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Home My WebLink About2014Annual Report.pdfANNUAL REPORT TO THE IDAHO PUBLIC UTILITIES COMMISSION FOR THE YEAR ENDED 2014 RuRI OF RURAL TELEPHONE COMPANY NAME 892 W.Madison Ave.Glenns Ferry,ID t—,. Or:’ iJ1 3 83623 ADDRESS ANNUAL REPORT OF SMALL TELEPHONE COMPANIES TO THE IDAHO PUBLIC UTILITIES COMMISSION FOR THE YEAR ENDING December 31,2014 COMPANY INFORMATION Exactnameof utility: Rur@ Address of principal office: 892 W. Telephone Number (Area Code - 208) 366-2614 Cities or towns served: Shoup, Boise River, Tipanuk, Three Creek, Atlanta, Prairie Name and title of officer having custody of the general corporate books of account: James R. Martell, President Address of office where corporate books are kept and phone number: Same as Above Organized under the laws of the State of: ldaho Date of organization: 712711979 Form of organization (proprietorship, association, corporation): Corporation lf a Subchapter S Corporation, please specify: Name and address of controlling company, if any: Martell Enterprises, lnc. 892 W. Madison Ave.. Glenns Ferry, lD 83623 Names of affiliated companies. Give address and description of business: Pend Oreille Telephone Company - Same as Above Nehalem Telecommunications, lnc. - Same as Above OFFICERS Report below the title, name and office address of each general otficer of the utility at the end of the year. lf there were any changes during the year, show the name, title, and address of the previous otficer and the date of change. Title Name President James R. Martell Address Same as Above Vice President MichaelJ. Martell Same as Above Sec./Treasurer Carmela M. Martell Same as Above Rev 3/02 Page 1 DIRECTORS List the name of each person who was a member of the Board of Directors at any given time during the year: (Fees related to meetings only.) Name and Address Term Expired or Current Term WillExpire James R. Martell Non-Term Carmela M. Martell Non-Term MichaelJ. Martell Non-Term Angela Carpenter Andrea Roberts Mark R. Martell Non-Term Matthew Martell Non-Term Name of Chairman of the Board:James R. Martell Meetings Aftended This year Fees Paid During Year 12 $27,600 12 $12,000 12 $16,800 Non-Term 12 $12,000 Non-Term 12 $18.000 12 $12.000 12 $12.000 Name of Secretary (or Clerk) of Board: Number of Meetings of the Board during the year: Carmela M. Martell 12 MANAGERS List the name of each person who performed management duties for the Company during the year, and the total wages and bonuses paid to those persons: (Do not include Director fees in these amounts.) Name James R. Martell Titte President Wages and Bonuses Paid $100,000.08 $60,000.00 $82,450.08 $69.700.08 Carmela M. Martell Sec.ffreasurer MichaelJ. Martell Vice President Mark R. Martell Administrative Manaqer Rev 3/02 Page 2 NOTES TO THE FINANCIAL STATEMENTS Please provide important information such as changes in accounting or depreciation practices, extensions or additions to the system; disposal of any substantial portion of the property of the utility; reorganization, mergers, or consolidations with other companies; leases executed; other contracts or agreements entered into; changes made in articles of incorporation or amendments; the occurrence of contingency losses or gains. *** See Attached Financials *** Rev 3/02 Page 3 BALANCE SHEET Assets and Other Debits Title ot Account Current Assets Cash and Equivalents Cash SpecialCash Deposits Working Cash Advances Temporary lnvestments Telecommunications Accts. Receivable Accts. Rec. Allow. -Telecommunications Other Accounts Receivable Accounts Receivable Allow. - Other Notes Receivable Notes Receivable Allowance lnterest & Dividends Receivable Materialand Supplies Prepayments Prepaid Rents Prepaid Taxes Prepaid lnsurance Prepaid Directory Expenses Other Prepayments Other Current Assets Noncurrent Assets lnvestment in Affiliated Companies lnvestment in Nonaffiliated Companies Nonregulated lnvestments Unamortized Debt lssuance Expense Sinking Funds Other Noncurrent Assets Deferred Maintenance & Retirements Deferred Charges Other Jurisdiction Assets - Net Property, Plant and Equipment Telecommunications Plants in Service Prop. Held for Future Telecom. Use Telecom. Plant under Constr. - Short Term Telecom. Plant under Constr. - Long Term Telecom. Plant Adjustment Nonoperating Plant Goodwill Depreciation and Amortization Accounts Accumulated Depreciated Accum. Depre. - Held for Future Use Accumulated Depreciation - Nonoperating Accumulated Amortization - Tangible Accum. Amort. - Capitalized Leases Accum. Amort. - Leasehold lmprovements Accumulated Amortization - lntangible Accumulated Amortization - Other TOTAL ASSETS BalanceEeginning ot Year 258,837.27 Balance at Endot Year 275,658.05 lncreaseor (Decrease) 16,820.781120 1130 1140 1 150 1 160 1 180 1 181 1 190 1 191 1200 1201 1210 1220 1280 1290 1 300 '1310 1320 1 330 1350 1401 1402 1406 1407 1408 1410 1438 1439 1500 2001 2002 2003 2004 2005 2006 2007 3100 3200 3300 3400 3410 3420 3500 3600 w @ lmE'ffir 544,440.40 1,340.06 -:00- --i7Fdmr 1,365.67 -IE1!-0- -166,23i15I25.61 9,481.00 J-S;BB6,T1- -T;il 8-"s o4-3 1- -Clffi i- 4,687,523.80 4,112,117.32 (575,406.48) @ -T7E0r6s:0r- 7 W -T6,8-ffi0'8- -Tmffi- 26,032,954.64 4,000.00 -34-m78- 27,379,231.02 1,346,276.38 --0oo.oo- -0T6- (398,015.29) (18,231 ,998.73) (19,383,863.44) (1 ,151 ,864.71) 17,809,250.06 16,533,067.00 (1,276,183.06) Rev 3/02 Page 4 BALANCE SHEET Liabilities & Stockholders' Equity Title of Account Current Liabilities 4010 Accounts Payable 4020 Notes Payable 4030 Advance Billings and Payments 4040 Customer Deposits 4050 Current Maturities - Long -Term Debt 4060 Current Maturities - Capital leases 4070 lncome Taxes - Accrued 4080 Other Taxes - Accrued 4100 Net Current Defer. Oper. lncome Taxes 41 10 Net Current Defer. Nonoper. lncome Taxes 4120 Other Accrued Liabilities 4130 Other Current Liabilities Long-Term Debt 4210 Funded Debt 4220 Premium on Long-Term Debt 4230 Discount on Long-Term Debt 4240 Reacquired Debt 4250 Obligations Under Capital Leases 4260 Advances from Affiliated Companies 4270 Other Long-Term Debt Other Liabilities & Deferred Credits 4310 Other Long-Term Liabilities 4320 Unamort. Oper. lnvest. Tax Credits - Net 4330 Unamort. Nonoper. lnvest. Tax Credits - Net 4340 Net Noncurrent Defer. Oper. lncome Taxes 4350 Net Noncur. Defer. Nonoper. lncome Taxes 4360 Other Deferred Credits 4370 Other Juris. Liab. & Def. Credits - Net Stockholders' Equity 4510 CapitalStock 4520 Additional Paid-ln Capital 4530 Treasury Stock 4540 Other Capital 4550 Retained Earnings TOTAL LIAB. & OTHER CREDITS Balance Beginning of Year 694,250.36 8,006.18 42,950.85 7,032.21 812,326.52 0.00 52,425.41 103,836.34 22,870.51 6,129,327.41 133,550.2s 0.00 0.00 0.00 56,900.00 10,197.00 9,735,577.02 17,809,250.06 Balance at End of Year 572,212.53 0.00 43,542.05 15,645.00 33,588.94 1 19,552.19 137,020.04 5,968,415.31 56,900.00 10,197.00 7,399,917.99 16.533.067.00 lncrease or (Decrease) (122,037.83\ (8,006.18) 591.20 15,645.00 (18,836.47) 0.00 0.00 (2,335,659.03) (1,276,183.06) 7.497.21 465.00 668,225.00 (144,101.52\ 15,715.85 114.149.53 (160,912.10) 33,380.74 (100,169.51) 14,937.00 14,937.00 1.245.412.00 1,245,412.00 206,624.00206.624.00 Rev 3/02 Page 5 @lolll.llNI @_l HIdlNl el8lolOr-l(ol Fl c., Ioldilols_lol*l |q$l qlq (o oits6N Eo,E..^ I Ba&e- 9;gp ,gfiEr f; ? 2 g,rEg,EggEEfi gsggg ggE,rgsgg; ggfi' i N (o $ rJ)(O e C! 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N F !: r r G| r r: N CO t @.: Y E !-\ I H tsi.:; i:Fo oi orc\r-#iN(,rcir(\ tirirS;Na\ii\i<idco qqOqr :E N N I N I & F &N N N N N N R &R RR T N N N N N N N R R & E uc(UJ N o66 Ec lqqq sl sl sr* qq ,€ €eEF.gFE' |q rEE.!'e otr&b slpl;l3l to;l oI E'lol0- NC\ld(f,o, ffi o,1o, EI;(,-l (.)- $l(o-l- (r,c!oN doC\l (DotnioC\Id(r)(i) (t(o <"i 'oc,io) .oatEEo EEtE €Eo <d ,rI EooJ E o 9.HE.EE 8 FEo ur(, gl!a =F2 Jo.o2otr (J-D--oaUJ ulFltooor - Fog)or (\to (Y) oG 6lu?lol(olro-l 6.i I El ^lollat r*'lol alclolc!l ql o)ltl6t ul g NI(\il $ldill4r lcDlotlsl'l EIIBI oloFo@(o F crj|f)qNNLt c)q rooLPE;$ E8-t odtsio EEE F !r' EE;G&b ln-lo ls $r(,) $lo)cio(f, ot if eE.E Eb E E;oo- cl(o (o rrin.Bi I E ='9 E E Bb F oF ==o(,o l-z 5Go =otr Iz - =ooIIJJl,uFlrooa J - Fc ryul gE g Bgg,,gEEEEgggSEgEg,rgsgi*gsi, I iii:EF$F$iHHRFfr ;il;EH=+$$$$E5E$EN N N N N N (\I N N N N N N N $I N (\I N N (\I N N N N N (\ 6I N C! c\I C\I oi,.E ot, ;E!o.otro Go.E E EoogoF=rhEo(E.g-o (!: <N (oq c{o)N.t-o)@€t (f, oq N@o) $(or t-t-oit-(f)o$o :l @lcDl -l -tc!l 3l NIu?l|f)l(ol @_l C\I INI@l =l @lostoo)(oN @q r(ot\ ot- |qqq sl s=; $l ^tse sl Eet rlE ?= I (oq o)r-(o- o,|r) @@(oo,a.N(a(a Noo @ o)g)o(L soq (f) @oc,(f, @-t-r so.t z so F-o el @llr)lo!llolol'l sl(olc.lllol>tzl slqlol -lel el <r;lol(ol El sl soooN slr)+r{)o)(o C! @st-(f) (f) @ soooN |qq$l l,ll, |qqq I P-r.= lE .iEg zIF 6utto- lrJooLtJ ok'Hio oEe if ei, O,t - ELYFL =E .3 =a) I IUFEPz UJ llo c2o z o 9r-o.= o .E EEf,'Fbo tr .9-.gooLELoo E'o--gJ EL Joo .=oo L#tr UJ o .!2o.> rEtr Eo s=a I Efiov eEgE gEe; # eEE; F;EE 66EF # i io otr $ g;g E=n?8P =o*rEE e,$E- frE gufiFEsEgfiggfiggggggEE-EgEEft gf, E SP=99NNRN:SPR5$=N568=NN&NRE5$NNNNN&NNNNNNNNN&RR&RNNNNNXNNE -oo\cf,(a <.itr(o .9 .g -e EE CLoo ot-o CD@- @(o o)q $\r(at\ t-N+$$- Irl()s E5oooo Eo(E 0) Lo o) (ULco (u'6 o) o-oo6fE :=E'.c ..2 E8EiFP NIrl s-l @lql d,Ir-l @_l 3l HI E =E86c,E(U.Er(JoEEEaoLoEeo oE oE' o'= 'g '^ q' o6' EE Hp-E' -El o EE €E= '+=;E S;Ep F e EE =E6 EEE6 {HEE . : E E€ I38. gg,gggu=gggggggggEggt,#sgg;gi ; i.-$TO@FNCDIFNTOOec\ITTFFNFFN.DI(OFFN q S E-r FFFFNNNNNN(f)(f)(f)(f)(f)$\ft{-{.{.sl$(o d O<NNC\INNNNNNNNNNNNNNNNNNNNNN(\INNN - E ulNld!l @_lol@lcil;l-l s-l sl$I slI olNIoil(Y)l Il tl|q OL E;ioio seE. P EEEp!* o .st gE oo E EE $IfiB' HI lfli l=l* |H]B lqlNlo,ls_lo lN rSlolclloIElel(Elslo Iu? l(o B||ltll$l|E]l*l*l .9 P- EEg zo 6 IIJtr0-IIJooII ->-El_ o =P t2 =; ::, c, Eo= !Ea= 6<o o =9. o6<9rJt ttrctFzlrllro 92o z uldllc,l sl =l lq|q lr l* l*l* l-loI(olo |q$ INVESTMENTS Report below the investments in Accounts 1401,1402 and 1406. ldentify each investment as to the account in which included. Minor amounts in Account 1406 may be grouped by classes. Description NRTC Patronase - 1410 Date Acquired 2005 Book Cost of !nvestments Disposed of This vear Book Gost of lnvestments Held at End of Year 218.859.08 Svrinqa Networks, LLC - 1406 2001 474,588.01 Solix - 1406 10.000.00 Telespire - 1406 2006 2.500.00 Fairfield lnternet - 1406 2006 3.000.00 Pend Oreille Telephone - 1401 1997 2,354,767.77 Nehalem Telecommunications - 1401 2004 1.757.349.55 Totals 5,821,064.41 RECEIVABLES Itemize amounts show in Accounts 1 1 80, 1 1 90 and 1200. For notes receivable list each note separately and include the maturity date and interest rate. Minor amounts in Account 1210 may be combined. Amount at End ofYearNotes Accounts Name of Companv Customer - 1180 Receivable Receivable 103.920.72 Customer - 1190 31,264.31 Advances - 1350 4,114.26 NECA- 1190 263,073.00 CABS - 1 190 62,348.31 ldaho USF - 1190 25.185.08 Miscellaneous - 1190 106.664.27 Elmore County E911 - 1190 939.55 Totals 597,509.50 Rev 3/02 Page 10 NOTES PAYABLE For Notes Payable, list each note separately and include the maturity date and interest rate. Name of Creditor Date of Note lnterest Rate Due Date Face Amount Totals ACCOUNTS PAYABLE Report below allAccounts Payable amounting to more than $100.00 Name of Greditor Alerus Retirement Solutions Amount 9,129.32 Allison. MacKenzie. Russell 23,810.00 Alpha Technoloqies Ltd.12.489.17 Computer Technoloqy, lnc.15.408.04 Little Valley Elk Ranch Moss Adams LLP 49,309.52 62,570.75 35,600.00NECA Nevada Bell 8.439.94 National Farmers Union 30,392.00 NationalRural 20.328.88 NeoNova Network Services 32,666.18 Pitney Bowes 10,191 .90 Power & Telephone Supply 88.110.27 Telispire PCS Syringa Networks, LLC US Bank 10,313.35 72,954.97 25,120.44 54,090.45Other A/P Totals 559,924.18 c\t oo)o(L 6to (f) ot tN+ @ o)qt- (o soo)a$ oo o,(9 or.c) ro oN oo6t cooJo) ! L(E tr)a:) l(,rod(ot-. soo)r(o @@ F-$t- lr)N q (f)s.o(f) o) oN(\t (f) oNo(\to =o Eo Looeo o)u? t-o)- N soo)o, F- No+@o c\ilr, o) Gi(Y)(o- @!o o, oC! ros soN N (f, (os(o {tEEoLo rc, olJ- @@dNo)- soo)r- dt oqrrt--o(f) 6lq @olo.f(a o) oc! ros soN c\t (f) N(o {*EEG)oroLo1r- t-lo e.i (f)- (f) soo)o) It- ai(9o- @lo $o) o,l() (f) l.c)(o o, oNros soc{ N(9 o)c! (o+t =ooo E'Lolr !tt- o,$o).{" s(olo\N so)+t-(a (")t-N ooo(f,s- @t-N (f) (f,oN \ioc\l (Lo Iaf E. oc! (o c\i s loo(fi toq (f)(o(9 o, ool'-lo(a @c{ c\(f)oN (f) oc{ (L E I U)f E. t-qo@\t- sN(o u? c\t t-@ F*N\ @ (r) oc! N ooT\ o;@ c\l(f)oc\l (L E Iaft @@ oi@o.llo (f, sooq r.o |r,q (f)o rooo)lo ooo@(o.o(f) rys @ o6tI(f) oN loooNIN@o) aftr @(f)zt+ =lN HEI 3 E<rLIol EI+j bl5 9l "'E ='EI Soo-cooooaiNLe 3 EE El = .El tlo6olEf,.>rtE=lgE ElEt r-t=iDd:ul@c3$ A ct Ef $ [* tElNI .- iP (''i.l rt 2 $ EE 5sl = J E EO;.. cL= o; gf; -EEl E: si fiEEl 3g aq "a:Hgol* r-iivEg *-El R t: 8'El E'OEg == $to o,'tsE o 9lS3 Ebslo->-cEo'Eoooo,bE+J.86otr -oEE .E=,rg { EIo o *.gl*e Epl gf = oEl E CAPITAL STOCK Report below the particulars called for concerning common and preferred stock at end of year, designating separate series of any general class. Show totals separately for common and preferred. For each class of preferred stock, show the dividend rate and whether dividends are cumulative or noncumulative. Show details in a footnote of capital stock sold during the year. lnclude number of shares, consideration received, premium or discount, and expenses incurred. Number of Shares Par Value Outstanding per Balance Sheet Glass & Series of Stock Common Stock Authorized 2500 per Share 100.00 Shares Amount 569 56,900.00 Rev 3/02 Page 13 Item INCOME & RETAINED EARNINGS STATEMENT TotalCompany ldaho Only TotalOperating lncome (from page 16) TotalOperating Expenses (from page 18) 7100 Other Operating lncome and Expense 7210 Operating lnvestment Tax Credits-Net 7220 Operating Federal lncome Taxes 7230 Operating State and Local lncome Taxes 7240 Operating Other Taxes 7250 Provision for Deferred Operating lncome Taxes-Net 7200 Operating Taxes (Total) 7310 Dividend lncome 7320 lnterest lncome 7330 lncome from Sinking and Other Funds 7340 Allowance for Funds Used During Construction 7350 Gains/Losses from the Disposition of Certain Property 7360 Other Nonoperating lncome 7370 SpecialCharges7300 Nonoperating lncome and Expense 7410 Nonoperating lnvestment Tax Credits-Net 7420 Nonoperating Federal lncome Taxes 7430 Nonoperating State and Local lncome Taxes 7440 Nonoperating Other Taxes 7450 Provision for Deferred Nonoperating lncome Taxes-Net 7400 Nonoperating Taxes 7510 lntereston Funded Debt 7520 lnterest Expense-Capital Leases 7530 Amortization of Debt lssuance Expense 7540 Other lnterest Deductions7500 lnterest and Related ltems 7610 Extraordinary lncome Credits 7620 Ertraordinary lncome Charges 7630 Current lncome Tax Effect of Extraordinary ltems-Net 7640 Provision for Deferred lncome Tax Effect of Extraordinary ltems-Net7600 Extraordinary ltems 791 0 lncome Effect of Jurisdictional Ratemaking Differences-Net 7990 Nonregulated Net lncome AMOUNT TRANSFERRED TO RETAINED EARNINGS Rev 3/02 5,001,663.28 4,728,881.47 37,075.56 (14,937.00) (53,316.00) (5,037.00) (131,652.34) (1 ,124,513.00) (1,329,455.34) 17,727.02 38.88 67,318.52 (5,700.00) (424,642.14\ (11,250.93) (356,508.65) (11,540.00) (20,794.00) (206,624.00) (238,958.00) (326,705.86) (49,136.38) 1375,842.241 0.00 (20,345.17\ 12,011,252.031 Page 14 3,088,793.60 2,657,658.11 16,313.25 (14,937.00) (66,700.04) (5,037.00) (94,424.06\ (494,785.72) (675,883.82) 7,799.89 17.11 6,175.34 (2,508.00) (186,842.54\ (4,950.41) (180,308.61) (5,077.60) (9,149.36) (90,914.56) (105,141.52) (143,750.58) (21,620.01) (165,370.59) 0.00 (91,464.79) 1770,720.591 OPERATING REVENUES TotalCompany ldaho Only 5081 5082 5083 5084 5100 5280.10 5280.20 5280.30 5280.31 Local Network Services Revenues 5001 Basic Area Revenue 5002 Optional Extended Area Revenue 5003 Cellular Mobile Revenue 5004 Other Mobile Services Revenue 5010 Public Telephone Revenue 5040 Local Private Line Revenue 5050 Customer Premises Revenue 5060 Other Local Exchange Revenue 5069 Other Local Exchange Settlements 378,487.22 11,800.11 390,287.33 168,246.79 3,646,753.56 23,515.26 444,866.62 154.16 4,283,536.39 3,307.00 6,810.00 10,117.00 57.170.04 180,534.00 237,704.04 27.OO 0.90 16,295.91 1,631.07 1,398.21 19,353.09 59,904.16 761.27 60,655.43 5,001,663.28 216,345.60 11,531.53 227,877.13 70,755.66 2,133,183.73 13.481.94 340,920.97 0.00 2,558,342.30 3,307.00 0.00 57.',170.M 27.OO 0.90 0.00 1.631.07 1,658.97 59,904.16 59,904.16 3,088,793.60 Network Access Services Revenues End User Revenue (SLC) Switched Access Revenue (lnterstate) Special Access Revenue State Access Revenue (lntrastate) Long Distance Network Services Revenues Long Distance Message Revenue - All lnternet Services DSL Modem Revenue ldaho DSL Modem Revenue Nevada Other Non-Regulated Revenues Fiber Lease ldaho DWNM Circuit Equipment Lease Miscellaneous Revenues 5230.10 Directory Revenue ldaho 5230.20 Directory Revenue Nevada 5220.10 lntrastate B&C ldaho 5220.20 lntrastate B&C Nevada 5260.10 Misc Revenue ldaho 5260.20 Misc Revenue Nevada Uncollectible Revenues 5300.10 Uncollectible Revenue ldaho 5300.20 Uncollectible Revenue Nevada TOTAL OPERATING REVENUES Please identiff the following revenues: 0.000.00 0.00 NECA USF $1,360,041.00. To what account were they booked? 5081.21 & 5081.22 State USF $ 302,220.96. To what account were they booked? 5084.21 Rev 3/02 Page 15 OPERATING REVENUES TotalCompany ldaho Only Plant Specific Operations Expense 61 10 Network Support Expenses 6112 Motor Vehicle Expense 6113 Aircraft Expense 6114 Special Purpose Vehicles Expense 6115 Garage Work Equipment Expense 6116 Other Work Equipment Expense 6120 General Support Expenses 6121 Land and Building Expenses 6122 Furniture and Artworks Expense 6123 Office Equipment Expense 6124 General Purpose Computers Expense 6210 Central Office Switching Expenses 6211 Analog Electronic Expense 6212 Digital Electronic Expense 621 5 Electro-Mechanical Expense 6220 Operators System Expense 6230 Central Office Transmission Expenses 6231 Radio Systems Expense 6232 Circuit Equipment Expense 6310 lnformation Origination/Termination Expense 6311 Station Apparatus Expense 6341 Large Private Branch Exchange Expense 6351 Public Telephone Terminal Equipment Expense 6362 Other Terminal Equipment Expense 6410 Cable and Wire Facilities Expenses 6411 Pole Expense 6421 Aerial Cable Expense 6422 Underground Cable Expense 6423 Buried Cable Expense 6424 Submarine Cable Expense 6425 Deep Sea Cable Expense 6426 lntrabuilding Network Cable Expense 6431 Aerial Wire Expense 6441 Conduit Systems Expense TOTAL PLANT SPECIFIC OPERATIONS EXPENSE Rev 3/02 22,384.73 11,527 .61 237,306.39 154,322.55 485.898.60 0.00 663,615.92 _L!Zg,05r99_ Page 16 9,849.28 5,072.15 220,811.01 129,062.40 325.332.08 0.00 333,518.85 023.645.77 OPERATING REVENUES TotalCompany ldaho Only Plant Nonspecific Operations Expense 651 0 Other Property/PlanUEquipment Expenses 651'1 Property Held for Future Telecomm. Use Expenses 6512 Provisioning Expense 6530 Network Operations Expense 6531 Power Expense 6532 Network Administration Expense 6533 Testing Expense 6534 Plant Operations Administration Expense 6535 Engineering Expense 6540 Access Expense 6560 Depreciation and Amortization Expenses 6561 Depreciation Expense-Telecom. Plant in Service 6562 Depreciation Expense-Propefi Held for Future Use 6563 Amortization Expense - Tangible 6564 Amortization Expense - lntangible 6565 Amortization Expense - Other Total Plant Nonspecific Operations Expenses Customer Operations Expense 6610 Marketing 6611 Product Management 6612 Sales 661 3 Product Advertising 6620 Services 6621 Call Completion Services 6622 Number Services 6623 Customer Services Total Customer Operations Expense Gorporate Operations Expense 6710 Executive and Planning 6711 Executive 6712 Planning 6720 General and Administrative 6721 Accounting and Finance 67 22 Externa I Relatio n s 6723 Human Resources 67 24 lnformation Management 6725 Legal 6726 Procurement 6727 Research and Development 6728 Other General and Administrative 6790 Provision for Uncollectible Notes Receivable Total Corporate Operations Expense TOTAL OPERATING EXPENSES Rev 3/02 3,247.06 66.734.13 102.160.75 184,027.22 56,020.95 1.164.982.85 1,577,172.96 124,691.60 138,994.13 263,685.73 292,104.92 789,507.57 170.475.97 60,878.52 1,312,966.98 3,153,825.67 Page 17 1.428.71 36,470.02 53,692.17 92,827.11 24,649.22 744.115.59 953,182.82 54,864.30 77.706.63 132,570.93 128.526.16 347.383.33 60,542.39 11,806.71 548,258.59 1,634,012.34 i- 8fr 8fiE - 8,6 @ oo)(U(L .o i,(l) ,9,coz LoEo-c.9 -ofo-coz E= =aL..ooc.ED: 'EL .12,< a9.eE OEoz N lON EEE:r PPI oEI -OI I aAI I (E'Ell or8 l': r= -cttq : a':'O E a6u ,OYAtLtiYOagEE EEE=: PTtE€e ;EEuoor g-oEtEE EE= s'O-- *E6 a833 S:E p oo)>9e(.)ooJj=,i \UY'cO-v =8EGPEEed)ZAuJ N (f) c\tro Nrr) rBxots.E ro+i(/,rJ-a6 1,.-l=ts el= I tq F- =l-ml ,-b = gF * =J-i xAME< E2 ri)(L.a EE (o c,:, stos e q EEl;; P E 5 ol E.E P P 6.EI5E E b P el Es F E Etil e5 .e I o- EIEE = E E(lO= r O O (5 .oc(s arxfitr o:o'E fl{99u EEEEorrJruO t,o .E .9E .Eoo o'EFO<Ed6 uJ(ao0i-giiE63JISEFN 2-lIJ A:'eb .ClE oooo oo(! 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GUSTOi'IER RELATIONS RULES COMPLIANCE Rule IDAPA 31.21.01.603 Rule IDAPA 31.41.01.105 Please provide copies of: Summary of Customer Relations Rules for Telephone Coroorations ldaho Teleohone Solicitation Act Notification Method of Notification: Rule IDAPA 31.41.01.403.02 Record of Complaints: Number received by Company Category of complaints (if known): Deposit Disputes Charges on Bill Denial/Termination Quality or Availability of Service Carrier Selection/Assig n ment Miscellaneous Mailed separately to customers lncluded in directory Date of notification Monthly included on customer billing. Annually printed in directory (copy attached). Alternate method of notification Newspaper publications: (copies attached) Times News - Twin Falls, lD.312712014 and912312014 Record Herald -lD, 31201201 4 and 91251201 4 Mountain Home News - Mountain Home, lD ,312412014 and 101112014 Yes Yes Rev 3/02 Page 20 CERTIFICATE State of ldaho County of WE, the undersigned MichaelJ. Martell and Mark R. Martell of the Rural Telephone Company utili$, on our oath do severally say that the foregoing return has been prepared under our direction, from the original books, papers, and records of said utility; that we have carefully examined same, and declare the same to be a correct statement of the business affairs of said utility for the period covered by the return in respect to each and every matter and thing therein set forth, to the best of our knowledge, information and belief. SS Subscribed and sworn to Before Me this Al day of O{r"t , ffear)Do/{ ')/r,*""'t *rZ; Notary Public / My commission expires 1 g , (Year) UD/ / Rev 3/02 (Officer in Charge of Accounts) gdUexcel/jnelson/anulrpts/telannualrpt Page21 RECEIVED APR 11 ZOU Affi davit of Publication srATE oF IDAHo I ,.. County of Lemhi J RICKY G. HODGES being first du (printers) of The Recorder Herald Idaho, and of general circulatio a true printed copy of lvhich printed and published in not in any supplement with the issue dated 3-20 STATE OF IDAHO )( rr. County ofLemhi II On this 21st day of March in this year of 2014 before me, A Notary Public, personally appeared RICKY G. HODGES, known or identified to me to be the person whose name subscribed to the within instrument, and being by me first duly sworn, declared that the statements therein are true, and acknowledged to me that he executed the same. Residing At Salmon, Idaho My Comnrission expires: 0l-16-2019 Publication Fee $94.08 sworn, deposes and says he is one of the publishers newspaper published weekly at Salmon, Lemhi County, in. That the NOTIGE OF SERVICE RATES - SHOUP, attached to the margin hereof, has been and was correctly and entire issue of every number of said newspaper and eof or thereto for ONE (1) consecutive issue(s), commencing 14 and ending with the issue dated 3-20-2014. Public for Idaho r_EGAr_ NOTTCE SHCUP (ALSO) 2014 RTI SERVICE RATES Rii is a qualitr, tL.ieccrnriunications servict-q irroviCer *'hc pr,-i;tdes Lrasic enhen,:ed ser\,ices at reasonable rates within ils srrvice terriiory. Basic services are r,f:,::'ct et ih-, followjr,g rates for At- lanta & Three Creek Areas: Residentia! & Business Rates Local Residence......................... $25.76 Local Business ........................... $42.00 Fed. Subscriber Line (FCC Access, 1 line) ........-...... $ 6.50 Fed. Subscriber Line (FCC Access, Multi Line).....,.. $ 9.20 ldaho Universal Service Fund Sur- charge (IUSF) ................... ... $.16 (Res) , ldaho Urriversal Service Fund Sur- charge (IUSF) ....................... $.25 (Bus) State of ldatro AssistanceProgram........ ...,... $.03 The above charges will have federal and local taxes added on. Touch Tone service is provided as a part of the loial service. Toll Blocking is available at no charge for low income customers who qualify. .Emergency 911 Services - Ex- changes with charges in ldaho are: 394, 653, 868, 864 and 796. There is a $1 .25 per line charge. Low income individuals eligible for Lifeline and Link-Up telephone assis- tance programs may be eligible for dis- I counts from these basic local service charges through state specified tele- 'phone assistance plans. Please contact your local Health and Welfare office.- Basic services are offered io all con- sumers in the RTI service territories at the rates, terms. and conditions speci- fied in the RTI tariffs and/or price lists. lf you have any questions regarding the RTI's services, please call us at 1-888- 366-7821, or visit our business office at 892 W. Madison Ave. Glenns Ferry, lD 83623 for further information regarding services. RTI - An Equal Opportunity Employer RTI with its main office located at 892 W. Madison Avenue. Glenns Ferry, lD 83623, complies and adheres to the fol- lowing statements under the U.S. Depart- nrent of Agriculture guidelines. ln accordance with Federal law and tlre U.S. Department of Agriculture's policy, this institution is prohibited from discriminating on the basis of race, color, naticnal origin, sex, religion, age, or dis- ability (lilot ail prohibited bases apply to all programs). To file a complaint of discrimination, vrrite USDA, Director, Office of Civil RiQhts, Room 326-W, Whitten Building, i 400 lndependence Avenue, SW, Wash- ington, DC 20250-9410, or call (202) 72C-5964 (voice or TDD). USDA is an equal opportunity provider and employer. Did you know Telephone Assistance Programs are avaiiable to low-income individuals. To qiralify for Lifeline Services, please con- t.:i yci:r'lccaj llealth and Welfare Office. :,i;sirr:: is : p|cgr^am designed to as- s ,.i :r:a, !rJom3 households afforci local i: l:f,ts,airp service. Lifeline assists with i ,"-.','?it,'t iel.i:11';3ne bi!ls and Link-Up a s-I : ! ri i, a ')' nection gnd irrslallatic.n irliii!es. Flease contaci your iocal l-;e:alih & Welfare CIfice or Call Toll Free Affi davit of Publication srATE OF IDAHO ) couNTY oF TWIN FALLS) SS. I, Ruby Aufderheide, being first duly sworn upon oath, depose and say that I am Legal Clerk of the TIMES-NEWS,published daily at, Twins Falls, Idaho, and do solemnly swear that a copy of the notice of advertisement, as per clipping attached, was published in the regular and entire issue of said newspaper, and not in any supplement thereof, for two consecutive , commencing with the issue dated 20th day of March, 2014 al;rd ending with the issue dated 27th day of March, 2014 And I do further certify that said newspaper is a consolidation, effective February 16, L942, of the Idaho Evening Times, published theretofore daily except Sunday, and the Twin Falls News, published theretofore daily except Monday, both of which newspapers prior to consolidation had been published under said names in said city and county continuously and unintemrptedly during a period of more than twelve consecutive nronths, and said TMES-NEWS, since such consolidation, has been published as a daily newspaper except Saturday, until Iuly 3 1 , 1978, at which time said newspaper began daily publication under said name in said city and county continuously and unintemrpted. Ani I further certiff that pursuant to Section 60-108 Idaho Code, Thursday of each week has been designated as the day on which legal notice by law or by order of any court of competent jurisdiction within the state of Idaho to be issued thereof Thursday is announced as the day on which said legal will be published. STATE OF IDAHO COUNTY OF TWIN FALLS On this 28th day of March, 2014, before me , a Notary Public, personally appeared Ruby Aufdeheide, known or identified to me to be the person whose name subscribed to the within instrument, and being by me fust duly sworn, declared that the statements therein are true, and acknowledged to me that he executed t}le same. hri*,vdLlu'tt t-' ^""ry *t*"*r"*" "Residlg at rwin ,^n",r^& bJ I lI My commision expires: RT! SERVICE RATESRTI is an lndependent 'Local Exchange Carrier (ILEC) telecommunications service provider offering basic telephone service within its service territory. Service rates otfered forthe Three Creek ldaho "857" exchange are as follows: Local Flesidence Local Business FCC subscriber single line FCC subscriber hulti line ldaho Universal S6rvice Fund surcharge (RES) $ 0.16 Idaho Universal Service Fund surcharge (BUS) $ 0.23 ldaho Telephone Assistance program Emergency 91 1 Services - (per line) $ 0.03$ 1.25 Federal and local taxes also apply The basic serviecs otfered to all bonsumers in lhe HTl eichange terrilories are at the rates, terms and conditions specified in RTI's tarifls. ll you have questions regarding RTI's services, please call toll free (888) 366-7821 or visit our business office at892 W. Madi.son Avenue, Glenns Ferry, ldaho. Further information is available on our website at www.rtci.net . RTI is an Equal Opportunity Employer BTI main is otlice located at 892 W. Madison Avenue, Glenns Ferry, ldaho 83623. RTI complies and adheres tci the following statements under the U.S. Department ol Agriculture guidelines: ln Accordance with the Federal law and the U.S. Department ot Agriculture's policy, this institution is prohibited Jrom discriminating on the basis of race, color, national origin, sex, religion, age, or disability (not all prohibited basis apply to all programs). To lile a complaint of discrimination, write to Otlice USDA, Director, oftice of civil right,.1400 lndependence Ave SW Washington DC 20250-9410 er call 800-795-3272 (voice) or 202-720-6382 (TDD). Did you know? Telephone assistance programs are available to low:income individuals. To qualify for Lileline/Link-up services, please contact your local Health & Welfare oftice. Lifeline service is designed to assist low-income households to atford Iocal telephone service and assists with monthly telephone bills. Link-up assists with connections and installation charges (not available in all areas). Toll blocking is available at no charge for qualilying low-income customers. PUBLISH: March 20 and 27,2014 $ 2s.76$ 40.68$ 6.50$ 9.20 - RTI Service Rates RTI is a quality telecommunications services provider who provides basic enhanced services at reasonable rates within its service territory. Basic services are offered at the following rates for Atlanta & Three Creek Areas: Residential & Rusiness Rates Local Residence Local Business Fed. Subscriber Line (FCC Access, 1 line) Fed. Subscriber Line (FCCAccess, Multi Line) Idaho Universal Service Fund Surcharge (US$ Idaho Universal Service Fund Surcharge (IUSF) State of Idaho Assistance Program The above charges will have federal and local taxes added on. Touch Tone service is provided as a part of the local service. $2s:76 $42.00 $ 6.50 $ 920$ .16 (Res) $ .25 (Bus)$ .03 AFFIDAVIT OF PUBLICATION I, Brenda M. Fincher, do solemnly swear that I am the Publisher of the: Mountain Home News A weekly newspaper of general circulation' published once a week, in Mountain Home' id"ho, that the notice attached hereto which is ;;; of publication tlereof; was published in "Ja t "*"paper for / consecutive weeks' W*"trruffi'ff?Hsill,*;olrUfi."ti"n having peen made on the'AbTh day of ,ilanfr-2O14;.1.ry W.d"."d"y i""r" of the paper during the p.rioa and time of publication and that the ;;tt;was publistrid in the paper proper and not in a suPPlement thereof' And I further swear that the said Mountain Home News has been continuously and .rtti.rt.t ,lptedly published in-yid Elmore C"r"tV during-the period 9f 78 consecutive *".f." ptior tJthe first publication of the attached notice. Subscribed and sworn to me this SYth day Residing in Mountain Home, Elmore County' Idaho. County of Elmore State of Idaho My 'i'ss. expires LL'L7'2O17. Toll Blocking is available at no charge for low income customers who qualiff. Emergency 9l I Services - Exchalges with charges in Idaho are: 394, 653, 868,864,aad796 There is a $l 25 per line charge. Low income individuals eligible for Lifeline and Link-Up telcphone assistance programs may be eligible for discounts from these basic local service chargcs tfuough state spicified telephone assistance plans. Please contact your local Health and Welfarc office. Basic services are offered to all consumers in the RTI service rcrritories at the rates, terms, and conditions specified in the I{TI tariffs and/or price lists. If you have any questions regarding the RTI's services, please call us at l-888-36G7821, or visit our busincss ofEce at 892 W. Madison Ave. Glenns Ferry, ID 83623 for further information regarding services. RII An Equal Opportunity Employer RTI with its main office located at 892 W. MadisonAvenue, Glenns Ferry,ID 83623,complies and adheres to the following statemcnts under the U.S. Departrncnt ofAgriculture guidelines. In accordance with Federal law and the U.S. Departsrent of Agriculturc's policy, this institu- tion is prohibited from discriminating on the basis of race, color, national origin, sex, religion, age, or disability (Not all prohibited bases apply to all programs). To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 1400 Independence Avenue, SW, Washington, DC 2O250-9410, or call (2O2) 72O-5964 (voice or TDD). USDA is an equal oppornrnity provider and employer. Did you know Telephone Assistance Programs are available to low-income individuals. To qualify for Lifeline Services, please contact your local lfeelth and Welfere Offfce. Lifeline is a program designed to assist low income households afford local telephone service. Lifeline assists with monthly telephone bills and Link-Up assists with connection and installa- tion charges. Please contact your local or Call Toll Free I-888-366-7821a J?TI" lne Publication: March 26.2014 Ptrblisher ldaho Statesm4n !h. N.rrp.D.. !t trc lr..!sr. V.al!, lDAtioSrarElgaF-<ou P0 Box 40, Boise, lD 83707-0040 LEGAL PROOF OF PUBLICATION Account #Ad Number ldentification PO Amount UOIS Lrnes 264023 0000957259 LEGAL NOTICE RTI Service Rates RTI is RATE CHANGES $122.06 2 61 Attention: THERESA WILSON RTI - RURAL TELEPHONE COMPANY 892 W MADISON AVE GLENNS FERRY, ID 836232374 , being duly sworn, deposes and says: That she is the Principal Clerk of The ldaho Statesman, a daily newspaper printed and published at Boise, Ada County, State of ldaho, and having a general circulation therein, and which said newspaper has been continuously and uninterruptedly published in said County during a period of twelve consecutive months prior to the first publication of the notice, a copy of which is attached hereto: that said notice was published in The ldaho Slatesman, in conformity with Section 60-108, ldaho Code, as amended, for: 'lnsertionS''1 tsegrnnrng rssue of: STATE OF TDAHO ) .SS couNTY oF ADA ) On this 24th day of March in the year of 2014 before me, a Notary Public, personally appeared before me known or identified to me to be the person whose name subscribed to the within instrument, and being by first duly sworn, declared that the-statements lherein are true, and acknowledged to me that she Notary Public FOR ldaho Residing at: Boise, ldaho LEGAL NOTICE Servico Rales RTI is a qLrality teleconrnunications services provider rvho provides ba-sic enhanced services at reasonable rates lvithin its service territorv.Basic sen'ices are offered at the followrng rates for Atlanta & l'hrie Creek fueas:Residential & Business Rates Local Residence S 25.76 Local fusiness S 42.00 Fed. Subscriber Line (FCCAccess, I line) S e.5O Fed. Subscriber Lire (FCCAccess, tululti Line) S 9.20ld*ro Universal Seruice Fund Surcharse (IUSF) S .16 (Res) ldaho Universal Service Fund Surcharge (IUSF) $ .25 (Bus) State of ldaho Assistance ProEram S .03 The aboue charges rvill have fEderal and local taxes added on.Touch Tone service is provided as a part of the local service- Toll-Blocking is available at no charge !or lou' irrconre custonrers 'r,rhooua lifv. EnreiBency 9II Services - Exchanges ,vitr charges in ldaho are:394, 653, 868. 864 and 796. There is a SI.25 per line charge.Low irrconre individuals elieible for Lifelire and LinkUo teleohone-assis-tance progranE nray be e-ligible {or discounts fronr't}rese basic localservicd cfurges thr-ouch stite speciiied telephone assistarre plans. Please contadt your local Health and Wetfare office. Basic services are offered to all consunrers in the Rll ser'"ice tenito-ries at the rates, ternrs, and conditions specified in the RTI tariffsand/br orice lists. lf vou have anv ouestrons reeardiru the RTI's sercices, pl6ase call us ai l€8&366-7821, or visit-arr b[siness office at892 W. Madison Ave. Glenns Ferry, lD 83623 for further in{ornration regardine services.RTIAn Eoual ODoortunitv Emolover RTI r,;ith its'rirain officie loc'ate0 at 892 VJ. Madison Avenue, Glenns Fer-rv. lD 83623. comolies and adheres io the follorvins statenrents under the U.S. Departnrent o{ Agriculture guidelines. ln accordance rvith Feileral larr End the U.S. Departnrent of Agricul- ture's oolicv. this institution is orohibited fronr discriminatin.e on the ba-sis of iace,'iolor, national origin, sex, religion, age, or disa6ility (Not allprohihited bases apply to all prbgranrs).To file a conrplaint of discrinrrnalion, rvrite USDA, Director, Offrce of Civil Rishts, Room 326-W, Whitten Buildine, 1400 lndependercc Ave- nue. S!!. Washineton. DC 20250-9410, oicoll (202) 720-5954 (voice or TDD). USDA is-an eilual opportunity prbvider and enrployer. Did you know.........Telephone fusistance Progranrs are ai,ailable to lowinconre individtr To quality for Lifeline Services, please c'Jntact your local Health and\{lelfaie Office.Lifeline is a Drosram desisned to assist low income hou-seholds aflord local telephorie sirvice. Li6line assists with nronthly telephone bills and Link-Lio assists rqilh connection and installation charpes"Pleaio contact vour local Health & Wetfare"Offico or Call TollFree l-888-366-7821 Pub. Mar. 22,2014 My Commission expires:>f ,,lzr:, RII Service Retes RII is a quality telecommunications services provider who provides basic enhanced services County of Elmore at reasonable rates within its service territory. Basic services are offered at the following rates State of Idaho forAtlanta & Three CreekAreas: R.esidential & Bnsiness Rates Local Residence $25j6 Local Business $42.00 Fed. SubscriberLine (FCCAccess, I line) $ 650 Fed. Subscriber Line (FCC Access, Multi Line) $ 9.20' Idaho Universal Service Fund Surcharge (IUSF) $ .16 (Res) Idaho Universal Service Fund Surcharge (IUSF) $ .25 (Bus) State of Idaho Assistance Program $ .Of The above charges will have federal and local taxes added on. Touch Tone service is provided as a part of the local service. Toll Blocking is availabte at no charge for low income customers who qualify. Emergency 9t i Services - Exchanges with charges in ldaho are: 3941 653, E68, 86zl and 796. There is a$1.25 perline charge. Low income individuals eligible for Lifeline and Link-Up rclephone assistance programs may De eligible for discoints from thcsc basic local service charges tfuorrgh state specified telephone assistance plans. Please contact your local Hcalth and Welfare office. Basic services are offered to all consumers in the RTI scrvice territories at the rates, terms, and conditions specified in the RTI tariffs and/or price lists. If you have any questions regarding the RTI's services, please call us at l-E88-36G7821, or visit our business ofEce at 892 W. Madison Ave. Glenns Ferry,ID 83623 for further information rcgarding services. RII Rrr with its mai n "*"", "":o'*n;; ;'::::-"H]n* r",,y, ,o s s 623, compries and adheres to the following statements under the U.S. Department ofAgriculturc guidelines. In accordance with Federal law and the U.S. Department ofAgriculture's policy, this institu- tion is prohibited from discriminating on the !,4sis of racc, colot, national. origin, sex, religion, age, or disability (Not all prohibited bases apply to all progiams)g^ ...r . , To 6le a complaint of .discriminati,on, write USDA, Director, Oftce if Civil Rights, Room 326-W, Whitten Building, 1400 Independence Avenue, $lV, Washintton, DC 20250-9410, or call(202)72o-59il (voice orTDD). USDA is an equal opportunity provider and employer. AFF'IDAVIT OF PUBLICATION 1..rJJ I, Brenda M. Fincher, do solemnly swear that I am the Publisher of the: Mountain Home News A weekly newspaper of general circulation, published once a week, in Mountain Home, Idaho, that the notice attached hereto which is a part of publicatiol thereof; was published in said newspaper for I consecutive weeks, the first publiqation having been made on the lS-t' auv "i **- ,2074, and the last publication having been made on the lSt day of doX- ,2014; every Wednesday issue of the paper during the period ancl time of publication and that the notice was published in the paper proper and not in a supplement thereof. And I further srvear that the said Mountain Home News has been continuously and uninterruptedly published in said Elmore County during the period of 78 consecutive My commission expires ll-L7-2OL7. Did you know.. Telephone Assistance Programs are available to low-income individuals. To qualify for Lifeline Services, please contact your local Health and Welfare Ofifice. Lifeline is a program designed to assist low income households afford local telephone service. Lifeline assists with monthly telephone bills and Link-Up assists with connection and installa- tion charges. Please 'contact your local llealth & Welfare Office or Call Toll Frec l{t&3667E21 lilTI" One Publication: OCtober I A to the first publication of the attached notice. Publisher Subscribed and sworn me this ? "4 aav of OCb, Notary Residing in Mountain Home, Elmore County, Idaho. roo o=P Lceo6oo= ci9e =Eo = -i: Eo.5o6 :o-o:tr!223-!>O<-;E.E - 0co=xErEo sc{ .+ g oalL o (! e.o A o\ c{€ ;o aIago EoO >'o'< d o c<n on od. 99-oo E irE RqiEH t*Eo!J.9E.RE lE.c'^E d ooi G - :, Oo::60>'--E- Fa9E6Ei =!,J ^-oLOY€0)rriE^oii=E-vLEEO:€O^:!Y.=aigr =OEL(ao=- I L.;. Eoe=.d > () o tr(!=.c;!tlz - u --o9!v!-oO<o !a a*q-3E.3 E'= 9 =6oc 6O - >'!: \)e6a r+ o6l()(\. o) o G o oo o o o g 6 o0o o o s =e 6 d o B o o o Lo o o 6 o ou0 d o (o 6 o o Eooo& o F o q E i rc .; bo '6 ! U) rl.](,oo () *() I tro. F.{+)d() op{ €)0r+io \P d€ t+= o !o -llLqOor! i.FE ,V' () rt o$tlo6l g, Eod'6o o ooE o DI) o o oo o o oa oo ulzo o o oL0.) o a, aE Lo do. 'o E ad o o! E Eo o o o .2 o o e oo o 'E d oo! 6 qioq o bn d o o ,Ji uJF E ulo e.ul att ll.o tuo Foz o aB =Fi'6 o o(J o.J E dU) 6 voo Eo 5 d o 6o. Bo 5 g o o o =o qs 6 o ooo = t? LEGAL NOTTCE SHOUP (ALSO) 2014 RTISERVICE R.ATES RTI is a quality telecommunications services provider who provides basic enhanced services at reasonable rates within its service territory. Basic services are offered at the following rates for Atlanta & Three Creek Areas: Residential & Business Rates Local Residence .,................... ...-.. $25.76 Local Business ...... $42.00 Fed. Subscriber Line (FCCAccess, 1 line) ......-... $6.50 Fed. Subscriber Line (Access, Multi line) ............. $9.20 ldaho Universal Service Fund Surcharge(IUSF) $.16 (Res) ldaho Universal Service Fund Surcharge(IusF) $.25 (Bus) State of ldaho Assistance Program .......................... $.03 The above charges will have federal and local taxes added on. Touch Tone service is provided as a part of local service. Toll Blocking is available at no charge for low income customers who qualify. Emergency 911 Services - Exchanges with charges in ldaho are: 394, 653, 868, 864 and 796. There is a $1.25 per line charge. Low income individu'als eligible for Lifeline and Link-Up telephone assistance pro- grams may be eligible for dismunts from these basic local service charges through state specified telephone assistance plans. Please contact your local Health and Welfare. Basic services are offered to all consumers in the RTI service territories at the rates, terms, and conditions specified in the RTI's tariffs and/or price lists. lf you have any questions regarding RTI's services, please call us at 1-888-366-7821 , or visit our busi- ness office at 892 W. Madison Ave. Glenns Ferry, lD 83623 for further information re- garding services. RTI An Equal Opportunity Employer RTI with its main office located at 892 W. Madison Avenue, Glenns Ferry ID 83623, complies and adheres to the following statements under the U.S. Department of Agricul- ture guidelines: ln accordance with Federal law and the U.S. Department of Agriculture's policy, this institution is prohibited from discriminating on the basis of race, color, national origin, sex, religion, age, or disability (Not all prohibited bases apply to all programs). To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 1400 lndependence Avenue, SW, Washington, DC 20250- 9410, or call (202)720-5964 (voice or TDD). USDA is an equal opportunity provider and Did You Know. .. Telephone Assistance Programs are available to low-income individuals. To qualify for Lifeline/Link-Up Services, please contact your local Health and Welfare Office. Lifeline is a program designed to assist low income households afford local telephone service. Lifeline assists with monthly telephone bills and Link-Up assists with connection and installation charges. Please contact your local Health & Welfare Office or Call toll free 1-888-366-7821 -9-25-1tc Affidavit of Publication STATE OF |DAHO ) couNTY oF TW|N FALLS) SS. I, Ruby Aufderheide, being first duly sworn upon oath, depose and say that I am Legal Clerk of the TIMES-NEWS,published daily at, Twins Falls, Idaho, and do solemnly swear that a copy of the notice of advertisement, as per clipping attached, was published in the regular and entire issue of said newspaper, and not in any supplement thereof, for one consecutive , commencing with the issue dated 23rd day of Septanber, 2014 and ending with the issue dated 23rd day of September,2OL4 And I do further certifr that said newspaper is a consolidation, effective February 16, 1942, of the Idaho Evening Times, published theretofore daily except Sunday, and the Twin Falls News, published theretofore daily except Monday, both of which newspapers prior to consolidation had been published under said names in said city and county continuously and unintemrptedly during a period of more than twelve consecutive months, and said TIMES-NEWS, since such consolidation, has been published as a daily newspaper except Saturday, until July 31, 1978, at which time said newspaper began daily publication under said name in said city and county continuously and uninterrupted. And I further certifu that pursuant to Sectien 60-108 Idaho Code, Thursday of each week has been designated as the day on which legal notice by law or by order of any court of competent jurisdiction within the state of Idaho to be issued thereof Thursday is announced as the day on which said legal will be published. STATE OF IDAHO COUNTY OF TWIN FALLS On this 23rd day of September, 2014, before me, a Notary Public, personally appeared Ruby Aufdeheide, known or identified to me to be the person whose name subscribed to the within insrument, and being by me first duly swom, declared that the statements therein are Eue, and acknowledged to me that he executd the same. Residing at Twin Falls, Idah My commision expires: .,,r-,'iir :: *:if'{*r A R p't Y1 ? - \' ! ^.r# : _- = -: 'rr'q i = W#*is$s RTI SERVICE RATESBTI is an lndependent Local Exctange Carrier (ILEC) telecommunications service provider offedng basic telephone service within its seMce territory. Service rates otlered for the Three Creek ldaho tB5TEgxchange.are as lollows: Local Residence Local Business FCC subscriber single line FCC subscriber multi line $ 25.76$ 42.00$ 6,50$ 9.20 ldaho Universal Service Fund surcharge (RES) $ 0.16 ldaho Universal Service Fund surcharge (BUS) $' 0.25 " ldaho Telephone Assistance program $ 0.03 Emergency 91 1 Services (per line) $ 1.25 Federal and local taxes also apply The basic services offered to all consumers in the RTI exchange territories are at the rates, terms and conditions specilied in RTI's tariffs. lf you have questions regarding BTI's services, please call toll tree (888) 366-7821 or visit our business otfice at892 W. Madison Avenue, Glenns Ferry, ldaho. Further inlormation is.available on our website at www.rtci.net . RTI is an Equal Oppoilunlty Employer RTI main is office located at 892 W. Madison Avenue, Glenns Ferry, ldaho 83623. RTI complies and adheres to the following statements under the U.S. Department ol Agriculture guidelines: ln Accordance with the Federal law and lhe U.S. Department of AgricultureB poliry, this institution is prohililted from discriminating on the basis of race, color, national origin, sex, religion, age, or disability (not all prohibited basis apply to all programs). To lile a complaint of discrimination, write to Ofiice USDA, Director, office of civil right, 12t00 lndependence .Ave SW Washington DC 20250-9410 or call 800-795-3272 (voice) or 202-720-6382 FDDI.' Did you know? Telephone assistance programs are available to low.income individuals. To qualify for Lifelinefunk-up services, please contact your local Health & Welfare office. Lifeline service is.designed to assist low-income households to afiord local telephone service and assists with monthly telephone bills. Link-up assists with connections. and installation charges (not. available in all areas). Toll blocking is available at no charge lor qualifyirig low-income customers. PUBLISH: September 23, 2014 fts6RTI /46,R,O F ffi,I\/INGluEvf if,t?t;#:iT,1r[TYl?.1"ffi resutaiions appticabte to its services are resutated by the pubtic urititi* Commission of your state and are available for inspection at our business office. Copies of these regul#Er tions may be obtained by contacting our business office toll free at 1-888-366-7821 or by contacting the Public Utilities Commission in your state. #'lfif#fl Prefixes inclu, 775 -200,20L,202 287,303, 313 337 ,338,342 384, 386, 391 544,560,562 742,745,746 823,824,825 857,858, 861 Application of The use of telep regardless of thr Automatic An: Long-distance c Charging begins LocalCalling Calls may be mi ' website: www.fcc.gov Customer Complaints and Disputes What to do when you have a complaint? lf you experience a problem with your telephone service or billing, please contact our.office toll free at 1-888-366-7821. Our personhel are trained to handle service ahd billing situations. However, if you are unsatisfied with the explanation provided, don't hesitate to ask for a supervisor. A custoiner may make a formal or informal complaint to the Public Utilities Commission for further review of the dispute or complaint. Telephone Company shall not terminate service while a complaint is pending. IDAHO PUblic Utilities Commission 1-800.432-0359 IDAHO Public Utilities Commission 1-800-432-0369 PO. Box 83720 Boise, lD 83720-0074' www.puc.idaho.gov NEVADA Public Utilities Commission 1-800-992-0900 NEVADA Public Utilities Commlssion i-800-992-0900 1150 E. William Street Carson City, NV 89701 http ://puc. state. nv. uV Boise* (302, 32L, 322, 323, 327, 331, 332, 333, 334, 336, 338, 342, 343,344,345, 348. 362, 363, 364, 367, 368, 373, 375,376, 377 , 378, 381, 383, 384, 385, 386, 387, 388, 389, 393, 395, 396, 422,424,426, 433, 562, 658, 672,685, 853, 854, 938, 939) Application of Business Rates The use of telephone service for business purposes will automatically subject that service to business rates, regardless of the type of premises on which the telephone service is installed. Automatic Answering Machine Long-distance charges apply to station calls made to telephones with automatic answering machines. Charging begins when the called telephone is answered by the automatic answerin! machlne. Locat Calling Region The prefix(es) listed beside your community (communities) listed. below, represent your local calling areas. Hii:Iil iJ'illTff:;"i:ll';,?1'*" ", n Mountain Home (580, 587, 828,832) Caldwell (453, 454,455, 459) Boise (*) Boise River (653) Bruneau (845) Emmett (365, 398, 477) Fruitland (452,546) Glenns Ferry (366) ldaho City (392) Kuna (922) Melba (495) Meridian (288,706, 822,846,855, 844, 887, 888, 893, 895, 898) Middleton (585). Nampa (442, 461, 463, 465, 466, 467, 468) New Plymouth (278) Nu Acres (566,570,674) Star (286) Weiser (549) Local Calting For Shoup, tD(394,756, 865) Local Calling tn Nevada. Calls may be made without a toll charge between the following exchanges, providing the use of direct dial: North Fork, NV <- Tuscarora, NV Three Creek, lD +---+ Jarbidge, NV raTI eo t 3-eo t4 ." DIREtrTORY ItrAHO eOA 394 Shoup 653 Boise River 796 Tipanuk 857 Three Creek 864 Atlanta 868 Prairie lncludes listings for mountain home businesses NEVAD A 77 5 969 Redrock 970 Antelope Valley 488 .larbridge 756 Tuscarora 758 North Fork lncludes listings for Cold Springs, Stead, and Lemmon Valley ,*W Rates, Rulce & Rqulatims The Company's rates, rules and regulations applicable b ib services are regulated by the Public Utilities Commission of your state and am ivailable for-inspection at oui business oflice. Copies ol these regula' tions may be obtained by contacting ur business oftrce toll free at 1€88-3667821or by contacting the Public Utilities @mmission in your state. IDAHO Pubtac WlitcrConrmlshn 1.800432-0369 NR'AOA Pubtlc Utilitcr Commisslon l-800-992-0900ufilb: wrv.fcc.rv, ,- GustomcrComplaints md Dispubs , " ,. What to do when you hat e a complaint? lf 1ou erpedence a goblem with your Hephone sarvice or billing, please contact our ofiice tof, lnc at 1.88&36&7821. Our penonnel ale trained to handle si:rvice and billing situations. Horcver, if you are unsatisfied with the erplanation povided, don't hesitate to ask.ior a supervisor. A customer may make a fuimal or inbmat complaint b the Pr.rbtic Utilities Commission for further raniew of the dispute or conplaint. Telephme Company shal not terminate service while a qomplaint is pending. loAtlo' Publh lr$ltc! Conmhclon l-800432.0369 PO. Box tIt720 . Bois€, lD tXl720-0O74 wvyw.puq.i#hg.ror, Applhation d Bsrincss R.t!s tIET'ADA PuDllc U0lltcs Comnhcim 1-800-992-09@ l15O E. Wlliam Strcet Caron City, NV 89701 hthy'/puc.state.nv.uV The use d telephone seruice br hrsiness puDces will automatically subiect that service to business rates, regardles of the type of pemises on which the telephone service is installed. ArJtonath Answcrlry tl*hlna Longdistance chaqes ipply to statirrn catls made b telephones with aubmath answering machines. Charging b€gins when the calhd telephone is answecd by the automatic answerlng machine. LocalGalling RGdon The prefix(es) listed beside your community (communities) listed belou reprsent your local calling areas. This infomation wa6 cuncnt as d July 16, 2009. Local Calli4br Boisc Rhnr, Pi.irh ild llp.nut Mountain Home (580, 587, 828, 832) Caldwell (453, 454, 455, 459) Boise (r) 1'' Eoiser. (302' 321, 322, 323, 327,1' 331,332,333,334,336, 338, 342, Bruneau (845) 367,368,373,375,376,377,378, Emmett (365, 398, 474 i 111, 383, 384,385' 386' 387' 388, Fruiuand (452, 546) ' 9!?;1?1' 19I,t99, 422,424,426, Grenns Ferry (368) 333; 333it*' 672'68s' 853' 854' ldaho City (392) Kuna (922) Mirridian 1288,7C6,,822,846; 855, 844, 887, 888, 893, 895,.898) Nampa (rt42, 451;4G1, 455, 466, 467,468t . . - . Nw Plymouth (270 Star (286) l (394,756,855) . Local Galling ln ilcnrada CallS may Ue made lvrttrlf a bll cha6e beh{e?n thefollqrmgoc!?Ee!, pronding the use of direct dial: . North Fork, NV <+Tuscarcra, NV ThreeCreek, lD <+Ja6ldge, NV Dial One U Unlimited r $5.00 per Prelires inr 775 -200,201,2 287, 303,3 337, 338,3 384, 386,3 544, 560, 5 742,745,7 823,824,8 857, 858, E Applicatior The use of te regardless ol Automatic Long{istanr Charging ber Local Callir Calls may br TDAHO 515 RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION WITH INDEPENDENT AUDITOR'S REPORTS Years ended December 31,2014 and 2013 RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO Gontents Page Independent Auditor's Report........ ............1 '2 Consolidated Financial Statements: Consolidated Balance Sheets......... ....3 '4 Consolidated Statements of Operations ............. ..........................5 Consolidated Statements of Stockholders'Equity ........................6 Consolidated Statements of Cash F1ows......... .....7 - 8 Notes to Consolidated Financial Statements................. ........9 - 19 Supplementary Information: Independent Auditor's Report on Supplementary Information ......................21 Consolidating Balance Sheet as of December 3I,2014... ...22 - 23 Consolidating Statement of Operations for the year ended December 3I,2014..... .........24 Consolidating Balance Sheet as of December3l,20l3... ...25 -26 Consolidating Statement of Operations for the year ended December 31,2013..... .........27 Independent Auditor's Report on Intemal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Consolidated Financial Statements Performed in Accordance with Government Auditing Standards ......28 - 30 Independent Auditor's Report on Compliance with Aspects of Contractual Agreements and Regulatory Requirements for Telecommunications kie$in// f oresisht for your f uture INDEPENDENT AUDITOR'S REPORT To the Board of Directors Rural Telephone Company and Subsidiaries Glenns Ferry,Idaho Renort on the Consolidated tr'inancial Statements We have audited the accompanying consolidated balance sheet of Rural Telephone Company (an Idaho corporation) and subsidiaries as of December 31, 2014, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended, and the related notes to the consolidated financial statements. Managemenfl s Resnonsibilitv for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Resnonsibilitv Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the 2014 financial statements of Syringa Networks, LLC (Syringa), a telecommunications and wireless company, the investment in which, as discussed in NOTE 2 to the financial statements, is accounted for by the equity method of accounting. The investment in Syringa was $1,474,587 and 51,397,143 as of December 31,2014 and20l3, respectively, and the equity in its net income was $137,058 and $224,018 for the years then ended. The financial statements of Syringa were audited by other auditors whose report has been furnished to us, and our opinion insofar as it relates to the amounts included for Syringa is based solely on the report of other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. Kiesling Associates LLP I Kiesling Consulting LLC I Kiesling lnvestment Management LLC An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment; including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers intemal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 0ninion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rural Telephone Company and subsidiaries as of December 31,2014, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Reoort on Other Legal and Reeulatorv Reouirements In accordance with Government Auditing Standards, we have also issued a report dated April 24,2015, on our consideration of Rural Telephone Company and subsidiary's intemal control over financial reporting and our tests of their compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of intemal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Govemment Auditing Standards and should be read in conjunction with this report in assessing the results of our audit. ,* a,**/- LcF Madison, Wisconsin Apil24,2015 -2- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLI DATED BALANCE SHEETS December 31,2014 and 2013 20t4 20t3 ASSETS CURRENT ASSETS Cash and cash equivalents Special construction account Marketable securities Accounts receivable: Due from customers Interexchange carriers Less allowance of $0 and $90,000, respectively Affiliates Other Materials and supplies at average cost Inventory at average cost Prepayments OTHER NONCURRENT ASSETS Marketable securities Equity method investrnents Other investrnents Deferred charges Intangibles PROPERTY, PLANT AND EQUIPMENT Telephone plant in service Other property Less accumulated depreciation Plant under construction Plant acquisition adjustment, net Property held for future use TOTAL ASSETS $ 1,494,229 9,216 8l,2lI 217,315 757,164 582,962 117,506 753,399 45,623 15,910 4,074,525 $ 1,060,796 9,224 19,ll2 163,790 730,356 559,643 874,741 811,490 49,777 22,818 4,301,747 67,390 1,397,143 956,557 52,184 513 2,373,787 52,868,766 538,459 53,407,225 40,267,051 13,r40,174 674,549 1,218,515 5.250 15,038,488 $2JJr4W 1,474,597 834,433 39,403 513 2,348.936 54,304,718 538.4s9 54,843,177 42.096,013 12,747,164 276,691 974,692 5,250 14,003.797 $_N,g.2sB The accompanying notes are an integral part of these consolidated financial statements. -3- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATED BALANCE SHEETS December 31,2014 and 2013 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt Accounts payable: Interexchange carriers Other Advance billing and payments Customer deposits Accrued income taxes Accrued taxes Accrued interest Other accrued liabilities LONG-TERM DEBT, LESS CURRENT PORTION OTTIER NONCURRENT LIABILITIES AND DEFERRED CREDITS Deferred income taxes Deferred investment tax credit STOCKHOLDERS' EQUITY Common stock - $100 par value, 2,500 shares authorized, 569 shares issued and outstanding Other capital Retained eamings 2014 20t3 $ 1,281,233 100,894 673,290 43,541 13,286 1 1,1 14 57,282 7,342 212.t98 2.400.180 8.373.1 83 2,l7l,g3g t4.937 2.t86.876 56,900 10,197 7.399.922 7,467,019 $ 1,395,825 255,151 720,603 42,951 ll,67l 62,473 7,342 200,714 2.696.730 9,214,613 56,900 10,197 9.735,582 9,802,679 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 20,427,258 $ 21,714.022 The accompanying notes are an integral part of these consolidated financial statements. -4- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31,2014 and 2013 20t4 OPERATING REVENUES Local network services Network access services Long distance services Intemet services Video services Other nonregulated services Miscellaneous Uncollectible, net of recoveries OPERATING EXPENSES P1ant specific operations Plant nonspecific operations Cost oflong distance services Cost of internet services Cost of video services Depreciation and amortization Customer operations Corporate operations General taxes OPERATING INCOME orHER TNCOME (EXPENSE) Interest and dividend income Allowance for funds used during construction Equity income in unconsolidated affiliate Interest expense Other, net INCOME BEFORE INCOME TAXES INCOME TAXES NET TNCOME (LOSS) $ 1,266,963 7,932,005 74,777 1,695,592 l4l,l54 328,176 197,885 48.080 11,684,632 2,gg9,6l5 771,269 50,449 1,418,411 217,494 2,099,237 588,242 2,799,677 257,121 1 1,08 1,5 15 603.1 17 43,150 68,270 137,058 (561,389) (26,469\ (339,380) 263,737 2,274,990 $ (2,011,253) 20t3 $ 1,295,550 7,594,506 77,906 1,655,319 122,536 316,487 158,584 (78.429\ 11,142.459 2,673,359 683,285 44,838 1,459,784 249,164 2,222,041 583,71I 2,495,532 305,826 10,707,540 434,919 106,582 27,403 224,018 (619,104) 135,51 1 (125,590) 309,329 $ 309,329 The accompanying notes are an integral part of these consolidated financial statements. -5- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY December 31,2014 and 2013 Common Stock TotalOther Retained Stockholders' Capital Eamings Equiw Balance at December 31,2012 Net income Dividends paid Balance at December 31,2013 Net loss Dividends paid Balance at December 31,2013 56,900 S 10,197 $ 9,481,094$ 9,548,191 309,329 309,329 (s4"841) (s4.841) 9,735,582 9,802,679 (2,011,253) (2,0t1,253) (324,407\ (324,407\ 56,900 10,197 $_:!.,29q $_l9.re7 $_L122922. $J"!SJ_W The accompanying notes are an integral part of these consolidated financial statements. -6- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31,2014 and 2013 20t4 2013 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation Amortization Deferred income taxes DeferraVamortization of investment tax credits, net Patronage in business conducted with cooperatives Patronage received from business conducted with cooperatives Equity income in unconsolidated affrliate Distributions received from unconsolidated affi liate (Gain) loss on trading securities Allowance for funds used during construction Changes in assets and liabilities: (Increase) Decrease in: Accounts receivable Material and supplies and inventory Prepayments and deferred charges Increase (Decrease) in: Accounts payable Accrued taxes Advanced billings and customer deposits Other accrued liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures Purchases of investments Proceeds from sales of investments Salvage, net of cost of removing plant Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term borrowing Repayment of long-term debt Change in special construction account Dividends paid Proceeds from RUS grant Net cash used in financing activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at Begiruring of Year Cash and Cash Equivalents at End of Year $ (2,011,253) 1,845,415 243,823 2,l7l,g3g 14,937 (l 8,748) 41,039 (137,058) 59,614 5,700 (68,270) 3,913 62,255 lg,6g9 (182,602) (13,045) 2,205 11,484 2,051,037 $ 309,329 1,978,338 243,703_ (54,994) 40,035 (224,0t8) 27,840 (7,200) (27,403) 166,051 67,979 (39,048) (305,594) 33,864 (82,798) 743 2,126,827 (1,006,277) (1,584,631)(s76) (64,848)- 22,674 20,000 (986,853)(1,626,805) 436,930 2,380,895 (1,392,952) (3,161,534)8 304,348(324,407) (54,841)649,670 299,501(630,751) (231,631) 433,433 268,391 1,060,796 792,405 $ 1,494,229 $ 1,060,796 The accompanying notes are an integral part of these consolidated financial statements. -7 - RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Years ended December 31,2014 and 2013 201320t4 SUPPLEMENTAL DISCLOSURES Noncash investing and financing transactions: Telecommunications plant acquisition Change in RUS grant receivable $ 649,670 $ (724,596) $ (649,670) g 724,596 -- The accompanying notes are an integral pan of these consolidated financial statements. RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 NOTE 1. SUMMARY OF SIGNIFICANT ACCOT]NTING POLICIES Basis of Presentation Rural Telephone Company and subsidiaries (herein referred to as "the Company") are providers of telecommunications exchange, local access, internet, cable television and long distance services in a service area located in southem Idaho, northem Nevada, northeast Washington, and northwest Oregon. The Company is a wholly-owned subsidiary of Martell Enterprises, Inc.. The accounting policies of the Company conform to accounting principles generally accepted in the United States of America. Management uses estimates and assumptions in preparing its consolidated financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management has evaluated subsequent events through April 17,2015, the date the consolidated financial statements were available for issue. Telephone operations reflect practices appropriate to the telephone industry. The accounting records of the telephone company are maintained in accordance with the Uniform System of Accounts for Class A and B Telephone Companies prescribed by the Federal Communications Commission (FCC) as modified by the state regulatory authorities. Princioles of Consolidation The consolidated financial statements include the accounts of the parent company, Rural Telephone Company, and its 100% owned subsidiaries, Nehalem Telecommunications,Inc. and Pend Oreille Telephone Company. All material intercompany transactions have been eliminated in consolidation. Cash Equivalents All highly liquid investments with a maturity of three months or less at the time of purchase are considered cash equivalents. Accounts Receivable Accounts receivable are reported net of an allowance for doubtful accounts. The allowance is based on management's estimate of the amount of receivables that will actually be collected. Inventory Inventory is stated at the lower of cost or market with cost determined by the average cost method. Inventory consists of various nonregulated equipment that is purchased by the Company primarily for sale to customers. -9- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 NOTE 1. SUMMARY OF SIGNIFICAI\T ACCOUNTING POLICIES (Continued) Investrnents Debt and marketable securities bought and held principally for selling in the near future are classified as trading securities and carried at fair value. Unrealized holding gains and losses on trading securities are reported in eamings. Marketable securities classified as available- for-sale are carried at fair value with unrealized holding gains and losses recorded as a separate component of stockholders' equity. Debt securities for which the Company has both the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amorlized cost. The Company uses the specific identification method of computing realized gains and losses. Nonmarketable equity investments over which the Company has significant influence are reflected on the equity method. Other nonmarketable equity investments are stated at cost. Property. Plant and Equipment Telephone plant is capitalized at original cost including the capitalized cost of salaries and wages, materials, certain payroll taxes, employee benefits and interest incurred during the construction period. The Company provides for depreciation for financial reporting purposes on the straight-line method by the application of rates based on the estimated service lives of the various classes of depreciable property as approved by the state regulatory authorities. These estimates are subject to change in the near term. Renewals and betterments of units of telephone property are charged to telephone plant in service. When telephone plant is retired, its cost is removed from the asset account and charged against accumulated depreciation less any salvage realized. No gains or losses are recognized in connection with routine retirements of depreciable telephone property. Repairs and renewals of minor items of telephone property are included in plant specific operations expense. Repairs of other property, as well as renewals of minor items, are charged to plant specific operations expense. A gain or loss is recognized when other property is sold or retired. Asset Retirement Obligations Generally accepted accounting principles require entities to record the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. When the liability is initially recorded, the entity capitalizes the cost of the asset retirement obligation by increasing the carrying amount of the related long- lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. -10- NOTE 1. RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Asset Retirement Obligations (Continued) The Company has determined it does not have a material legal obligation to remove long- lived assets, and accordingly, there have been no liabilities recorded for the years ended 2014 ard20l3. Software The Company capitalizes software costs (including right-to-use fees) associated with extemally acquired software for internal use. Software maintenance and training costs are expensed as incurred. Capitalized software is generally amortized on a straightJine basis over its useful life, not to exceed five years. Long-Lived Assets The Company would provide for impairment losses on long-lived assets when no longer cost of service regulated, indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Based on current conditions, management does not believe any of its long-lived assets are impaired. Income Taxes The Company was taxed as an S Corporation for federal and state income tax purposes for the year ending December 31,2013. The shareholders included their respective shares of income or loss on their individual tax retums. Accordingly, no provision was made in the accompanying financial statements. The Company is included in the consolidated retum of Martell Enterprises, Inc. In 2014, Martell Enterprises, Inc. revoked their S Corporation election. As a result, the Company recognized into current expense the deferred tax consequences of all book to tax differences at the time of revocation. Beginning n2014, income taxes are accounted for using a liability method and provide for the tax effects of transactions reported in the consolidated financial statements including both taxes currently due and deferred. Deferred taxes are adjusted to reflect deferred tax consequences at current enacted tax rates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred taxes arise from the effects of accelerated depreciation on property and equipment for tax purposes. The deferred tax assets and liabilities represent the future tax retum consequences of those differences, which will either be taxable or deductible, when the assets and liabilities are recovered or settled. Investment tax credits (ITC), which were deferred prior to the Tax Reform Act of 1986, are being amortized over the regulatory life of the plant which produced the ITC. - ll NOTE 1. RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue Recognition The Company recognizes revenues when eamed regardless of the period in which they are billed. The Company is required to provide telephone service to subscribers within its defined service territory. Local network service, video, and intemet revenues are recognized over the period a subscriber is connected to the network. Network access and long distance service revenues are derived from charges for access to the Company's local exchange network. The interstate portion of access revenues is based on a cost separation procedure settlement formula administered by the National Exchange Carrier Association (NECA) which is regulated by the FCC. The intrastate portion of access revenues are billed based on an individual company tariff access charge structure approved by the state regulatory authorities. The tariffs developed from this structure are used to charge the connecting carrier and recognize revenues in the period the haffic is transported based on the minutes of traffic carried. Long distance revenues are recognized at the time a call is placed based on the minutes of traffic processed at contracted rates. Reported network access revenues are estimates subject to settlement adjustments in the near term resulting from changes in expense and plant investment levels and rate of retum experience. Revenues from network access were increased/(decreased) by approximately $(201,000) and $109,000 in 2014 and 2013, respectively, as a result of adjustments to prior years' estimates. The Company recognizes internet revenue as the total amount eamed from charges to customers in the statement of operations as internet services. In accordance with tariffs filed with the FCC by NECA, the Company charges its non-regulated internet operations the tariffed wholesale DSL rate for the use of the Company's regulated plant facilities. These charges in network access services and cost of internet services totaled $595,190 and $57 6,167 in 2014 and 2013, respectively. The Company recognizes taxes charged to customers on a net basis. Advertising Costs Advertising costs are expensed as incurred. Advertising expenses were $208,552 and $200,5 54 in 201 4 and 2013, respectively. NOTE 1. NOTE 2. RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 SUMMARY OF SIGNIFICAIIT ACCOUNTING POLICIES (Continued) Fair Value Measurements The Company determined the fair value of its financial assets and liabilities based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs may be used to measure fair value: Level I Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level} Observable inputs other than Level I prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Reclassifications Certain reclassifications have been made to the 2013 consolidated financial statements to conform with the 2014 presentation. EQUITY METHOD AND OTHER INVESTMENTS The Company has a 3.84o/o interest in Syringa Networks, LLC which provides fiber transport and other services throughout ldaho. For investments ($1,474,587 and 51,397,143 at December 31,2014 and2013, respectively) accounted for under the equity method, the Company recognizes its proportionate share of the income and losses accruing to it under the terms of its membership agreement. The following is a sunmary of condensed financial information pertaining to the investment described above: December 31 20t4 20t3 s 84,0t7,421 $ 82,272,432 45.397,344 45,704,131 $ 38,620,077 $ 36,568,301 Years Ended December 31 2014 20t3 $ 56,058,165 $ 54,067,678 52,488,936 48,233,868 $ 3,569,229 $ 5,833,810 Assets Liabilities Equity Revenues Expenses Net Income 13- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,20'14 and 2013 NOTE 2. EQUITY METHOD AND OTHER INVESTMENTS (Continued) Other investments consist of the following at December 31: 20t4 CoBank patronage capital certifi cates National Rural Telecommunications Cooperative patronage capital certifi cates Independent NECA Services Other 2013 $ 354,664 $ 395,703 421,279 402,53130,000 30,00028,490 28"323 $_g3t1!1 s_Eff,ss7, Because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs, management has determined it is not practical to estimate the fair value of these investrnents. However, management believes that the carrying amount of these investments at December 31,2014, included in other investments is not impaired. NOTE 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment includes the following: 2014 2013 Telephone plant in service: Land Buildings Fumiture and office equipment Vehicles and work equipment Switching equipment Outside plant Leasehold improvements Subtotal Other property: Internet equipment Wireless equipment CATV equipment Other Subtotal Total property, plant and equipment Depreciation on depreciable property 2014 and 2013, respectively. $ 288,914 1,873,178 1,041,753 2,780,597 19,269,311 28,846,616 204,349 54,304,718 133,128 296,321 90,180 18.830 538,459 s 288,914 1,973,178 L,032,369 2,578,377 19,167,405 27,724,L74 204.349 s2,868.766 133,128 296,32r 90,180 18.830 538,459 s 54,843,177 $ 53,407.225 resulted in composite rates of 3.48o/o and 3.81% for -14- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 NOTE 3. PROPERTY, PLAI\IT AI\D EQUIPMENT (Continued) Plant acquisition adjustments of $3,655,545 have been approved by the state regulatory authorities and are included as a component of property, plant and equipment due to the underlying assets which produced the adjustment. The adjustments are being amortized over l5 years. Estimated amortization expense for the next four years is: 20t5 2016 20t7 2018 243,823 243,823 243,823 243,223 NOTE 4. LONG-TERM DEBT Long-term debt consists of: RDUP mortgage notes - 2o/o RDUP mortgage notes - 5olo RUS note payable for ARRA Broadband Initiative Program -2.567% RUS note payable for ARRA Broadband Initiative Program -3.051% RUS note payable for ARRA Broadband Initiative Program -2.756% Long-term note to Umpqua Bank, 5.00% at December 31, 2014 Long-term note to US Bank - 4.49% Long-term note to Chrysler Credit - 6.19% Long-term note to Ford Credit - 799% Long-term note to Ford Credit - 8.79% Total long-term debt Less current portion 20t4 $ 115,725 7,199,366 81,774 119,358 273,362 l,690,l56 8,1 14 25,748 I 10,102 30,7r1 9,654,41.6 1,28r,233 $ 8,373,183 2013 $ 156,484 8,049,298 86,425 125,757 2,143,963 18,779 29,732_ - 10,610,438 1,395.825 $ 9,214,613 The annual requirements for principal payments on long-term debt for the next five years are as follows: 20t5 2016 2017 2018 2019 $ 1,281,233 1,2gg,lg6 1,333,222 813,625 756,574 NOTE 4. NOTE 5. RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 LONG-TERM DEBT (Continued) Substantially all assets of the Company are pledged as security for the long-term debt under certain loan agreements with the Rural Development Utilities Program (RDUP). These mortgage notes are to be repaid in equal monthly and quarterly installments covering principal and interest beginning after date of issue and expiring by 2029. The mortgage to the United States of America, underlying the RDUP notes, contains certain restrictions on the declaration or payment of cash dividends, redemption of capital stock or investment in affiliated companies except as might be specifically authorized in writing in advance by the RDUP noteholders. The security and loan agreements underlying the Sterling Bank note contains certain restrictions on distributions to stockholders, and investment in or loans to others. The Company is required to maintain certain financial ratios for long-term debt to net worth and debt service coverage. Cash paid for interest net of amounts capitalizedfor 2014 and2013 totaled $561,389 and $609,785, respectively. Unadvanced funds at December 31,2014 and 2013 for long-term notes totaled $6,495,000 and $11,279,640, respectively for Pend Oreille Telephone Company. Under the provisions of the loan contract, advances of loan funds shall be deposited in a special construction account and held in trust for the govemment until disbursed. The loan contract restricts disbursements to such expenditures as RDUP may authorize. Allpayments from the trust accounts are subject to RDUP approval. INCOME TAXES Income taxes reflected in the Consolidated Statements of Operations consist of the following: 2014 20t3 Federal income taxes: Current tax expense $ 65,469 $ Deferred tax expense 2,073,601 State income taxes: Current tax expense 22,645 Deferred tax expense 98,338 Investment tax credits, net 14,937 Total income tax expense $ 2,274,990 $ Cash paid for income taxes and estimated income taxes for 2014 totaled $77,000. -16- RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 NOTE 5. INCOME TAXES (Continued) Deferred federal and state tax liabilities and assets reflected in the Consolidated Balance Sheets are summarized as follows: 2014 2013 Deferred Tax Liabilitres Federal State Total Deferred Tax Liabilities Deferred Tax Assets State Total Deferred Tax Assets Net Deferred Tax (Assets)/Liabilities Long-term Portion $ 2,073,601 116,151 2,199,752 17,813 17,813 $ 2.17r,939 $ - $J,JLfi2. $_ The tax provision differs from the expense that would result from applying the federal statutory rates to operations before income taxes because the Company revoked their S Corporation election and as a result, the deferred tax consequences of all book to tax differences were recognized into current income in the current year. The Company has evaluated its income tax positions and has determined that there are no uncertain income tax positions that need to be recorded or reported in the financial statements at December 31,2014 and20l3. The Company's federal and state income tax returns for years 2011 to present remain subject to examination. NOTE 6. EMPLOYEE BENEFITS The Company has a Safe Harbor 401(k) plan (Plan) covering all eligible employees. Plan expense for 2014 and 2013 was $159,792 and$172,583, respectively. The Company makes contributions to the Plan equivalent to amounts accrued, which are limited to amounts permitted under Intemal Revenue Service rules. -t7 - RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 NOTE 7. RELATED PARTY TRANSACTIONS Related party receivables at December 31 consists of the following: 2014 Accounts receivable, stockholders and employees Accounts receivable, Martell Enterprises, Inc. Accounts receivable, Little Valley Elk Ranch 20t3 $ 227,860 $ 219,678124,536 121,940230.566 218.025 NOTE 8. NOTE 9. The Company leases equipment from Little Valley Elk Ranch (LVER). LeasinB expenses were $309,604 and $329,213 in2014 and 2013, respectively. LVER is a related party to the Company as shareholders of the Company own LVER. CONCENTRATIONS OF CREDIT RISK The Company grants credit to customers, all of whom are located in the franchised service area, and telecommunications intrastate and interstate long distance carriers. The Company is subject to competition for telecommunications services including telecommunications exchange services offered by other providers in the franchised area. The Company received 680/o of its 2014 revenues from access revenues and assistance provided by the Federal Universal Service Fund. As a result of the Telecommunications Act of 1996, the manner in which access revenues and Universal Service Funds are determined is currently being modified by regulatory bodies. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents. The Company places its cash equivalents in several financial institutions which limits the amount of credit exposure in any one financial institution. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. BROADBAND INITIATIVES PROGRAM GRANT In 2010, the Company signed an agreement with the United States Department of Agriculture Rural Utilities Service (RUS) under its Broadband Initiatives Program. In accordance with the Agreement, the Company shall receive grants in the amount of $1,770,300 and a $728,700 loan over a maximum five-year period to finance the construction of a broadband infrastructure project (Project) to serve certain designated areas in Nevada. The Company recognizes grants receivable when grant approved project costs have been incurred. -18 RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2014 and 2013 NOTE 9. BROADBAND INITIATMS PROGRAM GRANT (Continued) Under the grant, the RUS retains a security interest in the property and, accordingly, must provide consent for the sale of the property to a third party or affiliate. ln addition, the agreement contains other provisions including an obligation to provide broadband services for the term of the agreement and the composite economic life (19 years) of the facilities financed by the grant; a requirement to achieve a minimum current ratio of one beginning on December 31, 2011; and certain restrictions on distributions to stockholders or members and, investment in, or loans to others. At December 3I,2014, the Company has received funds in the amount of of $1,158,514. ln January, 20 I 5, the Company received an additional $122,7 64. NOTE 10. REGULATORY ACCOT]NTING For its telephone operations, the Company follows generally accepted accounting principles for regulated enterprises. Accordingly, the Company defers certain cost and obligations and depreciates plant and equipment over lives approved by regulators. While the Company continues to believe the current regulatory and competitive environment supports this accounting treatment, should conditions change the Company would be required to write-off these deferred cost and obligations and evaluate the net carrying value of its plant and equipment for any impairment losses absent the future recovery currently permitted by the regulators. NOTE 11. REGULATORY MATTERS The Company receives revenues from access revenues and assistance provided by the Federal Universal Service Fund. As a result of the National Broadband Fund the manner in which access revenues and Universal Service Funds are determined has been modified by the Federal Communications Commission in an order effective December 29,2011. Among other things, this order provides for (1) a requirement to provide broadband services; (2) the establishment of a Connect America Fund (CAF) to replace current USF and high cost support mechanisms with a cap on the total fund; (3) modifications to the current rate of return support model including caps on the recovery of certain expenditures; (4) a reduction in the terminating access charges billed by the Company over a nine year period with eventual transition to a bill-and-keep framework for the exchange of traffic between carriers; (5) a new access recovery charge on monthly customer bills; and (6) a national framework for reporting and oversight. The order calls for further guidelines to be adopted on implementation and other topics. Portions of this order applicable to the Company are being challenged. Accordingly, neither the outcome of these proceedings nor their potential impact on the Company can be predicted at this time. -19- INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION To the Board of Directors Rural Telephone Company and Subsidiaries Glenns Ferry,Idaho We have audited the consolidated financial statements of Rural Telephone Company and subsidiaries as of and for the years ended December 31, 2014, and our report thereon, which contained an unmodified opinion of those consolidated financial statements. Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating supplementary information is presented for purposes of additional analysis and is not a required part of the consolidated financial statements, but is required by the United States of America Rural Development Utilities Programs. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and, in our opinion, which insofar as it relates to the Company's equity method investrnent in Syringa Networks, LLC is based on the reports of other auditors, and the consolidating supplementary information as of and for the year ended December 3I,2014 which was audited by other auditors, and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. ln our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole. ry a**-/- LcF Madison, Wisconsin April24,2015 -2t - Kiesling Associates LLP I Kiesling Consulting LLC I Kiesling lnvestment Management LLC RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATING BALANCE SHEET December 31,2014 ASSETS Rural Nehalem Telephone Telecommunications, Pend Oreille Telephone Company lntercompany Eliminations ConsolidatedCompany Inc. CURRENT ASSETS Cash and cash equivalents Special construction account Marketable securities Accounts receivable: Due from customers Interexchange carriers Affiliates Other Materials and supplies at average cost Inventory at average cost Prepayments OTHER NONCURRENT ASSETS Investment in affi liates Equity method investments Other investments Deferred charges Intangibles PROPERTY, PLANT AND EQUIPMENT Telephone plant in service Other property Less accumulated depreciation Plant under construction Plant acquisition adjustment, net Property held for future use TOTAL ASSETS 253,896 $ 8,351 13,412 55,606 175,451 79,559 84,257 8,479_ 566,521 $ 865 67,799 57,788 199,843 374,629 9,904 2t8,892 9,717 (947,067) 1,494,229 9,216 8l ,21 I 217,315 757,164 582,962 I17,506 753,399 45,623 15,910 4,074,525 1,474,587 834,433 39,403 513 103,921 381,870 I,075,841 107,602 450,240 27,427 15,910 2,439,470 4,112,118 1,474,587 234,360 1,077,164 267,80; 39,403 513 1,505,958 (947 ,067\ - (4,1l2,l l8) 332,265 10,810,337 10,810,337 9,370,946 2,439,491 974,692 4,799,071 $_1,lel,eos. $llplzl!, See Independent Auditor's Report on Supplementary Information 5,821,065 26,867,676 51 1,555 27,379,231 19,383,862 7,995,369 236,563 4,000 823sW $ 16,495,467 307.724 332,265 16,626,705 26,904 16,653,609 14,341,305 2,312,304 40,128 1,250 ,353,6U (4,1l2,l l8) 2,348,936 54,304,718 538,459 54,843,177 42,096,013 12,747,164 276,691 974,692 5,250 14,003,797 $_N,4272s3. -22 - RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATI NG BALANCE SH EET December 31,2014 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Cunent portion of long-term debt Accounts payable: Interexchange carriers Afiiliates Other Advance billing and payments Customer deposits Accrued income taxes Accrued taxes Accrued interest Other accrued liabilities LONG-TERM DEBT, LESS CURRENT PORTION OTHER NONCURRENT LIABILITIES AND DEFERRED CREDITS Deferred income taxes Deferred investment tax credit STOCKHOLDERS'EQUITY Common stock Other capital Retained eamings TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY 1t9,552 40,267 1,559,684 1,494,206 6,001,795 1,170,556 Pend Oreille Telephone Company Intercompany Eliminations Consolidated 93,408 S - 25,36653,859 (947,067) 63,435 4,910 :: 52.379 293,357 (947,067\ 2,400,180 1,200,832 8,373,183 342,946 2,171,939 14,937 2,196,976 Rural Telephone Company Nehalem Telecommunications, Inc. $ 668,225 $ 44,632 89,407 527,583 43,541 7,497 I 1,1 14 48,133 519,600 $ 30,896 803,801 82,272 879 9J4; 7,342 $ 1,281,233 l00,g94 673,290 43,541 13,286 I l,l 14 57,282 7,342 212,198 1,452,036 14,937 1,466,973 376,957_ 376,957 342,946 56,900 1,600,000 10,1977,399,918 157,352 7,467,015 1,757,352 2,666,346 (4,266,346) 56,900 l0,tg7(311,576) t54,228 7,399,922 2,354,770 (4,112,1l8) 7,467,019 $_r6,4esA67- $_4Jee,07r- $_1J2.!,e0s. SlIrgliJ!, $_20,4n 2s8. See Independent Auditor's Report on Supplementary Information -23 - RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATING STATEMENT OF OPERATIONS Year Ended December 31,2014 OPERATING REVENUES Local network services Network access services Long distance services Internet services Video services Other nonregulated services Miscellaneous Uncollectible, net of recoveries OPERATING EXPENSES Plant specific operations Plant nonspecific operations Cost oflong distance services Cost of intemet services Cost ofvideo services Depreciation and amortization Customer operations Corporate operations General taxes oPERATING INCOME (LOSS) oTHERINCOME (EXPENSE) Interest and dividend income Allowance for funds used during construction Equity income in unconsolidated affrliate Interest expense Other, net INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS (LOSS) OF STJBSIDIARIES INCOMETAXES TNCOME (LOSS) BEFORE EQUTTY EARNTNGS (LOSS) OF STTBSTDTARTES EQUITY EARNINGS (LOSS) OF SUBSIDIARIES NET LOSS 91s 171,766 1,436,761 45t,425 Rural Telephone Company $ 390,288 4,283,537 607,781 t41,154 273,026 19,353 60,665 5,775,804 Nehalem Telecommunications, Inc. $ 483,567 r,743,335 14,777 668,012 34,338 151,505 (2,672) 3,1s2,862 Pend Oreille Telephone ComDany $ 393,108 1,905,1 33 419,799 20,u; 27,027 (e,913) 2,755,966 693,426 19t,957 388,260 3 r 5,94; 165,053 797,211 54,556 2,606,41r 149,555 17,951 65 (70,41s) (6,100) (58,4ee) 91,056 386,804 (29s,748) Intercompany Eliminations Consolidated r,638,022 412,190 510,692 217,494 1,1 68,3 16 263,687 t,312,967 l3 l,653 5,655,02r 120,783 31,472 67,319 137,058 (37s,842) 20,12s (l 19,868) 558,167 167,122 50,449 5t9,459 604,973 I 59,s02 689,499 70,912 2,820,083 332,779 4,423 886 ( 1 2s,828) (40,494) ( 161,013) (279,659) (r0,6e6) 10,696 575,406 $ 1,266,963 7,932,005 74,777 1,695,592 t4t,t54 328,176 197,885 48,080 rr,684,632 2,989,615 771,269 50,449 1,418,411 217,494 2,089,237 s88,242 2,799,677 257,121 I 1,081,515 603,117 43,1 50 68,270 137,058 (s6 l,38e) (26,469) (33e,380) 263,737 2,274,990 (2,011,2s3)(1,43s,846) (s7s,406) $_(2,011,25a $_(27e,65e,) $_(2e549) $_s7s,406 $_(2,011,25' See Independent Auditor's Report on Supplementary Information RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATING BALANCE SHEET December 31,2013 ASSETS Nehalem Telecommunications, Inc. CURRENT ASSETS Cash and cash equivalents Special construction account Marketable securities Accounts receivable: Due from customers Interexchange carriers Less allowance of $90,000 Affiliates Other Materials and supplies at average cost Inventory at average cost Prepayments OTHER NONCURRENT ASSETS lnvestment in affiliates Marketable securities Equity method investments Other investments Deferred charges Intangibles PROPERTY, PLANT AND EQUIPMENT Telephone plant in service Other property Less accumulated depreciation Plant under construction Plant acquisition adjustment, net Property held for future use TOTAL ASSETS 46,664 101,294 78,37 | 7,599 78,466 11,972 21.478 957,470 (719,324\ (4,687,523_) 26631; 52,184 513 6,307 ,317 3 l g,0l3 434,990 (4,687,523\ Rural Telephone Company $ 231,367 9,359 19,ll2 70,580 366,035 937,387 864,277 512,4gg 31,943 1,340 3,042,898 4,687,523 t,397,143 222,651 $ 511,626 $ 1,060,796 9,224 19,l12 163,790 730,356 559,643 874,741 8t 1,490 49,777 22,818 4,301,747 67,390 1,397,143 956,557 52,184 513 2,373,797 52,868,766 538,459 53,407,225 40,267,051 13,140,174 674,549 1,218,515 5,250 15,038,488 Pend Oreille Telephone Company $ 317,803 tur_ 46,546 263,027 263,209 2,865 220,526 5,862 - 1,120,703 67,390 367,5g; Intercompany Eliminations Consolidated (71W2;) 25,521,401 5 I 1,555 26,032,956 18,231,999 7,800,957 634,578 4,000 8/39J35 t0,729,546 10,729,546 8,009,695 2,7lg,g5l 1,218,515 3,939,366 16,617,819 26,904 16,644,723 14,025,357 2,619,366 39,971 1,250 ,,6605t, $_t-7,789,7s,q $_1111,84e $_42t6270. See Independent Auditor's Report on Supplementary Information -25 - $ (5,406,847) $ 2t,714,022 RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATING BALANCE SHEET December 31,2013 LIABILITIES AND STOCKHOLDERS' EQUITY Rural Telephone Company Nehalem Telecommunications, Inc. Pend Oreille Telephone Company Intercompany Eliminations Consolidated CURRENT LIABILITIES Current portion of long-term debt Accounts payable: Interexchange carriers Afiiliates Other Advance billing and payments Customer deposits Accrued taxes Accrued interest Other accrued liabilities LONG.TERM DEBT, LESS CURRENT PORTION STOCKHOLDERS'EQUITY Common stock Other capital Retained earnings TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 812,327 $ 163,928 3,371 530,323 42,951 7,032 52,425 103,836 tJt6J% 70,932 663,160 139,317 969 10,049 7,342 42,107 l,42g,g3g 20,291 52,793 50,963 3,670 54,771 269,923 1,295,829 (719,324) 496,063 $ 87,435 $ 1,395,825 255,151 720,603 42,951 ll,67l 62,473 7,342 200,714 6,270,884 1,647,900 (719,324\ 2,696,730 9,214,613 2,666,346 (4,266,346) 56,900 l0,tg1(15,828) (42t,t77\ 9,735,582 2,650,518 (4,687,523\ 9,802,679 56,900 1,600,000 10,1979,735,576 437,011 9,802,673 2,037,011 $_l-7,789,75,q $5,114,849 $_4216270. $-(5,406,847,) $_2tJr4W See Independent Auditor's Report on Supplementary Information -26 - RURAL TELEPHONE COMPANY GLENNS FERRY, IDAHO CONSOLIDATING STATEMENT OF OPERATIONS Year Ended December 31, 2013 Rural Telephone Company Nehalem Telecommunications, Inc. Pend Oreille Telephone Company Consolidated OPERATING REVENUES Local network services Network access services Long distance services Intemet services Video services Other nonregulated services Miscellaneous Uncollectible, net of recoveries OPERATING EXPENSES Plant specific operations Plant nonspecific operations Cost of long distance services Cost of internet services Cost ofvideo services Depreciation and amortization Customer operations Corporate operations General taxes oPERATTNG TNCOME (LOSS) oTHERTNCOME (EXPENSE) Interest and dividend income Allowance for funds used during construction Equity income in unconsolidated affrliate Interest expense Other, net INCOME BEFORE EQUITY EARNINGS (LOSS) OF SUBSIDIARIES EQUITY EARNINGS (LOSS) OF SUBSIDIARIES NET TNCOME (LOSS) 579,789 122,536 258,752 20,911 (67,t22) 5,219,335 1,466,457 353,552 525,577 249,164 1,323,01I 251,96t 1,066,1 l9 147,541 5,383,382 399,914 3,904,555 73,465 15,229 25,891 16,064 (5,841) 2,989,458 645,155 172,200 36 1,128 300,87; 167,lt9 783,979 52,375 2,482,822 506,636 33,571 12,054 (70,940) t63 (25,152) 481,484 (19,972) t9.972 (392,020) $ l,29s,ss0 7,594,506 77,906 1,655,319 122,536 3t6,487 158,584 (78,429\ 11,142,459 2,673,359 683,285 44,838 1,459,784 249,164 2,222,041 583,711 2,485,532 305,826 10,707,540 434,919 106,582 27,403 224,0t9 (619,104) 135,51 I (125,590) 309,329 494,687 $ 400,949 1,541,541 2,148,410 77,906671,545 403,985 (164,047\ 92,330 31,g44 l2l,609 (5,466\ 2,933,666 561,747 157,533 44,939 573,079 598,1 55 164,640 635,434 105,910 2,941,336 19,518 120 224,018(396,733) (171,403)165,377 (30,029) 81,356 (181,794) (82,69 r ) 392,020 (89,464) $_10e,322 $___(8e,469 $_19!$1 $_GZ,Eq) $ 30e,32e See Independent Auditor's Report on Supplementary Information -27 - REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Rural Telephone Company and Subsidiaries Glenns Ferry,Idaho We have audited the accompanying consolidated financial statements of Rural Telephone Company and subsidiaries as of and for the year ended December 31,2014, and have issued our report thereon dated April24,2015. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting ln planning and performing our audit of the consolidated financial statements, we considered Rural Telephone Company's intemal control over financial reporting (intemal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we do not express an opinion on the effectiveness of the Company's internal control. Our consideration of the internal control was for the limited purpose described in the preceding paragraph and was not designed to identifl/ all deficiencies in internal control that might be material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in intemal control such that there is a reasonable possibility that a material misstatement of the entity's consolidated financial statements will not be prevented or detected and corrected on a timely basis. We did not identiff any deficiencies in intemal control that we consider to be material weaknesses. -28 - Kiesling Associates LLP I Kiesling Consulting LLC I Kiesling lnvestment Management LLC A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiencies in the Company's intemal control to be significant deficiencies: Comment: Similar to other companies its size, the Company has a limited number of personnel, as a result, it had utilized accounting assistance from another party to draft financial statements and assist with preparation of certain normal annual closing entries. Potential Effects: Lack of knowledge and experience in preparing financial statements and normal closing entries could result in incomplete disclosures and/or incorrect presentation of information which could have an adverse impact to investors relying on the financial statements. Management's Resoonse: The Company reviews and approves the results of these activities and believes this approach provides a cost effective solution in light of their limited resources. Comment: The Company's limited resources and personnel also limits their ability to have a formal intemal control and information technology system, complete segregation of duties and a formal risk assessment and monitoring system. Potential Effects: Due to the lack of segregation of duties, there is a potential for an employee to perpetrate and conceal a theft of assets from the Company. Manasement's Response: The Company periodically performs an informal risk assessment and monitors the business risk associated with assignment of personnel to various activities. Compliance and Other Matters As part of obtaining reasonable assurance about whether Rural Telephone Company's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Govemment Auditing Standards. Rural Telephone Company'Response to Findings The Company's written response to the significant deficiencies identified in our audit has not been subjected to the audit procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of intemal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Company's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Company's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ry a*,*1- LcF Madison, Wisconsin Apil24,2015 -30- esjlns INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH ASPECTS OF CONTRACTUAL AGREEMENTS AND REGULATORY REQUIREMENTS FOR TELECOMMUNICATIONS BORROWERS To the Board of Directors Rural Telephone Company and Subsidiaries Glenns Ferry,Idaho We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Govemment Auditing Standards issued by the Comptroller General of the United States, the consolidated financial statements of Rural Telephone Company and subsidiaries, which comprise the balance sheet as of December 31, 2014, and the related statements of operations, stockholders' equity and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated Apil24, 2015. ln accordance with Govemment Auditing Standards, we have also issued our report dated April 24,2015, on our consideration of Rural Telephone Company's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. No reports other than the reports referred to above related to our audit have been fumished to management. In connection with our audit, nothing came to our attention that caused us to believe that Rural Telephone Company failed to comply with the terms, covenants, provisions, or conditions of their loan, grant, and security instruments as set forth in 7 CFR Part 1773, Policy on Audits of Rurol Utilities Service Borrowers, $1773.33 and the clarified RUS policy memorandum dated February 7,2014, insofar as they relate to accounting matters as enumerated below. However, our audit was not directed primarily toward obtaining knowledge of noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding Rural Telephone Company's noncompliance with the above-referenced terms, covenants, provisions or conditions of the contractual agreements and regulatory requirements, insofar as they relate to accounting matters. In connection with our audit, we noted no matters regarding Rural Telephone Company's accounting and records to indicate that Rural Telephone Company did not: o Maintain adequate and effective accounting procedures; o Utilize adequate and fair methods for accumulating and recording labor, material and overhead costs, and the distribution of these costs to construction, retirement and maintenance or other expense accounts; o Reconcile continuing property records to the controlling general ledger plant accounts; o Clear construction accounts and accrue depreciation on completed construction; - 31 - Kiesling Associates LLP I Kiesling Consulting LLC I Kiesling lnvestment Management LLC o Record and properly price the retirement of plant; o Seek the approval ofthe sale, lease or transfer of capital assets and disposition ofproceeds for the sale or lease of plant, material or scrap; o Maintain adequate conhol over materials and supplies; . Prepare accurate and timely Financial and Operating Reports; o Obtain written approval to enter into any contract for the management, operation, or maintenance of the borrower's system if the contract covers substantially all of the telecommunications system; r Disclose material related party transactions in the financial statements, in accordance with requirements for related parties in generally accepted accounting principles; o Record depreciation in accordance with RUS requirements (See RUS Bulletin 183-1, Depreciation Rates and Procedures); . Comply with the requirements for the detailed schedule of investments. -32 - RURAL TELEPHONE COMPAIIY AND SUBSIDIARIES SCHEDULE OF SUBSIDIARY AI\D AFFILIATE INVESTMENTS December 31,2014 and 2013 EntiW Name Principal Business Ownership Percentage Accounting method Year ended December 3 l, 2013 Original Investment Prior years Earnings (losses) Prior years Cunent year Dividends received Prior years Current year Book value of investment December 31, 2013 Year ended December 3 l, 2014 Eamings (losses) Current year Dividends received Current year Book value ofinvestment December 31,2014 Nehalem Telecommunications, Inc. Local exchange and access t00% Consolidated Pend Orcille Telephone -9psq-Local exchange and access r00% Consolidated Syringa -@.8- Broadband Technology/Data Transport 4% Equity $- 361,576 1,069,407 224,018 (230,0r 8) (27,840) r,600,000 $ 526,475 (8e,464) 402,'745 481,484 (900,0s7) 2,037,011 2,650,518 t,397,143 (279,6s9) (29s,748\ 137,0s8 (se,6r4) s 2,354,770 g 1,474,587 -JJ- This report is intended solely for the information and use of the audit committee, board of directors and management of the Company, the Rural Development Utilities Program and supplemental lenders, and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a maffer of public record and its distribution is not limited. ,* a,*,*1- LcF Madison, Wisconsin Apil24,2015 -34- E o N.! No D on @ a{ c D r? ! oooloa qDNriNq E€q o , , r E{E iq* {tt o ooqoo or:,:@@qN l t!q D oEo d oAo 9 GE oo Eooe. 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