------
Accrued benefit cost $ (7,061) $ (5,128)
======== ========
The discount rates used in determining the projected benefit obligation
at December 31, 2000 and 1999 were 7.25% and 7.5%, respectively. The
assumed rate of increase in future compensation levels used to measure
the projected benefit obligation was 6% at both December 31, 2000 and
1999. The expected long-term rate of return on plan assets used in
determining net pension cost was 8.5% in 2000, 1999 and 1998. A decrease
in the discount rate at December 31, 1999 increased pension cost $330
for 2000.
8. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The Company also maintains two defined contribution retirement plans,
the Employee Stock Ownership Plan ("ESOP") and the Retirement Supplement
Plan ("RSP") which together provide a retirement and savings feature for
substantially all employees. The retirement feature allows for qualified
tax deferred contributions by employees under Section 401(k) of the
Internal Revenue Code (the "Code"). Subject to certain limitations,
one-half of all employee contributions made to the ESOP and RSP are
matched by the Company. Until January 1, 1999, employees made both
retirement and savings contributions to the RSP. However, effective
January 1, 1999, the Company approved an amendment to discontinue the
provisions of the retirement feature of the RSP and approved the
formation of the ESOP for the purposes of qualifying employer and
employee contributions under section 401(k) of the Code. The plan
provisions of the ESOP regarding eligibility, vesting, benefits and
qualifying contributions are substantially the same as the retirement
feature of the RSP. Additionally, the ESOP provides for voting rights as
to the participant's share of the Company's common stock held by the
ESOP and for certain diversification rights of participant's account
balances. Matching contributions made by the Company under the RSP and
ESOP amounted to $1,645, $1,499 and $1,417 in 2000, 1999 and 1998,
respectively. At December 31, 2000, 11% of the Company's outstanding
shares of common stock were held by the RSP and ESOP.
The Company provides certain postretirement benefits other than pensions
to substantially all employees, including life insurance benefits and a
stated reimbursement for Medicare supplemental insurance. The benefit
obligations and annual postretirement benefits costs relating to these
benefits are not significant to the Company's consolidated financial
position and results of operations.
9. COMMITMENTS AND CONTINGENCIES
Operating leases
The Company leases certain facilities and equipment used in its
operations and reflects lease payments as rental expense for the periods
to which they relate. Total rent expense was $1,957, $602 and $496 in
2000, 1999 and 1998, respectively.
As of December 31, 2000 the Company had various non-cancellable leases
with terms greater than one year. The minimum lease payments for the
next five years are as follows:
2001 $1,895
2002 1,727
2003 1,587
2004 787
2005 82
------
Total $6,078
======
Other commitments
As of December 31, 2000, binding commitments for future capital
expenditures approximate $6,292.
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Litigation and regulatory proceedings
The Company is subject to certain legal and regulatory proceedings and
claims arising in the ordinary course of its business. In the opinion of
management, the ultimate outcome of these matters will not materially
affect the consolidated financial position or results of operations of
the Company.
10. EQUITY INCENTIVE PLANS
The Company has adopted two equity incentive plans (the "Plans") for
certain employees, outside directors, and consultants of the Company,
which were approved by the shareholders. The Company authorized for
future issuance under the Plans one million shares of authorized but
unissued common stock. The Plans permit issuance by the Company of
awards in the form of Restricted Shares, Stock Units, Performance
Shares, Options and Stock Appreciation Rights. The exercise price per
share of Company common stock purchasable under any stock option shall
be determined by the Company provided, however, the exercise price under
an incentive stock option shall not be less than 100% of the fair market
value of a share of the Company's common stock on the date of the grant,
and the exercise price under a non-qualified stock option shall not be
less than 85% of the fair market value of the Company's common stock on
the date of the grant.
During 2000, non-qualified stock options to purchase 42,500 shares of
the company's common stock were granted at an exercise price ranging
from $39.25 to $42.00 per share, with vesting periods ranging from one
to seven years. During 2000, incentive stock options to purchase 588,700
shares of the Company's common stock were granted at an exercise price
ranging from $39.00 to $42.00 per share, with vesting periods ranging
from four to five years. The Company issued 12,591 restricted common
shares in 1999 with a value of $30.38 per share and 11,352 restricted
common shares in 2000 with a value of $32.84 per share. All outstanding
restricted common shares have a two year vesting period. At December 31,
2000 there were no exercisable options. The weighted average remaining
life of the options granted in 2000 is 9.5 years as of December 31,
2000.
The Company applies APB No. 25 and related interpretations in accounting
for the Plans. Accordingly, no compensation expense has been recognized
related to stock options. If the Company had elected to recognize
compensation expense based on the fair value of the options as
prescribed by SFAS No. 123, the following results would have occurred
using the Black-Scholes option-pricing model with the following listed
assumptions:
Net income, as reported $125,793
Basic earnings per share, as reported $ 8.06
Diluted earnings per share, as reported $ 8.05
Pro forma net income $125,429
Pro forma basic earnings per share $ 8.04
Pro forma diluted earnings per share $ 8.02
Volatility 0.2%
Dividend yield 2.5%
Risk-free interest rate 6.05%
Expected life in years 5.2
- --------------------------------------------------------------------------------
10. EQUITY INCENTIVE PLANS (CONTINUED)
A summary of the incentive and non-qualified stock option activity
under the Plans is as follows:
Weighted-
average
Shares under Exercise price per exercise price
option share per share
------------- ------------------- -------------
Outstanding at
December 31, 1999 - $ - $ -
Granted 631,200 39.00 - 42.00 39.45
Exercised - - -
Canceled (18,700) 39.00 - 42.00 39.21
------------- ------------------- -------------
Outstanding at
December 31, 2000 612,500 $ 39.00 - 42.00 $ 39.46
============= ==================== =============
11. EARNINGS PER SHARE
The following table depicts the computations of basic and diluted
earnings per share:
Years Ended December 31,
2000 1999 1998
---- ---- ----
Basic earnings per share:
Income before extraordinary loss
and cumulative effect of change
in accounting principle $ 139,998 $ 31,750 $ 25,049
Weighted average common shares
outstanding 15,610 15,815 15,815
Earnings per share income
before extraordinary loss
and cumulative effect of change
in accounting principle $ 8.97 $ 2.01 $ 1.58
Diluted earnings per share:
Income before extraordinary
loss and cumulative effect of
change in accounting principle $ 139,998 $ 31,750 $ 25,049
Effect of dilutive securities:
Weighted average common shares
outstanding 15,610 15,815 15,815
Weighted average unvested
restricted common shares
outstanding 20 7 -
------- ------ ------
15,630 15,822 15,815
Diluted earnings per share
income before extraordinary loss
and cumulative effect of change
in accounting principle $ 8.96 $ 2.01 $ 1.58
Extraordinary loss, net of tax $ (10,932) $ - $ -
11. EARNINGS PER SHARE (CONTINUED)
Cumulative effect of change
in accounting principle,
net of tax $ (3,273) $ - $ -
Extraordinary loss, net of tax,
basic and diluted earnings per share $ (0.70) $ - $ -
Cumulative effect of change
in accounting principle,
net of tax, basic and
diluted earnings per share $ (0.21) $ - $ -
Options to purchase 242,131 weighted average shares of common stock at
an average price of $39.46 per share were outstanding during the year
ended December 31, 2000, but were not included in the computation of
diluted earning per share because the options' exercise price was
greater than the average market price of the common stock for the year;
therefore, their inclusion would be anti-dilutive.
12. STOCK REPURCHASE
In February 2000, the Board of Directors authorized the repurchase of
up to one million shares of the Company's common stock. The shares are
purchased from time to time in the open market or through privately
negotiated transactions subject to overall financial and market
conditions. Through December 31, 2000, 328,944 shares of common stock
have been repurchased. As a result, the Company has authorization from
the Board of Directors to repurchase the remaining 671,056 outstanding
shares.
13. SHAREHOLDER RIGHTS PLAN AND CHANGE IN CONTROL AGREEMENT
The Company has a Shareholder Rights Plan wherein shareholders of the
Company receive rights to purchase the Company's common stock, or an
acquirer's common stock, at a discount in certain events involving an
acquisition of 20% or more of the Company's common stock by any person
or group in a transaction not approved by the Company's Board of
Directors. The rights expire in March 2008.
The Company has change in control agreements with approximately 20
employees, which provide upon (1) a change in control of the Company
and (2) a constructive termination of employment, the payment of a
severance benefit approximately equal to twice the employee's annual
compensation.
14. BUSINESS SEGMENTS
The Company has two reportable business segments: Telecom and PCS. The
Telecom segment primarily provides local, network access and long
distance services, directory advertising services, internet services
and the sale of non-regulated products and services principally to
customers residing in Roseville Telephone's service area. The PCS
segment provides personal communications services and the sale of
related communications equipment. The Company evaluates the performance
of these business segments based on income from operations.
14. BUSINESS SEGMENTS (CONTINUED)
These segments are strategic business units that offer different
products and services. The accounting policies of these segments are
the same as those described in Notes 1-3. The Company accounts for
intersegment sales and transfers at prevailing market rates.
Intersegment sales and transfers between the Telecom and PCS segments
are not significant. The Company's business segment information is as
follows:
2000 Telecom PCS Consolidated
---- -------- --- ------------
Total operating revenues $138,394 $ 4,922 $143,316
Depreciation and amortization 22,747 $ 6,144 28,891
Income from unconsolidated
businesses 10,089 - 10,089
Interest income 2,814 - 2,814
Interest expense (1,629) (2,594) (4,223)
Income tax expense (benefit) 103,282 (8,126) 95,156
Extraordinary loss, net of
tax (10,932) - (10,932)
Cumulative effect of change
in accounting principle,
net of tax (3,273) - (3,273)
Net income (loss) 137,618 (11,825) 125,793
Assets 452,814 76,128 528,942
Capital expenditures 45,973 41,261 87,234
1999 Telecom PCS Consolidated
---- ------- --- ------------
Total operating revenues $140,191 $ 610 $ 140,801
Depreciation and amortization 20,765 1,613 22,378
Income from unconsolidated
businesses 10,129 - 10,129
Interest income 1,725 - 1,725
Interest expense (2,660) (805) (3,465)
Income tax expense (benefit) 23,791 (2,516) 21,275
Net income (loss) 37,927 (6,177) 31,750
Assets 294,782 38,405 333,187
Investments in unconsolidated
business 38,426 - 38,426
Capital expenditures 34,762 23,640 58,402
1998 Telecom PCS Consolidated
---- ------- --- ------------
Total operating revenues $126,662 $ 20 $126,682
Depreciation and amortization 20,680 4 20,684
Income from unconsolidated
businesses 8,904 - 8,904
Interest income 1,282 - 1,282
Interest expense (2,716) (1) (2,717)
Income tax expense (benefit) 17,283 (581) 16,702
Net income (loss) 26,642 (1,593) 25,049
Assets 294,963 20,914 315,877
Investments in unconsolidated
business 35,875 - 35,875
Capital expenditures 23,604 11,605 35,209
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
March 31 March 31 June 30 June 30 September 30 September 30 December 31
2000
Operating revenues $36,997 $36,837 $37,720 $37,535 $39,293 $38,987 $29,957
Income (loss) from
operations 9,464 9,304 9,622 9,437 10,023 9,717 (4,731)
Income before
extraordinary loss
and cumulative
effect of accounting
change 7,770 7,610 7,498 7,313 7,762 7,456 117,619
Extraordinary loss,
net of tax - - - - - - (10,932)
Cumulative effect of
accounting change,
net of tax - (3,273) - - - - -
Net income $ 7,770 $ 4,337 $ 7,498 $ 7,313 $ 7,762 $ 7,456 $106,687
Basic earnings per
share:
Income before
extraordinary loss
and cumulative
effect of
accounting change,
net of tax $ .49 $ .48 $ .48 $ .47 $ .50 $ .48 $ 7.54
Extraordinary loss,
net of tax - - - - - - (.70)
Cumulative effect of
accounting change,
net of tax - (.21) - - - - -
Net income $ .49 $ .27 $ .48 $ .47 $ .50 $ .48 $ 6.84
Diluted earnings per
share:
Income before
extraordinary loss
and cumulative
effect of accounting
change, net of tax $ .49 $ .49 $ .48 $ .47 $ .50 $ .48 $ 7.52
Extraordinary loss,
net of tax - - - - - - (.70)
Cumulative effect of
accounting change,
net of tax - (.21) - - - - -
Net income $ .49 $ .28 $ .48 $ .47 $ .50 $ .48 $ 6.82
1999
Operating revenues $34,980 - $35,000 - $35,358 - $35,463
Income from
operations 11,894 - 12,933 - 9,434 - 8,691
Net income $ 8,254 - $ 9,340 $ 7,595 $ 6,561
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
Basic earnings per
share $ .52 - $ .59 - $ .48 - $ .42
Diluted earnings per
share $ .52 - $ .59 - $ .48 - $ .42
- --------------------------------------------------------------------------------
The Company adopted SAB 101, "Revenue Recognition of Financial Statements,"
effective January 1, 2000, which requires non-recurring revenues associated with
service and activation charges to be deferred. The cumulative effect of this
change in accounting principle was $3,273, net of tax, or ($.21) per share.
For the three-month periods ended March 31, June 30, September 30 and December
31, 2000, the Company recognized the following revenues that were included in
the cumulative effect adjustment as of January 1, 2000:
Three Months Ended
March 31, 2000 $652
June 30, 2000 $620
September 30, 2000 $578
December 31, 2000 $530
The net effect of these revenues was to increase net income in the three-month
periods ended March 31, June 30, September 30 and December 31, 2000 by $388,
$369, $344 and $316, respectively.
16. Related Party Transactions
An officer of the Company is also a member of the Board of Directors of a local
banking institution. As of December 31, 2000 the Company had a $15,000
certificate of deposit with a term of greater than one year with the
aforementioned banking institution.
A member of the Company's Board of Directors is also an executive officer and
director of a certain entity from which the Company purchased approximately
$1,000 in telecommunications equipment during 2000.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant
For information regarding the executive officers of the Company, see "Executive
Officers of the Registrant" at the end of Part I of this report. Other
information required by this item is incorporated herein by reference from the
proxy statement for the annual meeting of the Company's shareholders to be held
on May 18, 2001.
Item 11. Executive Compensation.
Incorporated herein by reference from the proxy statement for the annual meeting
of the Company's shareholders to be held on May 18, 2001.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated herein by reference from the proxy statement for the annual meeting
of the Company's shareholders to be held on May 18, 2001.
Item 13. Certain Relationships and Related Transactions.
Incorporated herein by reference from the proxy statement for the annual meeting
of the Company's shareholders to be held on May 18, 2001.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1 and 2. Financial Statements
None
3. Exhibits
The exhibits listed on the accompanying
Index to Exhibits are filed as part of this
annual report.
(b) Reports on Form 8-K
During the fourth quarter of 2000, Roseville
Communications Company filed current reports
on Form 8-K relating to the following
events:
October 20, 2000 - The Company filed a Form
8-K reporting the purchase agreement to sell
its 24.167% interest in Sacramento-Valley
Limited Partnership, a California limited
partnership, to AirTouch Cellular, D.B.A.
Verizon Wireless.
November 6, 2000 - The Company filed a Form
8-K announcing the completion of the sale of
its 24.2% limited partnership interest in
Sacramento-Valley Limited Partnership.
(c) Separate Financial Statements of
Subsidiaries Not Consolidated and Fifty
Percent or Less Owned Persons
The unaudited 2000 financial statements of a
50% or less owned unconsolidated company are
submitted in as much as the registrant's
equity in the income before income taxes of
such company exceeds 20% of the total
consolidated income before income taxes of
the registrant for the year ended December
31, 1998.
(d) Separate financial statement of
subsidiaries not consolidated and fifty
percent or less owned.
The audited financial statements of a 50% or
less owned unconsolidated company are
submitted inasmuch as the registrant's
equity in the income before income taxes of
such company exceeds 20% of the total
consolidated income before income taxes of
the registrant for the year ended December
31, 1998, and because the report of
registrant's independent auditors indicates
reliance on audits of the 50% or less owned
unconsolidated company's consolidated
financial statements for each of the two
years in the period ended December 31, 1999
that were performed by other auditors.
SACRAMENTO-VALLEY LIMITED PARTNERSHIP
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
(In thousands)
ASSETS
CURRENT ASSETS:
Cash $ 9
Accounts receivable, net of allowance for doubtful
accounts of $1,080 25,668
Due from general partner 9,288
Other current assets 550
----------
Total current assets 35,515
PROPERTY, PLANT AND EQUIPMENT, Net 173,934
OTHER ASSETS, net of accumulated amortization of $3,050 10,475
----------
TOTAL ASSETS $ 219,924
==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 16,806
Deferred revenue 5,794
Distributions payable 21,161
Other current liabilities 1,448
-----------
Total current liabilities 45,209
-----------
DEFERRED REVENUE 46,355
-----------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 77
-----------
PARTNERS' CAPITAL:
General partner 127,030
Limited partners 1,253
-----------
Total partners' capital 128,283
-----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 219,924
===========
See notes to consolidated financial statements.
SACRAMENTO-VALLEY LIMITED PARTNERSHIP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2000
(In thousands)
OPERATING REVENUE $ 227,333
-----------
OPERATING EXPENSES:
Cost of revenues 65,089
Selling, general and administrative 93,853
Depreciation and amortization 25,296
-----------
Total operating expenses 184,238
-----------
OPERATING INCOME 43,095
INTEREST INCOME ON AMOUNTS DUE
FROM GENERAL PARTNER 1,202
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARY (34)
------------
-----------
NET INCOME $ 44,263
===========
ALLOCATION OF NET INCOME:
General partner $ 23,935
Limited partners 20,328
-----------
TOTAL $ 44,263
===========
See notes to consolidated financial statements
SACRAMENTO-VALLEY LIMITED PARTNERSHIP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 2000
(in thousands)
Partners' Partners'
Capital Capital
December 31, Net Sale of December 31,
1999 Contributions Distributions Income Interest 2000
General Partners:
AirTouch Cellular $ 88,896 $ 1,746 $ (49,216) $ 23,935 $ 61,669 $ 127,030
Limited Partners:
Centennial Cellular
Telephone Company
of Sacramento Valley
38,760 3,901 (23,034) 9,685 (29,312)
Roseville Telephone
Company 38,760 3,901 (23,160) 9,537 (29,038)
Evans Cellular, Inc. 3,634 365 (1,354) 674 (3,319)
GTE Wireless Inc. 1,618 162 (959) 432 - 1,253
----------- ---------- ----------- -------- ---------- --------
Total $ 171,668 $ 10,075 $ (97,723) $ 44,263 $ - $ 128,283
=========== ========== =========== ========= =========== =========
See notes to consolidated financial statements
SACRAMENTO-VALLEY LIMITED PARTNERSHIP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 44,263
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 25,296
Minority interest in net income of consolidated subsidiary 34
Changes in assets and liabilities:
Accounts receivable, net (1,144)
Other current assets 2,592
Other assets 200
Accounts payable and accrued expenses (11,366)
Deferred revenue (3,157)
Other current liabilities 216
----------
----------
Cash flows provided by operating activities 56,934
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (48,233)
Change in due from general partner 7,269
----------
----------
Cash flows used in investing activities (40,964)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from partners 10,075
Distributions to partners (76,562)
Distributions to minority interest in consolidated subsidiary (158)
Proceeds from sublease of towers 50,667
=========
Cash flows used in financing activities (15,978)
---------
NET CHANGE IN CASH (8)
CASH, Beginning of year 17
---------
---------
CASH, End of year $ 9
=========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Distributions not paid as of December 31, 2000 $21,161
=========
See notes to consolidated financial statements
Sacramento-Valley Limited Partnership
and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000
(In thousands)
1........SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Sacramento-Valley Limited Partnership (the "Partnership")
was formed on April 2, 1984. The principal activity of the Partnership
is providing cellular service in the Northern California area. The
Partnership's ownership percentages at December 31, 2000 are as follows:
AirTouch Cellular, wholly-owned by a subsidiary of Verizon Wireless -
General Partner 99.022%
GTE Wireless, Inc. - Limited Partner 0.978%
On April 3, 2000, Vodafone Group Plc ("Vodaphone") (formerly the parent
of the General Partner) and Verizon Communications combined their U.S.
Cellular, PCS, and paging business ("Vodaphone Acquisition"). This
venture, Cellco ("Verizon Wireless") offers nationwide wireless
services. Verizon Communications and Vodafone own 55% and 45%,
respectively, of Verizon Wireless.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Redding MSA Limited Partnership ("RMLP") and the Partnership. The
Partnership owns a 97.1% interest in RMLP. All significant intercompany
transactions have been eliminated.
Trade Receivables
The Partnership generally does not require collateral. Receivables
generally are due within 30 days.
Revenue Recognition
The Partnership earns revenue by providing access to the cellular
network (access revenue), for usage of the cellular network
(airtime/usage revenue), which includes roaming and cellular long
distance revenue. Access revenue is billed one month in advance and is
recognized when earned; the unearned portion is included in accrued
liabilities. Airtime/usage revenue, roaming revenue and long distance
revenue are recognized when the service is rendered and included in
accounts receivable. Equipment sales revenue is recognized when the
equipment is delivered to and accepted by the customer. The
Partnership's revenue recognition policies are in accordance with the
Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No.
101, "Revenue Recognition in Financial Statements."
Depreciation
Depreciation of property and equipment is provided on the straight-line
method over estimated useful lives as follows:
Years
Buildings and leasehold improvements 5 - 18
Cellular plant and equipment 5 - 10
Other equipment and furniture 2 - 5
Amortization
Other assets includes FCC license cost, which are amortized using the
straight line method over a term not to exceed 40 years.
Long-Lived Assets
Partnership follows the provisions of the Financial Accounting Standards
Board ("FASB") Statement No. 121, Accounting for the Impairment of
"Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present. As December 31,
2000, management believes that there was not any impairment of the
Partnership's long-lived assets.
Income Taxes
No provision for income taxes has been made in the financial statements
of the Partnership. The Partnership has no tax liability since taxable
income or losses are allocated to the partners.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
New Accounting Pronouncements
In June 1998, the FASB issued a Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards requiring all derivative instruments be recorded in the
balance sheet as either an asset or liability measured at its fair
value. The Partnership is not required to adopt SFAS No. 133 until
October 1, 2000. As of September 30, 2000, management believes that
adoption of SFAS No. 133 will not have a material effect on its
financial statements.
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of:
December 31,
2000
Land $ 37
Buildings and leasehold improvements 39,993
Cellular plant and equipment 246,361
Other equipment and furniture 21,392
Construction in progress 23,861
---------
Total 331,644
Less accumulated depreciation 157,710
---------
Property, plant and equipment, net $173,934
=========
Related depreciation expense was $24,975.
In August 1999, Vodafone signed a definitive agreement with American
Tower Corporation ("ATC") for the sublease of all unused space on
approximately 2,100 of its communication towers in exchange for $800,000
plus a five-year warrant to purchase 3 million ATC shares at $22 per
share. The transaction is being closed in phases starting in the first
quarter of 2000. In connection with the Vodafone Acquisition, the
agreement was assumed by Verizon Wireless. The terms of the agreement
differ for lease communication towers versus those owned and ranges from
20 to 99 years. Verizon will be required to pay ATC a monthly
maintenance fee of approximately $1.5 per tower for the existing
physical space used by their cellular equipment. Up to approximately one
hundred fifty (150) towers owned and operated by the Partnership and
subsidiary are included in the above transaction. As of December 31,
2000, 133 towers owned and operated by the Partnership have been
subleased. The Partnership has received approximately $50,667 which has
been recorded as deferred revenue and is being amortized on the
straight-line method over the term of the agreement.
2. COMMITMENTS
Lease Commitments
The Partnership leases various facilities and equipment under
noncancellable lease arrangements. Most leases contain renewal options
for varying periods. Related rent expense under all operating leases was
$5,413.
Future minimum lease payments required under noncancellable operating
leases with an initial term of one year or more at December 31, 2000
were:
2001 $ 6,157
2002 5,780
2003 5,514
2004 5,129
2005 4,854
Thereafter 29,278
--------
Total minimum lease payments $ 56,712
========
3. DUE FROM GENERAL PARTNER
Under the terms of a management agreement, cash receipts and disbursements
are processed on behalf of the Partnership through the General Partner's
cash accounts. As a result, the Partnership maintains a due to/from
account with the General Partner which reflects the net cash activity
related to the Partnership's operations.
The Partnership pays/earns interest on amounts due to/from the General
Partner at a rate equal to the General Partner's average borrowing rate
(6.5% at December 31, 2000). There were no advances from the General
Partner outstanding at the year ended December 31, 2000; accordingly,
there was no related interest expense. Interest income from the General
Partner was $1,202 for the year ended December 31, 2000.
5. RELATED PARTY TRANSACTIONS
Certain services are performed on behalf of the Partnership by the General
Partner under the management agreement. These services include legal and
accounting, engineering and marketing, general and administrative, and
property and equipment acquisition. The Partnership is charged for these
services at the General Partner's cost. The financial statements include
expenses of $18,720, pursuant to the management agreement.
6. VALUATION AND QUALIFYING ACCOUNT
Balance Additions Write-Offs Balance
Beginning Charged to Net of at End
of the Year Operations Recoveries of the Year
Accounts receivable allowance $ 2,159 $ 2,549 $(3,628) $ 1,080
INDEPENDENT AUDITORS' REPORT
To the Partners of Sacramento-Valley Limited Partnership and subsidiary:
We have audited the accompanying consolidated balance sheet of Sacramento-Valley
Limited Partnership (the "Partnership") and subsidiary as of December 31, 1999,
and the related consolidated statements of income, changes in partners' capital,
and cash flows and the financial statement Schedule I - valuation and qualifying
account for the year then ended. These financial statements and the financial
statement schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedule 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 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. 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 audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Partnership and subsidiary as
of December 31, 1999, and the results of their operations and their cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 8, 2000
Report of Independent Accountants
To the Partners of Sacramento-Valley Limited Partnership
In our opinion, the accompanying consolidated balance sheet as of December 31,
1998 and the related consolidated statements of income, partners' capital and
cash flows and the financial statement schedule II - valuation and qualifying
account for each of the two years in the period ended December 31, 1998 present
fairly, in all material respects, the financial position, results of operations
and cash flows of Sacramento-Valley Limited Partnership and its subsidiary at
December 31, 1998 and for each of the two years in the period ended December 31,
1998, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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
audits provide a reasonable basis for the opinion expressed above. We have not
audited the consolidated financial statements of Sacramento-Valley Limited
Partnership for any period subsequent to December 31, 1998.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
March 1, 1999
SACRAMENTO-VALLEY LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(In thousands)
ASSETS 1999 1998
---- ----
CURRENT ASSETS:
Cash $ 17 $ 36
Accounts receivable, net of allowance for doubtful
accounts of $2,159 and $1,823, respectively 24,524 21,658
Due from general partner 12,383 7,362
Inventories 4,174 9,361
Other current assets 3,142 1,147
-------- --------
Total current assets 44,240 39,564
PROPERTY, PLANT AND EQUIPMENT, Net 150,774 141,109
FCC LICENSES, Net 9,886 10,204
OTHER NONCURRENT ASSETS 1,012 1,091
-------- --------
TOTAL ASSETS $205,912 $191,968
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable, trade $ 21,364 $ 28,228
Deferred revenue 4,639 3,307
Accrued commissions 2,356 3,109
Accrued employee benefits 2,550 1,988
Accrued taxes 1,902 2,289
Other current liabilities 1,232 1,159
-------- --------
Total current liabilities 34,043 40,080
-------- --------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 201 178
-------- --------
PARTNERS' CAPITAL:
General partner 88,896 75,663
Limited partners 82,772 76,047
-------- --------
Total partners' capital 171,668 151,710
-------- --------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $205,912 $191,968
======== ========
See notes to consolidated financial
statements.
SACRAMENTO-VALLEY LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999 1998 AND 1997
(In thousands)
1999 1998 1997
---- ---- ----
OPERATING REVENUE $215,105 $195,624 $173,616
-------- -------- --------
OPERATING EXPENSES:
Cost of revenues 56,684 47,801 35,385
Selling, general and administrative:
General partner and affiliates 15,681 10,371 8,162
Other 73,769 75,670 68,265
Depreciation and amortization 25,900 25,522 19,179
-------- -------- --------
Total operating expenses 172,034 159,364 130,991
-------- -------- --------
OPERATING INCOME 43,071 36,260 42,625
OTHER INCOME 2,136 - -
INTEREST INCOME ON AMOUNTS DUE
FROM GENERAL PARTNER 600 615 371
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARY (109) (80) (53)
-------- -------- --------
NET INCOME $ 45,698 $ 36,795 $ 42,943
======== ======== ========
ALLOCATION OF NET INCOME:
General partner $ 22,793 $ 18,352 $ 21,418
Limited partners 22,905 18,443 21,525
-------- -------- --------
TOTAL $ 45,698 $ 36,795 $ 42,943
======== ======== ========
See notes to consolidated financial
statements.
SACRAMENTO-VALLEY LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
General
Partner Limited Partners
-------- --------------------------------------------
Centennial
Cellular
Telephone
Company of Roseville Evans GTE
AirTouch Sacramento Telephone Cellular Wireless
Cellular Valley Company Inc. Inc. Total
-------- --------- --------- -------- -------- -----
Partners' capital,
December 31, 1996 $55,560 $26,150 $26,150 $2,450 $1,093 $111,403
Contributions 5,343 2,514 2,514 236 105 10,712
Distributions (12,130) (5,709) (5,709) (535) (238) (24,321)
Net income 21,418 10,080 10,080 945 420 42,943
------- ------- ------- ------ ------ --------
Partners' capital,
December 31, 1997 70,191 33,035 33,035 3,096 1,380 140,737
Contributions 1,489 701 701 66 29 2,986
Distributions (14,369) (6,761) (6,761) (635) (282) (28,808)
Net income 18,352 8,636 8,636 811 360 36,795
------- ------- ------- ------ ------ --------
Partners' capital,
December 31, 1998 75,663 35,611 35,611 3,338 1,487 151,710
Contributions 6,542 3,079 3,079 288 128 13,116
Distributions (16,102) (7,577) (7,577) (710) (316) (32,282)
Contributions
due from limited
partners - (3,079) (3,079) (288) (128) (6,574)
Net income 22,793 10,726 10,726 1,006 447 45,698
------- ------- ------- ------ ------ --------
Partners' capital,
December 31, 1999 $88,896 $38,760 $38,760 $3,634 $1,618 $171,668
======= ======= ======= ====== ====== ========
See notes to consolidated financial
statements.
SACRAMENTO-VALLEY LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 45,698 $ 36,795 $ 42,943
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 25,900 25,522 19,179
Minority interest in net income of
consolidated subsidiary 109 80 53
Loss on sale of equipment 171 975 113
Changes in assets and liabilities:
Accounts receivable, net (2,866) 2,546 (611)
Inventories 5,187 (498) (5,619)
Other current assets (1,995) 1,694 (886)
Other noncurrent assets 79 (135) (104)
Accounts payable, trade (4,413) (4,584) 3,294
Deferred revenue 1,332 373 1,070
Accrued commissions (753) (156) (630)
Accrued employee benefits 562 (666) 65
Accrued taxes (387) (3,919) 4,461
Other current liabilities 73 103 (4)
-------- -------- --------
Cash flows provided by operating activities 68,697 58,130 63,324
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (31,430) (41,245) (38,665)
Proceeds from sale of equipment 103 104 83
Change in due from general partner (5,021) 8,908 (11,097)
-------- -------- --------
Cash flows used in investing activities (36,348) (32,233) (49,679)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from partners - 2,986 10,712
Distributions to partners (32,282) (28,808) (24,321)
Distributions to minority interest in
consolidated subsidiary (86) (57) (34)
-------- -------- --------
Cash flows used in financing activities (32,368) (25,879) (13,643)
-------- -------- --------
NET CHANGE IN CASH (19) 18 2
CASH, Beginning of year 36 18 16
-------- -------- --------
CASH, End of year $ 17 $ 36 $ 18
======== ======== ========
See notes to consolidated financial
statements.
SACRAMENTO-VALLEY LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS -
Acquisition of property, plant and equipment included
in accounts payable, trade at year-end $ 5,495 $ 7,946 $ 15,147
======== ======== ========
Contribution of property, plant and equipment by
the General Partner $ 6,542 $ - $ -
======== ======== ========
See notes to consolidated financial
statements.
Sacramento-Valley Limited Partnership and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
1.DESCRIPTION OF PARTNERSHIP AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Sacramento-Valley Limited Partnership (the "Partnership") was formed on
April 2, 1984 under the laws of the State of California and provides
wireless telecommunications services in the Northern California and
Northern Nevada areas. The Partnership's ownership interests are as
follows:
General Partner:
AirTouch Cellular, wholly-owned by a subsidiary of
Vodafone AirTouch Plc. ("Vodafone AirTouch") 49.878%
Limited Partners:
Centennial Cellular Telephone Company of Sacramento Valley 23.472%
Roseville Telephone Company 23.472%
Evans Cellular Inc. 2.200%
GTE Wireless, Inc. 0.978%
Profits and losses are allocated based on respective partnership
interests. Capital calls and distributions are made quarterly, at the
discretion of the General Partner.
Financial Statement Presentation
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). Conformity with GAAP requires
the use of estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Redding MSA Limited Partnership ("RMLP") and the Partnership. The
Partnership owns a 97.1% interest in RMLP. All significant intercompany
transactions have been eliminated.
Inventory
Inventory consists of wireless communications equipment (primarily
handsets). Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out or average method. Any losses
on the sales of handsets to customers are recognized at the time of
sale.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful life
of the asset. Land is not depreciated. Gains and losses on disposals are
included in income at amounts equal to the difference between the net
book value of the disposed assets and the proceeds received upon
disposal. Expenditures for replacements and improvements are
capitalized, while expenditures for maintenance and repairs are charged
against earnings as incurred. Assets under construction are not
depreciated until placed into service.
FCC Licenses
The Federal Communications Commission ("FCC") issues cellular licenses
that enable U.S. cellular carriers to provide service in specific
Cellular Geographic Service Areas. A cellular license is issued
conditionally for ten years. Historically, the FCC has routinely granted
license renewals providing the licensees have complied with applicable
rules, policies, and the Communications Act of 1934, as amended. The
Partnership records FCC licenses at cost and believes it has complied
and intends to continue to comply with applicable standards. The
Partnership amortizes the FCC licenses using the straight-line method
over 40 years. Accumulated amortization of FCC licenses totaled $2,827
and $2,509 at December 31, 1999 and 1998, respectively. Related
amortization expense was $318, $318 and $321 in 1999, 1998 and 1997,
respectively.
Valuation of Long-Lived Assets
The Partnership periodically reviews the carrying value of long-lived
assets and certain identifiable intangible assets, including FCC
licenses, for impairment when events or changes in circumstances
indicate that the book value of an asset may not be recoverable. An
impairment loss is recognized whenever the review demonstrates that the
book value of a long-lived asset is not recoverable.
Revenue Recognition
Operating revenues primarily consist of billings to customers for
monthly access charges, cellular airtime usage, prepaid airtime usage,
long distance and roamer charges. Revenues are recognized as services
are provided.
Unbilled revenues, resulting from cellular service provided from the
billing cycle date to the end of each period and from other cellular
carriers' customers using the Partnership's cellular systems for the
last half of each period, are estimated and recorded as receivables.
Unearned monthly access charges relating to periods after period end are
deferred.
Concentration of Credit Risk
Due to the diversity and large number of customers within the
Partnership's service area, concentrations of credit risk with respect
to trade receivables are limited. The Partnership performs ongoing
credit evaluations of its customers and in certain circumstances obtains
refundable deposits. The Partnership maintains reserves for potential
credit losses and, historically, such losses have been within
management's expectations.
Income Taxes
No provisions have been made for federal or state income taxes since
such taxes, if any, are the responsibility of the individual partners.
Advertising Costs
The Partnership expenses advertising costs as incurred. Advertising
expense was $10,269, $9,484 and $9,652 in 1999, 1998 and 1997,
respectively.
Reclassifications
Certain reclassifications of the 1998 financial statements have been made
to conform to the 1999 presentation. The reclassifications have not
affected previously reported net income or Partners' capital.
2.PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of:
Depreciable December 31,
Lives (Years) 1999 1998
Land $ 37 $ 37
Buildings and leasehold improvements 5-18 36,205 33,322
Cellular plant and equipment 5-10 204,103 183,215
Other equipment and furniture 2-5 20,417 22,356
Construction in progress 23,160 15,885
-------- --------
Total 283,922 254,815
Less accumulated depreciation 133,148 113,706
-------- --------
Property, plant and equipment, net $150,774 $141,109
======== ========
Related depreciation expense was $25,582, $25,204 and
$18,858 in 1999, 1998 and 1997, respectively.
3.COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Partnership leases various facilities and equipment under
noncancellable lease arrangements. Most leases contain renewal options
for varying periods. Related rent expense under all operating leases was
$4,824, $4,760 and $4,334 in 1999, 1998 and 1997, respectively.
Future minimum lease payments required under noncancellable operating
leases with an initial term of one year or more at December 31, 1999
were:
2000 $ 5,460
2001 4,031
2002 4,640
2003 4,263
2004 4,147
Thereafter 35,987
------
Total minimum lease payments $58,528
=======
Contingencies
In December of 1998, the Partnership was named as a defendant in a class
action lawsuit, Parrish versus AirTouch Cellular. The lawsuit alleges
that the defendant conspired to fix prices of cellular services across
California, and seeks damages up to $100,000. The Partnership intends to
defend itself vigorously. While the outcome is uncertain, management
does not believe that this proceeding will have a material adverse
effect on the Partnership's financial position or results of operations.
The Partnership is also involved in a lawsuit with Roseville Telephone
Company, a limited partner in the Partnership. The lawsuit is based on
allegations of misconduct relative to the Partnership Agreement. The
lawsuit also seeks the right for Roseville to operate its PCS licenses
within certain markets in which the Partnership operates. The
Partnership intends to defend itself vigorously and does not believe
that these proceedings will have a material adverse effect on the
Partnership's financial position or results of operations.
The Partnership is subject to state regulation of the "terms and
conditions" of cellular service other than rates and market entry and is
party to various legal proceedings in the ordinary course of business.
Although the ultimate resolution of these proceedings cannot be
ascertained, management does not believe they will have a materially
adverse effect on the financial position or results of operations of the
Partnership.
4.RELATED PARTY TRANSACTIONS
The General Partner is reimbursed for all Partnership expenditures made
as General Partner. As provided in the Partnership agreement, certain
system operations and selling, general and administrative expenses
incurred by the General Partner on behalf of the Partnership are passed
through to the Partnership.
The Partnership participates in a centralized cash management
arrangement with the General Partner. The General Partner pays or
charges the Partnership monthly interest, computed using the General
Partner's average borrowing rate (5.09% and 5.63% at December 31, 1999
and 1998, respectively) on the amounts due to or from the Partnership.
In December 1999, the General Partner contributed network equipment with
an appraised fair market value of $6,542 to the Partnership. As a
result, the General Partner issued a capital call that required the
Limited Partners to contribute cash of $6,574, to maintain their
respective ownership percentages. As of December 31, 1999, the
contributions had not been received. These amounts were recorded as
contributions in the period, with the related receivable amounts being
shown as a reduction in Partners' Capital. All requested contributions
were received by March 16, 2000.
4. MCI COMMUNICATIONS SETTLEMENT
In December 1999, the Partnership settled all outstanding litigation
with MCI Communications pertaining to a contract breach regarding retail
kiosks. As a result of this settlement, the Partnership was awarded
$2,136, that was recorded as other income in the financial statements.
The cash payment was received in January 2000.
5. MAJOR SUPPLIER
The Partnership purchases substantially all of its network equipment
from one supplier.
6. SUBSEQUENT EVENTS
In January 2000, Vodafone AirTouch entered in to a tower sublease
agreement ("the Agreement") with American Tower Corporation ("American
Tower"). Concurrent with the original sublease agreement, American Tower
also entered a build-to-suit agreement whereby American Tower has an
exclusive right to construct new towers in certain domestic markets to
Vodafone AirTouch's specifications that will be leased to Vodafone
AirTouch. The term of the Agreement differs for leased sites versus
sites owned by the company and ranges up to 99 years. Under the
Agreement, Vodafone AirTouch will transfer the right to lease available
space on up to 2,100 cellular towers owned by Vodafone AirTouch in
exchange for a cash payment of approximately $380 per tower. Vodafone
AirTouch will also receive a warrant to purchase 3,000,000 shares of
American Tower Corporation Class A Common Stock (subject to reduction if
fewer than 2,100 towers are subleased). Vodafone AirTouch will be
required to pay American Tower a monthly maintenance fee of
approximately $1.5 per tower for the existing physical space used by
their cellular equipment. Vodafone AirTouch will retain title to the
tower equipment and will have the right of first refusal for leasing
additional space on the tower. Up to approximately one hundred sixty
(160) towers owned and operated by the Partnership and subsidiary are
included in the above transaction. The Partnership is entitled to
payments of approximately $380 per tower subleased to American Tower
under the terms of the Agreement. The Partnership is also entitled to a
proportionate share of the warrants issued. The Agreement is expected to
close in multiple tranches during the year 2000.
In September 1999, Vodafone AirTouch and Bell Atlantic Corporation
("Bell Atlantic") entered into an Alliance Agreement under which
Vodafone AirTouch would contribute its U.S. wireless interest to the
existing Cellco Partnership ("Cellco"), an existing general partnership
formed by Bell Atlantic, in exchange for a partnership interest in
Cellco, subject to certain regulatory and other approvals. Upon
obtaining such approvals, as applicable, Vodafone Air Touch's interest
in the Partnership and subsidiary will be contributed to Cellco as part
of the Alliance Agreement. The Alliance Agreement is expected to close
in the second quarter of 2000.
SACRAMENTO-VALLEY LIMITED PARTNERSHIP AND SUBSIDIARY
SCHEDULE I - VALUATION AND QUALIFYING ACCOUNT
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
Balance at Charged to Balance
Beginning of Costs and At end
Period Expenses Deductions of Period
------------ ---------- ----------- ----------
YEAR ENDED DECEMBER 31, 1999:
Allowance for doubtful accounts $1,823 $4,286 $(3,950) (a) $2,159
YEAR ENDED DECEMBER 31, 1998:
Allowance for doubtful accounts $1,964 $4,289 $(4,430) (a) $1,823
YEAR ENDED DECEMBER 31, 1997: $1,305 $3,247 $(2,588) (a) $1,964
Allowance for doubtful accounts
(a) Amounts reflect items written off, net of recoveries.
ROSEVILLE COMMUNICATIONS COMPANY
INDEX TO EXHIBITS
(ITEM 14(A) 3)
Exhibit No. Description Method Page
of Filing
----------- ----------- --------- ----
3(a) Articles of Incorporation of the Incorporated by -
Company, together with Certificate reference
of Amendment of Articles of Incorporation
dated of Incorporation dated June 21, 1996
(Filed as Exhibit 3(a) to Form 10-Q
Quarterly Report for the quarter
ended September 30, 1996)
3(b) Bylaws of the Company Filed Herewith 84
4(a) Shareholder Rights Plan(Filed as Exhibit Incorporated by -
2.1 to Form 8-A Registration Statement reference
under the Securities Act of 1934)
10(a) Sacramento-Valley Limited Partnership Incorporated by -
Agreement, dated April 4, 1984 (Filed reference
as Exhibit I to Form 10-Q Quarterly Report
of Roseville Telephone Company for the
quarter ended March 31, 1984)
10(b) Credit Agreement of Roseville Telephone Incorporated by -
Company with Bank of America National reference
Trust and Savings Association, dated
March 27, 1992, with respect to $25,000,000
term loan. (Filed as Exhibit 10(a) to
Form 10-Q Quarterly Report of Roseville
Telephone Company for the quarter
ended March 31, 1992)
10(c) Note Purchase Agreement for Series A Incorporated by -
Senior Notes in the aggregate amount reference
of $40,000,000 dated December 9, 1998
(Filed as Exhibit 10(c) to Form 10-K
Annual Report of Roseville Communications
Company for the year ended
December 31, 1998)
10(d) Operating Agreement of West Coast Incorporated by -
PCS LLC (Filed as Exhibit 10(d) reference
to Form 10-K Annual Report of Roseville
Communications Company for the year
ended December 31, 1997)
10(e) 1999 Restricted Stock Bonus Plan Incorporated by -
(Filed as Exhibit 10(e) to Form 10-K reference
Annual Report of Roseville Communications
Company for the year ended
December 31, 1998)
10(f) 2000 Equity Incentive Plan (Filed as Incorporated by -
Exhibit 10(f) to Form 10-K Annual reference
Report of Roseville Communications
Company for the year ended
December 31, 1999)
10(g) Purchase Purchase agreement for Incorporated by -
sale of Sacramento-Valley Limited reference
Partnership, dated October 6, 2000
(Filed as Exhibit 2.1 to Form 8-K
Report of Roseville Communications
Company)
10 (h) Letter agreement dated January 16, 2001 Filed herewith 107
between Roseville Communications Company
and Brian H. Strom
10 (i) Letter agreement dated January 16, 2001 Filed herewith 114
between Roseville Communications Company
and Michael D. Campbell
10 (j) Letter agreement dated January 16, 2001 Filed herewith 121
between Roseville Communications Company
and Jay B. Kinder
10 (k) Letter agreement dated January 16, 2001 Filed herewith 128
between Roseville Communications Company
and Phillip D. Germond
10 (l) Letter agreement dated January 16, 2001 Filed herewith 135
between Roseville Communications Company
and Robert M. Burger
21(a) List of subsidiaries (Filed as Exhibit 21 Incorporated by -
(a) to form 10-Q reference
Quarterly Report of Roseville
Communications Company for reference
the quarter ended September 30, 20000)
23.1 Consent of Ernst & Young LLP, Filed herewith 142
Independent Auditors
23.2 Independent Auditors Consent Filed herewith 143
23.3 Consent of Independent Accountants Filed herewith 144
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ROSEVILLE COMMUNICATIONS COMPANY
(Registrant)
Date: March 28, 2001 By: /s/ Brian H. Strom
------------------
Brian H. Strom,
President and Chief
Executive Officer
Date: March 28, 2001 By: /s/Michael D. Campbell
----------------------
Michael D. Campbell,
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: March 28, 2001 /s/ Thomas E. Doyle
-------------------
Thomas E. Doyle,
Chairman of the Board
Date: March 28, 2001 /s/ Brian H. Strom
------------------
Brian H. Strom,
President and Chief
Executive Officer; Director
Date: March 28, 2001 /s/ Michael D. Campbell
-----------------------
Michael D. Campbell,
Executive Vice President
and Chief Financial Officer
Date: March 28, 2001 /s/ Ralph E. Hoeper
-------------------
Ralph E. Hoeper,
Director
Date: March 28, 2001 /s/ John R. Roberts III
-----------------------
John R. Roberts III,
Director
Date: March 28, 2001 /s/ Chris L. Branscum
---------------------
Chris L. Branscum,
Director
Date: March 28, 2001 /s/ Neil J. Doerhoff
--------------------
Neil J. Doerhoff,
Director
Date: March 28, 2001 /s/ Kirk C. Doyle
-----------------
Kirk C. Doyle,
Director
Date: March 28, 2001 /s/ Timothy D. Taron
--------------------
Timothy D. Taron,
Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ROSEVILLE COMMUNICATIONS COMPANY
(Registrant)
Date: March 28, 2001 By:
--------------------------------------
Brian H. Strom,
President and Chief
Executive Officer
Date: March 28, 2001 By:
--------------------------------------
Michael D. Campbell,
Executive Vice President
and Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: March 28, 2001
--------------------------------------
Thomas E. Doyle,
Chairman of the Board
Date: March 28, 2001
--------------------------------------
Brian H. Strom,
President and Chief
Executive Officer; Director
Date: March 28, 2001
--------------------------------------
Michael D. Campbell,
Executive Vice President
and Chief Financial Officer
Date: March 28, 2001
--------------------------------------
Ralph E. Hoeper,
Director
Date: March 28, 2001
--------------------------------------
John R. Roberts III,
Director
Date: March 28, 2001
--------------------------------------
Chris L. Branscum,
Director
Date: March 28, 2001
--------------------------------------
Neil J. Doerhoff,
Director
Date: March 28, 2001
--------------------------------------
Kirk C. Doyle,
Director
Date: March 28, 2001
--------------------------------------
Timothy D. Taron,
Director