UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
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Explanatory Note
This Current Report on Form 8-K/A amends the Initial Form 8-K to include the unaudited pro forma consolidated financial information required by Item 9.01(b) of Form 8-K and to update certain disclosures under Item 9.01(b) of the Initial Form 8-K. Such information should be read in conjunction with the Initial Form 8-K. Except as provided herein, the disclosures made in the Initial Form 8-K remain unchanged.
| Item 9.01. | Financial Statements and Exhibits. |
(b) Pro Forma Financial Information.
The unaudited pro forma consolidated financial information of the Company (giving effect to the Transaction) as of December 31, 2023 and for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 (the “Unaudited Pro Forma Financial Information”), is filed as Exhibit 99.1 to this Current Report on Form 8-K/A and is incorporated herein by reference.
The Unaudited Pro Forma Financial Information is presented for illustrative purposes only and is not intended to represent or be indicative of the Company’s consolidated results of operations or financial position that would have been reported had the Transaction been completed as of the dates presented in the Unaudited Pro Forma Financial Information. The Unaudited Pro Forma Financial Information should not be taken as a representation of the Company’s future consolidated results of operations or financial condition. The pro forma adjustments in the Unaudited Pro Forma Financial Information are based on available information and certain assumptions that management believes are reasonable under the circumstances.
| (d) Exhibits. | |
| Exhibit No. | Description |
| 99.1 | Unaudited Pro Forma Condensed Consolidated Financial Information |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Forward-Looking Statements
This communication contains forward-looking statements about Shentel regarding, among other things, its business strategy, its prospects and its financial position. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “plans,” “should,” “could,” or “anticipates” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. The forward-looking statements are based upon management’s beliefs, assumptions and current expectations and may include comments as to Shentel’s beliefs and expectations as to future events and trends affecting its business that are necessarily subject to uncertainties, many of which are outside Shentel’s control. Although management believes that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at which such performance or results will be achieved, and actual results may differ materially from those contained in or implied by the forward-looking statements as a result of various factors. A discussion of other factors that may cause actual results to differ from management’s projections, forecasts, estimates and expectations is available in Shentel’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Reports on Form 10-Q. Those factors may include, among others, Shentel’s ability to satisfy the closing conditions for subsequent tower sale closings, the expected savings and synergies from Shentel’s acquisition of Horizon Telecom may not be realized or may take longer or cost more than expected to realize, changes in overall economic conditions including rising inflation, regulatory requirements, changes in technologies, changes in competition, demand for our products and services, availability of labor resources and capital, natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as COVID-19, and other conditions. The forward-looking statements included are made only as of the date of the statement. Shentel undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events, except as required by law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SHENANDOAH TELECOMMUNICATIONS COMPANY | |
| Dated: April 4, 2024 | /s/ James J. Volk |
| James J. Volk | |
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Senior Vice President – Chief Financial Officer
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Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Information
Effective as of March 29, 2024, Shenandoah Mobile, LLC, a wholly-owned subsidiary of Shenandoah Telecommunications Company (the “Company”), completed the previously announced sale of substantially all of the Company’s tower portfolio and operations (“Tower Portfolio”) to Vertical Bridge Holdco, LLC for $309.9 million in cash (the “Transaction”). The Transaction was completed pursuant to the terms of Purchase and Sale Agreement, dated February 29, 2024, as amended by Amendment No. 1 to the Purchase and Sale Agreement, dated March 29, 2024.
The sale of the Tower Portfolio is considered a significant disposition for purposes of Item 2.01 of Form 8-K. As a result, the Company prepared the accompanying unaudited pro forma condensed consolidated financial information in accordance with Article 11 of Regulation S-X.
The Company has not previously reported its operations of the Tower Portfolio as discontinued operations in its consolidated financial statements included in Form 10-K for the year ended December 31, 2023. The accompanying unaudited pro forma condensed consolidated statements of comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021 give effect to the divestiture as if it had occurred on January 1, 2021. The unaudited pro forma condensed consolidated financial information only present financial results through continuing operations attributable to the Company and excludes any historically reported discontinued operations other than those of the Tower Portfolio. The accompanying unaudited pro forma condensed consolidated balance sheet gives effect to this divestiture as if it had occurred on December 31, 2023, the date of the Company’s most recently filed balance sheet.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with the consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.
The unaudited pro forma condensed consolidated financial information is presented based on assumptions, adjustments, and currently available information described in the accompanying notes and is intended for informational purposes only. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been had the divestiture been completed on the dates assumed. In addition, it is not necessarily indicative of the Company’s future results of operations or financial condition. Actual adjustments may differ materially from the information presented.
| SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES | ||||||||||||||
| Unaudited Pro Forma Condensed Consolidated Balance Sheet | ||||||||||||||
| December 31, 2023 | ||||||||||||||
| (in thousands) | ||||||||||||||
| Historical | Transaction Accounting Adjustments | Unaudited Pro Forma Continuing Operations | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 139,255 | $ | 305,033 | a | $ | 444,288 | |||||||
| Accounts receivable, net | 19,782 | — | 19,782 | |||||||||||
| Income taxes receivable | 4,691 | — | 4,691 | |||||||||||
| Prepaid expenses and other | 11,782 | — | 11,782 | |||||||||||
| Current assets held for sale | 561 | — | 561 | |||||||||||
| Total current assets | 176,071 | 305,033 | 481,104 | |||||||||||
| Investments | 13,198 | — | 13,198 | |||||||||||
| Property, plant and equipment, net | 879,499 | (29,162 | ) | b | 850,337 | |||||||||
| Goodwill and intangible assets, net | 81,123 | — | 81,123 | |||||||||||
| Operating lease right-of-use assets | 50,640 | (36,237 | ) | b | 14,403 | |||||||||
| Deferred charges and other assets | 13,698 | (2,137 | ) | b | 11,561 | |||||||||
| Total assets | $ | 1,214,229 | $ | 237,497 | $ | 1,451,726 | ||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Current maturities of long-term debt, net of unamortized loan fees | $ | 7,095 | $ | — | $ | 7,095 | ||||||||
| Accounts payable | 53,546 | — | 53,546 | |||||||||||
| Advanced billings and customer deposits | 13,241 | (847 | ) | b | 12,394 | |||||||||
| Accrued compensation | 11,749 | — | 11,749 | |||||||||||
| Current operating lease liabilities | 3,081 | (878 | ) | b | 2,203 | |||||||||
| Accrued liabilities and other | 9,643 | (1,816 | ) | b | 7,827 | |||||||||
| Total current liabilities | 98,355 | (3,541 | ) | 94,814 | ||||||||||
| Long-term debt, less current maturities, net of unamortized loan fees | 292,804 | — | 292,804 | |||||||||||
| Other long-term liabilities: | ||||||||||||||
| Deferred income taxes | 88,147 | (2,087 | ) | b | 86,060 | |||||||||
| Asset retirement obligations | 10,069 | (9,516 | ) | b | 553 | |||||||||
| Benefit plan obligations | 3,943 | — | 3,943 | |||||||||||
| Non-current operating lease liabilities | 48,358 | (39,534 | ) | b | 8,824 | |||||||||
| Other liabilities | 19,883 | (3,550 | ) | b | 16,333 | |||||||||
| Total other long-term liabilities | 170,400 | (54,687 | ) | 115,713 | ||||||||||
| Shareholders' equity: | ||||||||||||||
| Common stock | — | — | — | |||||||||||
| Additional paid-in capital | 66,933 | — | 66,933 | |||||||||||
| Retained earnings | 584,069 | 295,725 | a,b | 879,794 | ||||||||||
| Accumulated other comprehensive income | 1,668 | — | 1,668 | |||||||||||
| Total shareholders' equity | 652,670 | 295,725 | 948,395 | |||||||||||
| Total liabilities and shareholders' equity | $ | 1,214,229 | $ | 237,497 | $ | 1,451,726 | ||||||||
| SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES | ||||||||||||
| Unaudited Pro Forma Condensed Consolidated Statement of Comprehensive Income (Loss) | ||||||||||||
| Year Ended December 31, 2023 | ||||||||||||
| (in thousands) | ||||||||||||
| Historical | Transaction Accounting Adjustments (c) | Unaudited Pro Forma Continuing Operations | ||||||||||
| Service revenue and other | $ | 287,379 | $ | (18,247 | ) | $ | 269,132 | |||||
| Operating Expenses: | ||||||||||||
| Cost of services exclusive of depreciation and amortization | 106,101 | (5,251 | ) | 100,850 | ||||||||
| Selling, general and administrative | 103,631 | (1,412 | ) | 102,219 | ||||||||
| Impairment expense | 2,552 | — | 2,552 | |||||||||
| Depreciation and amortization | 65,471 | (2,103 | ) | 63,368 | ||||||||
| Total operating expenses | 277,755 | (8,766 | ) | 268,989 | ||||||||
| Operating income (loss) | 9,624 | (9,481 | ) | 143 | ||||||||
| Other income: | ||||||||||||
| Other income, net | 1,387 | — | 1,387 | |||||||||
| Income (loss) from continuing operations before income taxes | 11,011 | (9,481 | ) | 1,530 | ||||||||
| Income tax expense (benefit) | 2,973 | (2,479 | ) | 494 | ||||||||
| Income (loss) from continuing operations | $ | 8,038 | $ | (7,002 | ) | $ | 1,036 | |||||
| Basic - Income (loss) from continuing operations | $ | 0.16 | $ | (0.14 | ) | $ | 0.02 | |||||
| Diluted - Income (loss) from continuing operations | $ | 0.16 | $ | (0.14 | ) | $ | 0.02 | |||||
| Weighted average shares outstanding, basic | 50,396 | — | 50,396 | |||||||||
| Weighted average shares outstanding, diluted | 50,715 | — | 50,715 | |||||||||
| SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES | ||||||||||||
| Unaudited Pro Forma Condensed Consolidated Statement of Comprehensive Income (Loss) | ||||||||||||
| Year Ended December 31, 2022 | ||||||||||||
| (in thousands) | ||||||||||||
| Historical | Transaction Accounting Adjustments (c) | Unaudited Pro Forma Continuing Operations | ||||||||||
| Service revenue and other | $ | 267,371 | $ | (18,460 | ) | $ | 248,911 | |||||
| Operating Expenses: | ||||||||||||
| Cost of services exclusive of depreciation and amortization | 107,546 | (5,267 | ) | 102,279 | ||||||||
| Selling, general and administrative | 92,392 | (1,279 | ) | 91,113 | ||||||||
| Restructuring expense | 1,251 | — | 1,251 | |||||||||
| Impairment expense | 5,241 | — | 5,241 | |||||||||
| Depreciation and amortization | 68,899 | (2,416 | ) | 66,483 | ||||||||
| Total operating expenses | 275,329 | (8,962 | ) | 266,367 | ||||||||
| Operating loss | (7,958 | ) | (9,498 | ) | (17,456 | ) | ||||||
| Other expense: | ||||||||||||
| Other expense, net | (1,348 | ) | — | (1,348 | ) | |||||||
| Loss from continuing operations before income taxes | (9,306 | ) | (9,498 | ) | (18,804 | ) | ||||||
| Income tax benefit | (927 | ) | (2,499 | ) | (3,426 | ) | ||||||
| Loss from continuing operations | $ | (8,379 | ) | $ | (6,999 | ) | $ | (15,378 | ) | |||
| Basic - Loss from continuing operations | $ | (0.17 | ) | $ | (0.14 | ) | $ | (0.31 | ) | |||
| Diluted - Loss from continuing operations | $ | (0.17 | ) | $ | (0.14 | ) | $ | (0.31 | ) | |||
| Weighted average shares outstanding, basic | 50,155 | — | 50,155 | |||||||||
| Weighted average shares outstanding, diluted | 50,155 | — | 50,155 | |||||||||
| SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES | ||||||||||||
| Unaudited Pro Forma Condensed Consolidated Statement of Comprehensive Income (Loss) | ||||||||||||
| Year Ended December 31, 2021 | ||||||||||||
| (in thousands) | ||||||||||||
| Historical | Transaction Accounting Adjustments (c) | Unaudited Pro Forma Continuing Operations | ||||||||||
| Service revenue and other | $ | 245,239 | $ | (17,048 | ) | $ | 228,191 | |||||
| Operating Expenses: | ||||||||||||
| Cost of services exclusive of depreciation and amortization | 102,299 | (5,005 | ) | 97,294 | ||||||||
| Selling, general and administrative | 82,451 | (1,197 | ) | 81,254 | ||||||||
| Restructuring expense | 1,727 | — | 1,727 | |||||||||
| Impairment expense | 5,986 | — | 5,986 | |||||||||
| Depreciation and amortization | 55,206 | (2,053 | ) | 53,153 | ||||||||
| Total operating expenses | 247,669 | (8,255 | ) | 239,414 | ||||||||
| Operating loss | (2,430 | ) | (8,793 | ) | (11,223 | ) | ||||||
| Other income: | ||||||||||||
| Other income, net | 8,665 | — | 8,665 | |||||||||
| Income (loss) from continuing operations before income taxes | 6,235 | (8,793 | ) | (2,558 | ) | |||||||
| Income tax benefit | (1,694 | ) | (2,175 | ) | (3,869 | ) | ||||||
| Income (loss) from continuing operations | $ | 7,929 | $ | (6,618 | ) | $ | 1,311 | |||||
| Basic - Income (loss) from continuing operations | $ | 0.16 | $ | (0.13 | ) | $ | 0.03 | |||||
| Diluted - Income (loss) from continuing operations | $ | 0.16 | $ | (0.13 | ) | $ | 0.03 | |||||
| Weighted average shares outstanding, basic | 50,026 | — | 50,026 | |||||||||
| Weighted average shares outstanding, diluted | 50,149 | — | 50,149 | |||||||||
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
| a. | Adjustment represents the net cash proceeds from the sale of the Tower Portfolio as if the closing date was December 31, 2023. |
| b. | Adjustment reflects the elimination of the assets and liabilities of the Tower Portfolio due to the Transaction. |
| c. | Adjustments include the removal of historical operations of the Tower Portfolio and the addition of intercompany revenue and cost of services from continuing operations of the Company previously eliminated in consolidation. |