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
--------------------------------------
October 23, 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. Other Events
NEWS RELEASE
For further information, please contact Laurence F. Paxton at 540-984-5222.
SHENANDOAH TELECOMMUNICATIONS COMPANY
INCREASES CASH DIVIDEND
ANNOUNCES THIRD QUARTER RESULTS
EDINBURG, VA, (October 17, 2002) - Shenandoah Telecommunications Company
(Shentel; NASDAQ: SHEN) has declared a cash dividend of $0.74 per share. The
dividend is payable December 2, 2002, to shareholders of record on November 15,
2002. The dividend is an increase of $0.04 per share or six percent over the
2001 dividend. The total payout to shareholders will be approximately $2.8
million.
Shenandoah Telecommunications Company also announced unaudited revenues
and financial results for the three and nine month periods ended September 30,
2002. Total consolidated net income for third quarter 2002 was $2.2 million,
compared to net income of $2.1 million in the third quarter of 2001, an increase
of six percent. Net earnings per share for the third quarter was $0.58 on a
diluted basis, compared to net income per share of $0.55 on a diluted basis in
third quarter 2001. Total consolidated net income for the nine months ended
September 30, 2002 was $2.3 million, versus net income of $4.6 million for the
first nine months of 2001. Results for all periods include gains and losses on
external investments, the most significant related to the Company's former
investment in VeriSign, Inc. stock, which produced a $0.5 million after-tax gain
in the first nine months of 2001, and a $5.5 million after-tax loss in the first
nine months of 2002.
Results from ongoing operations increased by $0.1 million to $2.6 million
for the third quarter of 2002, or $0.69 per share on a diluted basis, up from
$2.5 million or $0.65 per share in third quarter 2001. Results from ongoing
operations for the nine months ended September 30, 2002 increased by $2.3
million or 39 percent to $8.1 million, or $2.14 per share on a diluted basis,
compared to $5.8 million or $1.55 per share for the first nine months of 2001.
The Company defines ongoing operations as net income excluding gains and losses
on external investments unaffiliated with operations.
Total revenues were $29.8 million in third quarter 2002, as compared to
$24.5 million in the comparable period in 2001, an increase of 22 percent. The
Company's revenue growth was primarily driven by a 29 percent increase in its
wireless revenues compared to third quarter 2001.
Tempering the impact of the revenue growth was an increase in bad debt
expense. The Company recorded $1.8 million in bad debt expense, as compared to
$0.8 million in the previous quarter, and $0.5 million in third quarter 2001.
The majority of this increase was in the PCS subsidiary. This increase is
principally attributed to the write-off of non-paying credit challenged
customers that qualified for a no-deposit service offering prior to mid-April
2002. The remaining
portion of the increase is associated with the financial difficulties, and in
some situations bankruptcy proceedings, for interexchange carriers served by the
telephone and network subsidiaries.
The Company invested an additional $3.4 million in capital expenditures
during the quarter, bringing its gross property, plant, and equipment to $193.0
million. The majority of this increase is attributed to provisioning 3G services
for the PCS operation. Total debt was $57.8 million at the end of the quarter,
compared to $62.3 million at the end of the second quarter and $62.6 million at
year-end 2001.
President and CEO, Christopher E. French, commented: "Although we are
disappointed with our write-offs associated with credit problems of both
wholesale and retail customers, we are very pleased with the operating financial
results of third quarter 2002. While we recognize we are not immune from the
challenges currently facing the telecommunications industry, we were still able
to generate improvement in our operating results. Revenues for the quarter grew
sufficiently to more than offset the increased bad debt expense, so that our
results from ongoing operations increased by six percent over third quarter
2001. During the quarter we also completed the capital improvements necessary
for launching 3G services on our portion of the Sprint Nationwide PCS Network.
Our PCS network offers 3G services throughout our covered service area,
providing both new features to PCS customers as well as increased voice capacity
within our portion of the Sprint Nationwide PCS Network."
Wireless Operations
Total Wireless revenues grew to $21.0 million, an increase of $4.7 million
or 29 percent compared to third quarter 2001. The Company, as a PCS Affiliate of
Sprint, experienced strong growth in its PCS revenues, which increased by $4.9
million, or 43 percent, to $15.2 million for the third quarter of 2002 over
third quarter 2001. Revenues from the cellular operation, which had grown
significantly in recent years, experienced a slight decline. The Company also
recorded a $0.1 million increase in tower revenue 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 base of Sprint PCS customers ended the quarter at nearly
63,000, as compared to approximately 60,000 as of June 30, 2002 and 40,000 as of
September 30, 2001. Net additions for the quarter were negatively impacted by
the removal of customers with poor payment histories, as discussed above. The
mid-2002 introduction of a $125 deposit for prospective credit challenged
customers is intended to limit the impact of credit problems in the future.
PCS travel revenue, which is generated by use of the Company's network by
PCS customers located in Sprint and its other affiliate markets, generated $4.7
million in third quarter 2002. The offsetting expense, generated by Sprint PCS
customers located in Shentel's territory, using other portions of the Sprint
Nationwide PCS Network, was $3.1 million, resulting in a positive net of $1.6
million. The net of travel revenue for third quarter 2001 was $2.0 million.
Roaming revenue generated by non-Sprint PCS customer use of the network was $0.9
million, versus the offsetting expense of $0.2
million by the Company's own customers' roaming off Sprint Nationwide PCS
Network, for a net of $0.7 million. The net of roamer revenue and expense for
third quarter 2001 was less than $0.1 million.
The PCS operation generated $1.3 million of EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization) in the third quarter, its fifth
consecutive positive quarter. Depreciation expense in the PCS operation was $2.3
million for the third quarter 2002, as compared to $1.3 million in third quarter
2001. Bad debt expense for the PCS operation, due in part to the removal of the
credit challenged customers discussed above, increased by $1.0 million compared
to the third quarter of 2001. Net loss for the Company's PCS operations was $1.3
million for the quarter, compared to a net loss of $1.0 million in the third
quarter 2001.
Wireline Operations
Total wireline revenues reached $7.1 million, an increase of $0.2 million
or 3 percent, compared to third quarter 2001. Access revenues in the local
telephone operation increased $0.4 million in third quarter 2002 to $2.8
million, compared to third quarter 2001. This revenue growth was driven by
increased use of our network by other telecommunications providers.
The Company's interstate fiber optic network generated a total of $1.3
million of lease revenue, a decrease of $0.4 million compared to third quarter
2001. Financial difficulties of some of the customers of the Company's fiber
network, as well as rate decreases for both renewed and new agreements due to
competitive pricing, have resulted in lower lease revenues. 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 primary customers for access and fiber lease services are other
telecommunications carriers. As discussed above, the Company has recently
experienced delayed payments or received notice of bankruptcy proceedings by
some of these carriers. Accordingly, the telephone subsidiary recognized an
increase in bad debt expense of $0.3 million in the third quarter, compared to
the same period in 2001.
Other Operations
Other revenues increased by 32 percent to $1.7 million during third
quarter 2002 as compared to third quarter 2001, primarily due to Internet access
and online information services revenues.
External Investments
Total consolidated results for the third quarter 2002 included pre-tax
losses on investments of $0.7 million, compared to the $0.6 million loss in the
same quarter of 2001. For the nine months ended September 30, 2002, losses on
external investments were $9.6 million, compared to $2.0 million for the nine
months ended September 30, 2001. This change is principally attributed to the
Company's former investment in VeriSign, Inc., as discussed in previous filings.
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 November
14, 2002.
Shenandoah Telecommunications Company is a holding company which provides
a broad range of telecommunications services through its nine operating
subsidiaries. The Company celebrated its 100th anniversary of service on June 9,
2002. 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
Results from ongoing operations and EBITDA are not measures of financial
performance under generally accepted accounting principles and should not be
considered alternatives to net income (loss) as measures of performance or to
cash flows as a measure of liquidity. 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 Consolidated Balance Sheets September 30, December 31,
------------------------------------- 2002 2001
---- ----
Total current assets $ 16,881 $ 16,034
Total securities and investments 7,568 18,463
Property, plant and equipment 193,013 175,286
Less accumulated depreciation (57,564) (47,182)
--------- ---------
Net property, plant and equipment 135,449 128,104
Other assets, net 4,228 4,196
--------- ---------
Total assets $ 164,126 $ 166,797
========= =========
Current liabilities, exclusive of
debt of $9,088 and $10,587 $ 11,538 $ 11,054
Long- and short-term debt 57,812 62,636
Total other liabilities 15,960 16,667
Minority interests 1,790 1,838
Total stockholders' equity 77,026 74,602
--------- ---------
Total liabilities and stockholders' equity $ 164,126 $ 166,797
========= =========
Condensed Consolidated Statements of Three months ended Nine months ended
- ------------------------------------- September 30, September 30,
Income 2002 2001 2002 2001
- ------ ---- ---- ---- ----
Operating Revenues-Wireless $ 21,003 $ 16,319 $ 57,009 $ 39,545
-Wireline 7,117 6,927 21,428 20,337
-Other 1,718 1,299 4,734 3,777
-------- -------- -------- --------
Total operating revenue 29,838 24,545 83,171 63,659
Cost of goods and services 2,725 1,964 7,346 5,336
Network operating costs 8,892 8,270 25,446 21,839
Depreciation 3,907 3,117 11,040 8,509
Selling, general and administrative 7,588 4,825 19,107 12,633
-------- -------- -------- --------
Total operating expenses 23,112 18,176 62,939 48,317
-------- -------- -------- --------
Operating income 6,726 6,369 20,232 15,342
Minority interest (1,300) (1,286) (3,879) (3,283)
Interest expense (1,057) (1,035) (3,177) (3,072)
Other income (expense) (727) (632) (9,453) (1,611)
Income tax provision (1,418) (1,322) (1,457) (2,797)
-------- -------- -------- --------
Net income $ 2,224 $ 2,094 $ 2,266 $ 4,579
======== ======== ======== ========
Net earnings per share, diluted $ 0.58 $ 0.55 $ 0.60 $ 1.21
======== ======== ======== ========
RECONCILIATION OF NET INCOME TO RESULTS FROM ONGOING OPERATIONS (unaudited)
(In thousands)
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Net income $ 2,224 $ 2,094 $ 2,266 $ 4,579
Adjustment for loss on investments 680 642 9,594 2,041
Tax effect on investment results (265) (244) (3,742) (775)
------- ------- ------- -------
Results from ongoing operations $ 2,639 $ 2,492 $ 8,118 $ 5,845
======= ======= ======= =======
####
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)
October 23, 2002 /S/ CHRISTOPHER E. FRENCH
-------------------------
Christopher E. French
President