SEC Filing - Shenandoah Telecommunications Co

SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1999 Commission File Number 0-9881 SHENANDOAH TELECOMMUNICATIONS COMPANY (Exact name of registrant as specified in its charter) Virginia 54-1162806 -------- ---------- (State or other jurisdiction (IRS Employer of incorporation or Identification organization) Number) P.O. Box 459, Edinburg, Virginia 22824 -------------------------------------- (Address of principal executive office and zip code) Registrant's telephone number, including area code: (540) 984-4141 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the close of the period covered by this report. Class Outstanding at August 10, 1999 ----- ------------------------------ Common Stock, No Par Value 3,755,760 Shares

SHENANDOAH TELECOMMUNICATIONS COMPANY INDEX Page Number PART I. FINANCIAL INFORMATION Item I. Financial Statements Consolidated Balance Sheets June 30, 1999 and December 31, 1998 1 - 2 Consolidated Statements of Income Three Months and Six Months Ended June 30, 1999 and 1998 3 - 4 Consolidated Statements of Cash Flow Six Months Ended June 30, 1999 and 1998 5 Condensed Consolidated Statement of Stockholders' Equity 6 Notes To Consolidated Financial Statements 7 Item II. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 13 PART II. OTHER INFORMATION Item 4. Submission of Matters To a Vote 1of Security Holders 16 Item 6. Exhibits and Reports On Form 8-K 16 Signatures 17

SHENANDOAH TELECOMMUNICAITONS COMPANY AND SUBSIDIARY COMPANIES PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 1999 December 31, 1998 ------------- ----------------- ASSETS (Unaudited) Current Assets Cash and cash equivalents $ 6,655,892 $ 4,891,109 Held to maturity securities 499,581 Accounts receivable, including interest 4,448,030 4,272,016 Materials and supplies 3,337,876 3,488,137 Prepaid expenses and other current assets 494,704 777,853 ------- ------- Total current assets 14,936,502 13,928,696 Securities and Investments Available-for-sale securities 2,705,703 2,677,789 Other Investments 5,904,324 5,921,206 --------- --------- 8,610,027 8,598,995 Property, Plant and Equipment Plant in service 91,759,329 88,427,844 Plant under construction 6,829,844 5,670,371 --------- --------- 98,589,173 94,098,215 Less accumulated depreciation 31,840,343 29,063,738 ---------- ---------- $66,748,830 $65,034,477 Other assets Cost in excess of net assets of Business acquired, less accumulated Amortization 4,593,792 4,876,215 Deferred charges and other assets 503,459 354,216 Radio spectrum license net of Accumulated amortization 1,114,914 653,145 --------- ------- 6,212,165 5,883,576 --------- --------- $96,507,524 $93,445,744 =========== =========== See notes to condensed consolidated financial statements.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 1999 December 31, 1998 ------------- ----------------- LIABILITIES & STOCKHOLDERS EQUITY (Unaudited) Current Liabilities Current maturities of long-term debt $ 1,055,645 $ 863,972 Accounts payable 1,505,233 1,149,286 Advance billings & payments 494,212 712,581 Customers' deposits 123,574 113,586 Accrued compensation 489,941 890,443 Other current liabilities 1,127,429 1,072,422 Other taxes payable 381,326 214,433 ------- ------- Total current liabilities 5,177,360 5,016,723 Long-Term Debt, less current maturities 27,932,765 28,398,374 Other Liabilities and Deferred Credits Deferred investment tax credit 111,116 145,909 Deferred income taxes 6,750,530 6,741,121 Pension and other 1,556,295 1,331,465 --------- --------- 8,417,941 8,218,495 Minority Interests 2,175,144 2,265,426 Stockholders' Equity Common stock 4,734,377 4,734,377 Retained earnings 47,428,071 44,173,730 Accumulated other comprehensive income, Unrealized gain on available-for-sale Securities, net 641,866 638,619 ------- ------- 52,804,314 49,546,726 ---------- ---------- $96,507,524 $93,445,744 =========== =========== See accompanying notes to consolidated financial statements.

SHENANDOAH TELECOMMUNICAITONS COMPANY AND SUBSIDIARY COMPANIES PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 Operating Revenues ---- ---- ---- ---- Telephone: Local service $ 1,008,967 $ 929,325 $ 1,969,071 $ 1,851,355 Access 1,948,981 2,022,831 3,839,932 3,947,151 Toll 6,145 17,708 11,947 30,341 Directory 299,334 307,660 613,480 601,147 Facility leases 621,502 494,319 1,123,884 996,934 Billing and collection 113,515 137,710 237,467 256,134 Miscellaneous 43,975 39,817 81,962 81,224 ------ ------ ------ ------ Total telephone revenues 4,042,419 3,949,370 7,877,743 7,764,286 Cable television 876,520 784,233 1,662,261 1,500,901 ShenTel Service 796,859 573,601 1,729,603 1,099,968 Leasing 2,733 4,303 6,028 8,888 Mobile 3,158,602 2,426,328 5,580,036 4,483,371 PCS 937,822 910,948 1,640,300 1,577,684 Long distance 241,523 216,162 521,782 434,995 Network 169,310 153,733 323,043 307,467 ------- ------- ------- ------- Total operating revenues 10,225,788 9,018,678 19,340,796 17,177,560 Operating Expense Cost of products and services sold 292,469 340,969 754,583 706,227 Line costs 112,224 108,988 219,400 209,367 Plant specific 814,223 609,624 1,570,062 1,309,146 Plant non-specific: Network and other 1,643,780 1,443,094 3,138,355 2,683,724 Depreciation 1,617,700 1,312,564 3,175,636 2,594,095 Customer operations 1,285,139 1,213,359 2,498,287 2,412,045 Corporate operations 687,227 649,256 1,355,497 1,339,532 Other operating expenses 261,717 210,082 526,234 428,801 Taxes other than income 160,106 134,172 199,474 267,682 Total Operating Expense 6,874,585 6,022,108 13,437,528 11,950,619 --------- --------- ---------- ---------- Operating Income $ 3,351,203 $2,996,570 $ 5,903,268 $ 5,226,941 See notes to condensed consolidated financial statements.

SHENANDOAH TELECOMMUNICAITONS COMPANY AND SUBSIDIARY COMPANIES PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1999 1998 1999 1998 ---- ---- ---- ---- Non-operating income less expense $ 641,490 $ 413,381 $ 874,020 $ 622,768 Interest expense 441,565 418,422 910,126 731,266 ------- ------- ------- ------- Income before income taxes 3,551,128 2,991,529 5,867,162 5,118,443 Provision for income taxes 1,170,464 997,104 1,955,103 1,680,046 --------- ------- --------- --------- Net income before minority interest 2,380,664 1,994,425 3,912,059 3,438,397 Minority interest (439,220) (326,397) (657,718) (582,006) -------- -------- -------- -------- Net income $1,941,444 $1,668,028 $3,254,341 $ 2,856,391 ========== ========== ========== =========== Earnings per share Net earnings per share, basic and diluted $0.52 $0.44 $0.87 $0.76 ===== ===== ===== ===== Weighted average common shares outstanding basic and diluted 3,755,760 3,755,760 3,755,760 3,757,031 ========= ========= ========= ========= See notes to condensed consolidated financial statements.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL SATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOW (UAUDITED) Six Months Ended June 30, 1999 June 30, 1998 ------------- ------------- Cash Flows from Operating Activities Net income $ 3,254,341 $ 2,856,391 Adjustments to reconcile net income to net cash Provided by operating activities: Depreciation & amortization 3,175,636 2,596,329 Deferred taxes (59,460) 270,627 Investment (gains)/losses (742,776) (741,692) Minority share of income, net of distributions (90,282) 242,005 Other 66,967 57,809 Decrease/(increase) in Accounts receivable (176,014) (1,064,505) Materials 150,261 122,505 Increase/(decrease) in Accounts payable 355,947 (89,389) Income taxes payable 401,226 553,866 Deferrals & accruals (404,031) 424,638 -------- ------- Net cash provided by operating activities 5,931,815 5,228,584 Cash Flows From Investing Activities Purchase of property and equipment (4,666,121) (6,897,415) Purchase of intangible assets (486,214) 0 Purchase of investment securities (138,697) (623,457) Maturities of certificates of deposit 0 104,122 Maturity of investment securities 499,581 1,098,998 Cash flows from securities 898,355 335,231 ------- ------- Net cash used in investing activities (3,893,096) (5,982,521) Cash Flows From Financing Activities Proceeds from long-term debt 0 2,166,556 Stock redemption 0 (100,000) Principal payments on long-term debt (273,936) (129,157) -------- -------- Net cash provided by financing activities (273,936) 1,937,399 -------- --------- Net increase in cash and cash equivalents 1,764,783 1,183,462 Cash and cash equivalents: Beginning 4,891,109 5,203,521 --------- --------- Ending $ 6,655,892 $ 6,386,983 =========== =========== See notes to condensed consolidated financial statements.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) Accumulated Other Common Retained Comprehensive Shares Stock Earnings Income Total ------ ----- -------- ------ ----- Balance, January 1, 1998 3,760,760 $ 4,740,677 $ 40,579,090 $1,190,717 $46,510,484 Comprehensive income: ----------- Net income 5,603,775 -- 5,603,775 Change in unrealized gain on Securities available-for-sale, Net of tax ($368,110) (552,098) (552,098) ---------- Total comprehensive income 5,051,677 ---------- Dividends declared (1,915,435) (1,915,435) Redemption of common stock (5,000) (6,300) (93,700) (100,000) ------ ------ ------- -------- -------- Balance, December 31, 1998 3,755,760 4,734,377 44,173,730 638,619 49,546,726 --------- Comprehensive income Net income 3,254,341 3,254,341 Change in unrealized gain on Securities available-for-sale, Net of tax ($2,165) 3,247 3,247 --------- Total comprehensive income 3,257,588 --------- -------- -------- ------- --------- Balance, June 30, 1999 3,755,760 $ 4,734,377 $47,428,071 $641,866 $52,804,314 === ==== ========= =========== =========== ======== =========== See notes to condensed consolidated financial statements.

SHENANDOAH TELECOMMUNICATIONS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management, the accompanying condensed consolidated financial statements, contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly Shenandoah Telecommunications Company's financial position as of June 30, 1999 and the results of operations and cash flows for the six-month periods ended June 30, 1999 and 1998. While the Company believes that the disclosures presented are adequate, to make the information not misleading it is suggested that these financial statements be read in conjunction with the financial statements and notes included in the Company's annual report on Form 10-K. 2. The results of operations for the six-month period ended June 30, 1999 and 1998 are not necessarily indicative of the results to be expected for the full year. 3. The earnings per common share were computed on the weighted average number of shares outstanding. The Company has stock options outstanding, which are not dilutive; therefore basic and diluted earnings per share are the same. 4. The Company has identified nine reporting segments based on the products and services each provide. Each segment is managed and evaluated separately because of differing technologies and marketing strategies. A summary of external revenues and net income for each segment is as follows: Six Months Six Months June 30, 1999 June 30, 1998 External External Subsidiary Revenues Net Income Revenues Net Income ---------- -------- ---------- -------- ---------- Holding $ - $ 252,759 $ - $ 189,554 Telephone 7,877,743 2,903,950 7,764,286 2,850,982 Cable TV 1,662,261 (134,971) 1,500,901 (82,505) ShenTel 1,729,603 (37,562) 1,099,968 (220,853) Leasing 6,028 10,725 8,888 12,891 Mobile 5,580,036 842,762 4,483,371 739,437 Long Distance 521,782 102,386 1,577,684 52,828 Network 323,043 148,406 434,995 151,090 PCS 1,640,300 (834,114) 307,467 (837,033) --------- -------- ------- -------- Total $19,340,796 $ 3,254,341 $17,177,560 $ 2,856,391 =========== =========== =========== ===========

SHENANDOAH TELECOMMUNICATIONS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to changes in the interest rate environment; management's business strategy; national, regional, and local market conditions; and legislative and regulatory conditions. Readers should not place undue reliance on forward-looking statements, which reflect management's view only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances Shenandoah Telecommunications Company is a diversified telecommunications holding company providing both regulated and unregulated telecommunications services through its eight wholly-owned subsidiaries. This industry has, for some time, been in a period of transition from a protected monopoly to a competitive environment. A milestone in this transition was the passage of the Telecommunications Act of 1996. As a result of this ongoing change, Shenandoah Telecommunications has made and plans to continue to make significant investments in the new and emerging technologies. The most significant revenues are from the telephone local exchange company accounting for 39.5% of revenue and the cellular dominated operations of the Mobile subsidiary, accounting for 30.9% of revenue during the most recent quarter. Other significant services provided are paging, personal communications services (PCS), cable television, Internet access, long distance, and fiber facilities and towers leased to other telecommunications carriers. The Company also sells and leases equipment, mainly related to services provided and also participates in emerging technologies by direct investment in non-affiliated companies. RESULTS OF OPERATIONS Access revenues are fees for connection to the local exchange network charged to interexchange carriers. The volume for approximately two-thirds of these access revenues typically correlates with changes in minutes of use. This has not held true in 1999 due to rate reductions effective January 1, 1999. The minutes of use during the second quarter and the first six months of 1999 increased .2% and 2.9% respectively from the total minutes of use in comparative periods in 1998. The revenue decreased 2.7% in the second quarter and 3.7% year-to-date for the associated revenues.

SHENANDOAH TELECOMMUNICATIONS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) Second quarter cable television revenues increased 11.8% over the second quarter of 1998, due principally to a rate increase effective April 1, 1999. The year-to-date increase is 10.8%. The increase in the ShenTel Service revenues category for the second quarter of 1999 compared to 1998 was 38.9%. The year-to-date increase is 57.2%. This was due to increases in Internet Service revenues. The second quarter Internet revenues increased $206,509 or 57.0%. Second quarter 1998 revenues from our Internet Service operations increased $95,859 or 69.1% compared to the second quarter of 1997. Equipment sales revenue for the second quarter of 1999 increased $29,212 over second quarter 1998. The Mobile revenues are mainly comprised of revenues from cellular services. Total cellular revenues represented 24.6% of the Company's revenues during the second quarter. Second quarter 1999 local cellular revenues increased $124,609 or 11.4% compared to the same period in 1998. The year-to-date increase is $233,017 or 11.1%. Price reductions in our service plans were more than offset by customer growth. The year-to-date increase in outcollect roamer revenues is $708,384 or 33.8%. This change is attributed to additional network facilities our Company placed in service in late 1998, complemented growth in usage. Total revenues from the Cellular operation accounted for 27.0% of total Company revenues year-to-date, compared to 24.6% for the first six months of 1998. Long Distance revenues are principally for toll calls placed to locations outside the regulated telephone service area. These revenues increased by 11.7% for the second quarter and 20.0% for the first six months as compared to the corresponding periods in 1998. New discount calling plans have increased market share, and in combination with reduced line costs from a new contract, resulted in improved profitability for the Long Distance subsidiary. Network revenues are derived from fiber facility leases in Maryland and West Virginia. These revenues increased 10.1% in the second quarter and 5.1% in the first six months as compared to the corresponding periods in 1998. Additional leases have been offset in part by rate reductions in this increasingly competitive business. Cost of Goods Sold decreased 14.2% in the second quarter compared to the same period in 1998. The year-to-date increase is 6.9%. This is due primarily to the decrease in ShenTel equipment sales.

SHENANDOAH TELECOMMUNICATIONS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) Plant Specific expenses consist mainly of maintenance to the Company's plant in service. This expense category increased 33.6% in the second quarter compared to the second quarter of 1998. The year-to-date increase is 19.9% over the same period of 1998, principally in the Telephone, Cable Television, and PCS companies due to network expansions. The expense category Network and Other consists primarily of network support, engineering, and leased facilities costs. This was our largest expense category in the second quarter. These costs increased 13.9% in the second quarter compared to the second quarter of 1998. The year-to-date increase is 16.9%. These increases are primarily due to increased incollect roaming costs in the cellular operation, and increased leased facilities costs in the PCS and Internet operations due to network expansion. Depreciation and Amortization, historically our largest expense category, was 23.3% higher in the second quarter of 1999 compared to the same period in 1998. This is principally due to the pace of plant additions due mainly to the expansion of our fiber network and Cable TV upgrade. Plant in Service increased $3,331,485 or 3.8% at the end of second quarter 1999 compared to year-end 1998. Depreciation expense has also been increased as a result of decreasing the useful life estimates on a portion of the wireless equipment. The year-to-date increase is 22.4%. Customer operations increased 5.9% for the quarter and 3.6% year-to-date compared to the same periods in 1998. These costs are for the marketing and sales, billing, and customer service functions. Customer growth in the Internet and cellular businesses is primarily responsible for the increase. The Other Operating Expense category consists of royalty expense paid to programming providers for the Cable Television subsidiary. Interest expense has increased 5.5% in the second quarter compared to the second quarter of 1998, and increased 24.5% year-to-date.

SHENANDOAH TELECOMMUNICATIONS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Company has a note with CoBank to borrow up to $25 million. The term of the loan is for up to 15 years, with multiple interest options. The Company has borrowed $18,280,000 at July 31 against this note, with the last draw made in the first quarter of 1998. The Company is currently in discussions with CoBank about extending and enlarging this facility, particularly with regard to potential capital requirements for our PCS operation. A loan agreement with the RTB allows for additional borrowings of approximately $2,800,000. Expenditures of these loan funds are limited to capital projects for the regulated local exchange carrier. The Company has a $2 million line of credit with First Union Bank and a $5 million line of credit with CoBank. No draws are outstanding on these lines of credit as of July 31, 1999. The Company budgeted potential capital expenditures of approximately $17,800,000 for our subsidiaries in 1999. These capital needs will be met through internally generated cash flows and the existing CoBank facility and Rural Telephone Bank note. PCS TRANSITION Our PCS subsidiary has operated a GSM network since January 1996 under an agreement with American Personal Communications (APC), in which switching, billing, and other services are provided by APC. Sprint Spectrum, the current controlling interest of APC, recently announced the APC customer base will be transitioned to CDMA as Sprint PCS customers. We are currently in the process of building a CDMA network for use by Sprint PCS. We have executed purchase orders totaling $5 million for CDMA equipment to be installed by the end of this year. The Company's GSM equipment has a book value of approximately $6.5 million. Management is exploring various options for disposing of the equipment profitably or at a minimal amount of loss. IMPACT OF THE YEAR 2000 ISSUE The Year 2000 (Y2K) issue is the result of computer programs using a two-digit format, as opposed to four digits, to indicate the year. Some computer systems may be unable to interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to disruptions in operations. Year 2000 readiness means the ability to (a) continue to operate without substantial interruption attributable to the inability of systems to correctly process, provide, store and receive date data in and around the Year 2000 and (b) to mitigate the risks associated with such system limitations to an acceptable level. The Company has developed a four-phase program for Y2K readiness.

SHENANDOAH TELECOMMUNICATIONS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS IMPACT OF THE YEAR 2000 ISSUE (Continued) Phase I (Inventory and Assessment): In this Phase, an inventory was conducted of all hardware and software that might be at risk, including third-party businesses whose Y2K failures might significantly impact the Company, and an assessment was made on corrective direction. A Y2K Task Force, reporting to senior management, started work on this Phase in 1997. The Company determined that software provided by third parties was its most vulnerable link to the Y2K event. The at-risk software included switching, end user billing, carrier access billing, and financial accounting systems. The Company further identified that it had one mainframe and a local area network consisting of a server and approximately 75 individual microcomputers that may be vulnerable. Phase II (Strategy): In this Phase, the Company determined whether each at-risk system should be classified as "routine upgrade", "obsolete", or "non-critical." A "routine upgrade" involves the upgrade of hardware or software as part of the normal course of doing business. An "obsolete" designation involves total replacement in that the application no longer meets our business needs. A "non-critical" designation is for those applications that can be addressed through simple work-around solutions, manual updates, or other inexpensive measures. The majority of this classification work was completed mid-1998. Phase III (Installation and Testing): In this Phase, the selected approach to Y2K remediation is executed. The information that follows reflects the Company's current plans and estimates as of August 1999 and is subject to change. Routine upgrade classification: A performance enhancing upgrade of the mainframe computer, which also made the hardware and operating system Y2K compliant, was performed in the first quarter of 1998. The main telephone switches received new feature upgrades, incorporating Y2K compliance, in the fourth quarter of 1998. The latest releases of end user billing software, placed in service in the second quarter of 1999, have been represented by the vendors to be Y2K compliant. The local area network, comprised of the hardware and software on the server and the microcomputers, was approximately 95% Y2K compliant at the end of the second quarter of 1999. Obsolete classification: The new financial software and new carrier access billing software were placed in service in the second quarter of 1999. Non-critical classification: The measures identified to deal with these low priority systems are expected to be tested by the end of the third quarter of 1999, and implemented as necessary.

SHENANDOAH TELECOMMUNICATIONS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS IMPACT OF THE YEAR 2000 ISSUE (Continued) Phase IV (Monitoring and Contingency planning): In this Phase, the implemented changes are monitored and backup plans designed where necessary. With the majority of the required hardware and software changes completed by mid-1999, the Company is utilizing the changes in a production setting. This approach minimized disruption to current operations and had provided a basis for ongoing testing and monitoring. Contingency plans have not been deemed necessary as of mid-1999. With this four-phase program, where the normal business practice of weighing replacement against adopting routine upgrades was followed, the Company's non-routine expense in making its core operations Y2K compliant has thus far been minimal. The Company has also reviewed other third party relationships that could affect its operation. Most relationships are with large interexchange carriers and suppliers who state that they are or will be Y2K compliant. .

SHENANDOAH TELECOMMUNICATIONS COMPANY PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders (a) At the Annual Meeting of Shareholders of the Company held on April 20, 1999, 2,616,619 of the Company's 3,755,760 outstanding shares were present in person or by proxy and entitled to vote, which constituted a quorum. (b) At the Annual Meeting, the following nominees were elected: CLASS I DIRECTORS - To serve until the 2002 Annual Meeting Douglas C. Arthur Harold Morrison, Jr. Zane Neff (c) At the Annual Meeting, the following matters were voted upon and received the vote set forth below: (1) Election of Directors. Provided that a quorum is present, the nominees receiving the greatest number of votes cast are elected as directors and, as a result in tabulating the vote, votes withheld have no effect upon the election of directors. Each nominee for director was elected, having received the following vote: NOMINEE FOR WITHHELD Douglas C. Arthur 2,542,826 73,793 Harold Morrison, Jr. 2,562,054 54,565 Zane Neff 2,576,772 39,847 ITEM 6. Exhibits and Reports on Form 8-K A. Exhibit No. 27 - Financial Data Schedule B. No reports on Form 8-K were file for the period covered by this report.

SHENANDOAH TELECOMMUNICATIONS COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SHENANDOAH TELECOMMUNICATIONS COMPANY (Registrant) August 11, 1999 /s/ CHRISTOPHER E FRENCH -------------------------------- Christopher E. French President August 11, 1999 /s/ LAURENCE F PAXTON ------------------------------ Laurence F. Paxton Vice President - Finance

5 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 6,655,892 8,610,027 4,448,030 0 3,337,876 14,936,502 98,589,173 31,840,343 96,507,524 5,177,360 28,988,410 0 0 4,734,377 48,069,937 96,507,524 0 19,340,796 754,583 13,437,528 0 0 910,126 5,209,444 1,955,103 3,253,341 0 0 0 3,254,341 .87 .87