UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
----------
April 16, 2002
Date of Report (Date of earliest event reported)
Shenandoah Telecommunications Company
(Exact name of registrant as specified in its charter)
Virginia 0-9881 54-1162807
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 459
Edinburg, VA 22824
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (540) 984-4141
Item 5.
April 16, 2002
NEWS RELEASE
For further information, please contact Laurence F. Paxton at 540-984-5222.
SHENANDOAH TELECOMMUNICATIONS COMPANY
ANNOUNCES FIRST QUARTER RESULTS
AT ANNUAL SHAREHOLDERS' MEETING
Edinburg, VA. -- Shenandoah Telecommunications Company announced results
for first quarter 2002. The results are a combination of strong revenue and
ongoing operating income growth, partially offset by losses on external
investments. The ongoing operating performance was the result of continued
growth and expansion of its wireless businesses (which includes its Sprint PCS,
cellular, and tower operations); improvements in its wireline operations (which
includes its local telephone, cable television, and fiber optic networks); and,
increases in other services, primarily Internet access and web services.
Overall Highlights
Total consolidated net income for first quarter 2002 was $2.2 million, an
increase of 341 percent from $0.5 million in the first quarter of 2001. Net
income per share was $0.57 on a diluted basis, compared to $0.13 in first
quarter 2001. Results for both periods include losses on external investments,
as further described in a following section of this release.
Net income from ongoing operations increased by $1.2 million or 87 percent
to $2.6 million for the first quarter of 2002, or $0.68 per share in a diluted
basis, up from $1.4 million and $0.37 per share in first quarter 2001. The
Company experienced an increase in total
revenues to $25.8 million as compared to $17.8 million in 2001, an increase of
45 percent. The Company's revenue growth was primarily driven by large increases
in its wireless businesses.
The Company invested an additional $5.6 million in its operations during
the quarter, bringing its gross property, plant, and equipment to $180.9
million. Total debt decreased $1.9 million from $62.6 million to $60.7 million
during the quarter.
President and CEO, Christopher E. French, commented "We are pleased with
the operating financial results of first quarter 2002, and the fact that we were
able to reduce our debt slightly while continuing our growth. The basic buildout
of our portion of Sprint's PCS network is essentially complete with service now
available to 70 percent of our potential market."
Wireless Operations
Total Wireless revenues increased to $16.9 million, a change of $6.9
million or 69 percent compared to first quarter 2001. The Company experienced
strong growth in its Sprint PCS revenues, which increased by $5.8 million, or
107 percent, to $11.2 million for 2001. Revenues from the cellular operation
increased by $1.0 million to $5.2 million for an increase of 24 percent. The
Company also recorded $0.5 million from outside parties for lease of space on
its wireless towers. In addition to this external revenue, the Company's towers
are also used in the provision of the Company's own wireless services.
The Company's Sprint PCS customer base ended the quarter at approximately
58,000, compared to approximately 27,000 at first quarter 2001. Sprint PCS
travel revenue, which is generated by use of the Company's network by customers
of Sprint PCS and its affiliates, generated $3.0 million in first quarter 2002,
compared to an offsetting expense of $2.1 million generated by the Company's own
customers' use of other portions of Sprint's PCS network.
The PCS operation generated $0.2 million of EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization), its third consecutive positive
quarter. Net loss for the Company's Sprint PCS operations was $1.6 million for
the quarter, compared to a loss of $1.7 million in first quarter 2001.
Wireline Operations
Total wireline revenues increased to $7.4 million, a change of $0.7
million or 11 percent, compared to first quarter 2001. The local telephone
operation exhibited improvements during the quarter driven by an increase in
access revenues of $0.3 million. This revenue growth was driven by increased use
of our network by other telecommunications providers.
The Company's extensive interstate fiber optic network generated a total
of $1.8 million of lease revenue, an increase of $0.3 million. This lease
revenue is only recognized as it is earned based on monthly billings for access
to the network by customers, as the Company does not engage in any capacity
sales where profits are booked in advance. In addition to generating revenue
from outside leases, the Company's fiber network is also extensively used to
support its telephone, CATV, Internet and wireless operations.
The Cable Television operation had a profit of $105,000 for the quarter,
compared to a loss of $42,000 first quarter 2001. The Company implemented a
general increase in CATV service rates on December 1, 2001, and with accounting
rule changes taking effect January 1, 2002, the Company no longer amortizes
goodwill. CATV results for first quarter 2001 included $94,000 of goodwill
amortization expense.
Other Operations
Within other revenues, Internet access and web services revenues increased
by 37 percent to $1.2 million. The Company ended the quarter with 18,000
Internet Customers, of which 341 access the service through Digital Subscriber
Lines (DSL).
External Investments
Pre-tax losses on investments of $0.7 million are included in total
results for the quarter. This included a loss of $0.4 million associated with
the sale of 50,000 shares of the Company's VeriSign, Inc. investment. In 2001
the Company had recognized a $7.9 million non-cash gain resulting from the
December 12, 2001 merger between Illuminet Holdings, Inc. and VeriSign, Inc. At
the time of the closing of this merger, the Company received 310,158 shares of
VeriSign valued at $13.2 million. The Company's recognition of the gain on
exchange of Illuminet shares for VeriSign shares in 2001 was required by
generally accepted accounting principles. Subsequent to the merger, the market
value of VeriSign's stock declined, and at the end of 2001 the Company carried
its investment in VeriSign at $38.04 per VeriSign share.
The Company's investment in VeriSign is a result of its prior investments
in Illuminet's predecessor companies. In total, the Company originally invested
$1.0 million and had received cash proceeds of $5.3 million from sales of
Illuminet stock prior to the exchange for VeriSign shares. The sale of the
50,000 VeriSign shares in the first quarter generated cash proceeds of $1.5
million, bringing total cash proceeds to $6.8 million. The sales were made at an
average price of $30.16 per share. The Company held 260,158 shares of VeriSign
at the end of the quarter.
The Company continues to caution readers that should the Company liquidate
additional portions of its VeriSign investment, the actual total gains or losses
realized on this investment may significantly differ.
Investment losses of $0.3 million were recognized on other external
investments which are carried at cost, including a $0.2 million loss generated
by the Dolphin Communications Parallel Fund, L.P.
As previously announced, full year 2001 consolidated net income increased
to $16.4 million over the previous year, an increase of 66 percent. These
results included the $7.9 million non-cash gain on the Illuminet/VeriSign merger
described above and other external investment results. Net income from ongoing
operations, which excludes gains and losses on external investments and the $4.3
million after-tax gain on the sale of a limited partnership interest in the
Virginia RSA 6 cellular operation in 2000, increased by 31 percent to $8.3
million in 2001. Revenues increased 47 percent to $88.7 million from $60.5
million in 2000. The Company's wireless operations were principally responsible
for the revenue growth during 2001.
Stock Symbol Change
During the Annual Meeting, Mr. Christopher French announced that the stock
symbol under the NASDAQ exchange is now traded under the symbol SHEN.
During the annual meeting of shareholders, the current Class I directors,
Douglas C. Arthur, Harold Morrison, Jr., and Zane Neff, were re-elected for
three-year terms. There were approximately 2.6 million shares represented at the
meeting, out of a total of 3.8 million shares outstanding.
Additional Information
Summary financial information with reconciliation between total net income
and results from ongoing operations is attached to this release. Additional
information and detail may be found in the Company's upcoming Form 10Q filing,
which is due to be filed with the Securities and Exchange Commission by May 15,
2002.
Shenandoah Telecommunications Company is a holding company which provides
a broad range of telecommunications services through its eight operating
subsidiaries. The Company is traded on the NASDAQ National Market under the
symbol "SHEN." The Company's operating subsidiaries provide local telephone,
cable, Internet access, interexchange facilities, cellular and PCS services,
along with many other associated services, to the Quad State region from
Harrisonburg, Virginia to Harrisburg and Altoona, Pennsylvania.
/S/ LAURENCE F. PAXTON
Laurence F. Paxton
Vice President -Finance
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 filings with the SEC. Those factors may include changes
in general economic conditions, increases in costs and other competitive
factors.
SUMMARY FINANCIAL INFORMATION (unaudited)
(In thousands, except per share amounts)
Condensed Balance Sheets March 31, December 31,
2002 2001
---- ----
Total current assets $ 18,488 $ 16,034
Total securities and investments 14,652 18,463
Property, plant and equipment 180,918 175,286
Less accumulated depreciation (50,568) (47,182)
--------- ---------
Net property, plant and equipment 130,350 128,104
Other assets, net 4,226 4,196
--------- ---------
Total assets $ 167,716 $ 166,797
========= =========
Current liabilities, exclusive of
debt of $9,794 and $10,587 $ 14,144 $ 11,054
Long- and short-term debt 60,727 62,636
Total other liabilities 15,949 16,667
Minority interests 1,873 1,838
Total stockholders' equity 75,023 74,602
--------- ---------
Total liabilities and stockholders' equity $ 167,716 $ 166,797
========= =========
Condensed Statements of Income
Quarters Ended March 31, 2002 2001
---- ----
Operating Revenues-Wireless $ 16,910 $ 10,025
-Wireline 7,415 6,677
-Other 1,521 1,132
--------- ---------
Total operating revenue 25,846 17,834
--------- ---------
Cost of goods and services 2,678 1,529
Network operating costs 7,601 6,219
Depreciation and amortization 3,495 2,483
Selling, general and administrative 5,568 3,707
--------- ---------
Total operating expenses 19,342 13,938
--------- ---------
Operating income 6,504 3,896
Minority interest (1,259) (883)
Interest expense (net) (1,068) (1,041)
Other income (expense) (574) (1,186)
Income tax provision (1,447) (298)
--------- ---------
Net income $ 2,156 $ 488
========= =========
Net earnings per share, diluted $ 0.57 $ 0.13
RECONCILIATION OF NET INCOME TO RESULTS FROM ONGOING OPERATIONS
(In thousands)
Net income $ 2,156 $ 488
Add back net loss on investments 693 1,440
Tax effect on investment results (269) (546)
--------- ---------
Results from ongoing operations $ 2,580 $ 1,382
========= =========
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES
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)
April 16, 2002 /s/ LAURENCE F. PAXTON
Laurence F. Paxton
Vice President - Finance