Company Completes Acquisition of NTELOS During Second Quarter

Adjusted OIBDA of $55.9 Million and Continuing OIBDA of $49.8 Million

EDINBURG, Va., Aug. 05, 2016 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company ("Shentel") (NASDAQ:SHEN) announces financial and operating results for the three and six months ended June 30, 2016.

Consolidated Second Quarter Results

For the quarter ended June 30, 2016, the Company reported total revenues of $130.3 million, an increase of 52.1% compared to $85.7 million for the 2015 second quarter.  The increase was almost entirely due to the nTelos acquisition which was completed effective May 6, 2016.  The integration of nTelos' operations and the transition of its assets and customers is progressing as expected, with Shentel currently ahead of its schedule on the migration of nTelos customers to the Sprint platform.

Wireless service revenues increased 78.2% as a result of the acquisition of approximately 404,000 postpaid and 155,000 prepaid subscribers from nTelos and Sprint, and a reduction in postpaid fees retained by Sprint.  Cable segment revenues increased 9.3% due to an increase in subscribers and Revenue Generating Units (RGUs), video price increases to offset increases in programming costs, as well as improved product mix with customers selecting higher-speed data packages.  Wireline segment revenues increased 12.9% due to higher fiber lease revenues, as well as higher internet service fees as customers upgraded their services.

Total operating expenses were $136.5 million in the second quarter of 2016 compared to $67.0 million in the prior year period.  Operating expenses in the second quarter of 2016 included $20.1 million of overall integration and acquisition costs associated with the nTelos acquisition, including $5.3 million in the Wireless segment and $14.8 million in the Other segment.  An additional $2.3 million of costs to operate and support the nTelos back office and billing functions until customers can migrate to the Sprint platforms was included in cost of goods and services and selling, general and administrative expenses.

For the quarter ended June 30, 2016, the Company reported a net loss of $7.0 million, compared to net income of $10.5 million in the second quarter of 2015, primarily reflecting acquisition and integration costs incurred for its acquisition of nTelos.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 48.5% to $55.9 million in the second quarter of 2016 from $37.6 million in the second quarter of 2015.  Continuing OIBDA (Adjusted OIBDA less the benefit received from the waived Sprint management fee over the next six years) increased 32.3% to $49.8 million.

President and CEO Christopher E. French commented, "Our second quarter results include the customers and assets we gained through our merger with nTelos and we're pleased to have delivered revenue growth and increased OIBDA throughout all of our segments.  This is a transformational time for our company as we work to ensure that we are effectively serving our newly expanded customer base with the consistent coverage and high speed access our state-of-the-art networks provide.  The transition to one blended company is progressing well, and in addition to doubling our customer base we're excited about the opportunities presented by our increased footprint which has enhanced our presence in the Mid-Atlantic region."

Wireless Segment

Second quarter wireless service revenues increased $38.1 million or 78.2%, primarily related to the addition of both postpaid and prepaid customers as a result of the nTelos acquisition.   Additionally, the segment benefitted from a reduction in the postpaid fees retained by Sprint as part of the amended affiliate agreement.

Excluding the subscribers added on May 6, 2016 in the nTelos acquisition, during the second quarter of 2016, net postpaid subscribers declined by 1,319 as compared to 5,414 net postpaid subscriber additions in the second quarter of 2015, while net prepaid subscribers declined by 6,912 during second quarter 2016, compared to a decline of 2,352 in the second quarter of 2015.

Second quarter adjusted OIBDA in the Wireless segment was $45.0 million, an increase of 60.5% from the second quarter of 2015.  Continuing OIBDA in the Wireless segment was $38.9 million.

"Our wireless customer base has more than doubled, and we've added several highly complementary contiguous markets to our footprint.  During the quarter, we incurred expenses related to the migration of certain nTelos customers to the Sprint billing platform, but we also continued to benefit from a reduction in Sprint's fees.  We are continuing to improve reliability and coverage in our acquired markets as our upgrade progresses," Mr. French stated.

Cable Segment

Service revenues in the Cable segment increased $2.1 million or 9.3% to $24.2 million, due to 6.7% growth in average RGUs (the sum of voice, data, and video users), video rate increases implemented in January 2016 to pass through programming cost increases, and customers selecting higher speed data access packages.  Operating expenses increased slightly to $25.2 million in the second quarter of 2016. Second quarter operating income was $1.2 million compared to an operating loss of $0.4 million in the prior year.

Revenue generating units totaled 130,871 at June 30, 2016, an increase of 6.7% over June 30, 2015.

Adjusted OIBDA in the Cable segment for second quarter 2016 was $7.3 million, up 28.0% from $5.7 million in the second quarter of 2015.

Mr. French stated, "Customers are increasingly demanding more from their broadband provider, and our enhanced products and services position us well to meet those needs.  The strength of our offerings has enabled us to attract new customers and has motivated existing customers to increase their service selection and upgrade their monthly subscription plans." 

Wireline Segment

Revenue in the Wireline segment increased 12.9% to $18.6 million in the second quarter of 2016, as compared to $16.5 million in the second quarter of 2015.  Carrier access and fiber revenue for the quarter was $12.3 million, an increase from $2.1 million for the same quarter last year, as a result of new fiber contracts.  Operating expenses increased 7.3% or $0.9 million to $13.4 million for second quarter 2016, primarily due to costs to support new fiber contracts.

Adjusted OIBDA in the Wireline segment for second quarter 2016 was $8.3 million, as compared to $7.3 million in second quarter 2015.

Other Information

Capital expenditures were $39.6 million in the second quarter of 2016 compared to $15.6 million in the comparable 2015 period. 

Cash and cash equivalents as of June 30, 2016 were $40.6 million, compared to $76.8 million at December 31, 2015. Total outstanding debt at June 30, 2016 totaled $815.6 million, net of unamortized loan costs, compared to $199.7 million as of December 31, 2015.  At June 30, 2016, debt as a percent of total assets was 56.0%. The amount available to the Company through its revolver facility was $75.0 million, and from the delayed draw term loan, $50.0 million.

"Our balance sheet provides a solid platform for the continued growth of our customer base, and positions us well to enhance our service offerings and capabilities.  The nTelos integration and the expansion of our operations to include additional customers and new markets is progressing well.  We look forward to growing our position as one of the top six public wireless providers in the United States," Mr. French concluded.

Conference Call and Webcast

The Company will host a conference call and simultaneous webcast today, Friday, August 5, 2016, at 9 A.M. Eastern Time.

Teleconference Information: 
Friday, August 5, 2016 9:00 A.M. (ET)
Dial in number: 1-888-695-7639

Password: 59001676
Audio webcast: http://investor.shentel.com/

An audio replay of the call will be available approximately two hours after the call is complete, through August 12, 2016 by calling (855) 859-2056.

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States.  The Company's services include: wireless voice and data; cable video, internet and voice; fiber network and services; and local and long distance telephone. Shentel is the exclusive personal communications service ("PCS") Affiliate of Sprint in portions of Pennsylvania, Maryland, Virginia and West Virginia.  For more information, please visit www.shentel.com.  

This release contains forward-looking statements that are subject to various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen factors. A discussion of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations is available in the Company's filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(in thousands, except per share amounts)

Non-GAAP Financial Measure

In managing our business and assessing our financial performance, management supplements the information provided by financial statement measures prepared in accordance with GAAP with adjusted OIBDA and continuing OIBDA, which are considered "non-GAAP financial measures" under SEC rules.

Adjusted OIBDA is defined by us as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of:  certain non-recurring transactions; impairment of assets; gains and losses on asset sales; straight-line adjustments for the waived management fee; amortization of the affiliate expansion asset; and share-based compensation expense.  Adjusted OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.  Continuing OIBDA is defined by us as adjusted OIBDA, less the benefit received from the waived management fee by Sprint over the next approximate six years.

In a capital-intensive industry such as telecommunications, management believes that adjusted OIBDA and continuing OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance.  We use adjusted OIBDA and continuing OIBDA as supplemental performance measures because management believes they facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made.  In the future, management expects that the Company may again report adjusted OIBDA and continuing OIBDA excluding these items and may incur expenses similar to these excluded items.  Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes.  By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes adjusted OIBDA and continuing OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors.  In addition, we believe that adjusted OIBDA and continuing OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA and continuing OIBDA have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.  These limitations include the following:

• they do not reflect capital expenditures;
• many of the assets being depreciated and amortized will have to be replaced in the future and adjusted OIBDA and continuing OIBDA do not reflect cash requirements for such replacements;
• they do not reflect costs associated with share-based awards exchanged for employee services;
• they do not reflect interest expense necessary to service interest or principal payments on indebtedness;
• they do not reflect gains, losses or dividends on investments;
• they do not reflect expenses incurred for the payment of income taxes; and
• other companies, including companies in our industry, may calculate adjusted OIBDA and continuing OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers adjusted OIBDA and continuing OIBDA as a financial performance measure that supplements but does not replace the information reflected in our GAAP results.

The following table shows adjusted OIBDA for the three and six months ended June 30, 2016 and 2015:

The following table reconciles adjusted OIBDA and continuing OIBDA to operating income (loss), which we consider to be the most directly comparable GAAP financial measure, for the three and six months ended June 30, 2016 and 2015:

The following tables reconcile adjusted OIBDA and continuing OIBDA to operating income by major segment for the three and six months ended June 30, 2016 and 2015:

(1) Integration and acquisition costs consist of severance accruals for short-term nTelos personnel to be separated as integration activities wind down, transaction related expenses, device costs to support the transition to Sprint billing platforms, and other transition costs to support the migration to Sprint back-office functions  
(2) As part of the Company's amended affiliate agreement, Sprint agreed to waive the management fee, which is historically presented as a contra-revenue by the Company, for a period of approximately six years.  The impact of Sprint's waiver of the management fee over the approximate six-year period is reflected as an increase in revenue, offset by the non-cash adjustment to recognize this impact on a straight-line basis over the contract term of approximately 14 years.  
(3) Pursuant to the intangible asset exchange with Sprint, the Company recognized an intangible asset for the affiliate contract expansion received.  Consistent with the presentation of related service fees charged by Sprint, the Company recognizes the amortization of this intangible as a contra-revenue over the contract term of approximately 14 years.

Supplemental Information

Subscriber Statistics

The following tables show selected operating statistics of the Wireless segment as of the dates shown:

The June 30, 2016 numbers shown above include the following amounts acquired in the nTelos acquisition:

1) POPS refers to the estimated population of a given geographic area and is based on information purchased from third party sources.  Market POPS are those within a market area which we are authorized to serve under our Sprint PCS affiliate agreements, and Covered POPS are those covered by our network.
2) Net of approximately 160 overlap cell sites we intend to shut down in coming months.
3) PCS Average Monthly Retail Churn is the average of the monthly subscriber turnover, or churn, calculations for the period.

In addition, 1,260 former nTelos prepaid subscribers switched to postpaid subscribers as they migrated to the Sprint back-office platforms during the three and six months ended June 30, 2016.

The following table shows selected operating statistics of the Wireline segment as of the dates shown:

1) Effective October 1, 2015, we launched cable modem services on our cable plant, and eliminated the requirement that a customer have a telephone access line to purchase DSL service. 
2) The Wireline segment's video service passes approximately 16,000 homes.
3) June 2016 and December 2015 totals include 725 and 420 customers, respectively, served via the coaxial cable network.  During first quarter 2016, we modified the way we count subscribers when a commercial customer upgrades its internet service via a fiber contract. We retroactively applied the new count methodology to prior periods and the net result was increases in internet subscriber counts of 804, 434 and 352 subscribers to December 31, 2015, June 30, 2015 and December 31, 2014 totals, respectively.
4) Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles. Fiber counts were revised following a review of fiber records in the first quarter of 2015.

The following table shows selected operating statistics of the Cable segment as of the dates shown:

1) Homes and businesses are considered passed ("homes passed") if we can connect them to our distribution system without further extending the transmission lines.  Homes passed is an estimate based upon the best available information. 
2) Customer relationships represent the number of customers who receive at least one of our services.
3) Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer.  Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.  During the first quarter of 2016, we modified the way we count subscribers when a commercial customer upgrades its internet service via a fiber contract. We retroactively applied the new count methodology to prior periods, and applied similar logic to certain bulk customers; the net result was reductions in internet subscriber counts of 559, 682 and 673 subscribers to December 31, 2015, June 30, 2015 and December 31, 2014 totals, respectively.
4) Penetration is calculated by dividing the number of customers by the number of homes passed or available homes, as appropriate.
5) Digital video penetration is calculated by dividing the number of digital video customers by total video customers.  Digital video customers are video customers who receive any level of video service via digital transmission.  A dwelling with one or more digital set-top boxes or digital adapters counts as one digital video customer.
6) Homes and businesses are considered available ("available homes") if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area.
7) Revenue generating units are the sum of video, voice and high-speed internet customers.
8) Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

On January 1, 2016, the Company acquired the assets of Colane Cable Company.  With the acquisition, the Company acquired 3,299 video customers, 1,405 high-speed internet customers, and 302 voice customers.  The customers are included in the June 30, 2016 totals shown above.

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker.  The Company has three reportable segments, which the Company operates and manages as strategic business units organized by lines of business: (1) Wireless, (2) Cable, and (3) Wireline.   A fourth segment, Other, primarily includes Shenandoah Telecommunications Company, the parent holding company.

The Wireless segment has historically provided digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, as a Sprint PCS Affiliate.  With the recent acquisition of nTelos, the Company's wireless service area expanded to include south-central and western Virginia, West Virginia, and small portions of Kentucky and Ohio. This segment also owns cell site towers built on leased land, and leases space on these towers to both affiliates and non-affiliated service providers.

The Cable segment provides video, internet and voice services in Virginia, West Virginia and Maryland, and leases fiber optic facilities throughout southern Virginia and West Virginia. It does not include video, internet and voice services provided to customers in Shenandoah County, Virginia.

The Wireline segment provides regulated and unregulated voice services, DSL internet access, and long distance access services throughout Shenandoah County and portions of Rockingham, Frederick, Warren and Augusta counties, Virginia. The segment also provides video and cable modem services in portions of Shenandoah County, and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia and adjacent areas along the Interstate 81 corridor through West Virginia, Maryland and portions of central and southern Pennsylvania.

Wireless Service Revenues

Shenandoah Telecommunications, Inc.

Adele Skolits

CFO and VP of Finance

540-984-5161

Adele.skolits@emp.shentel.com



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John Nesbett/Jennifer Belodeau

Institutional Marketing Services (IMS)

203-972-9200

jnesbett@institutionalms.com

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