UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
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February 24, 2003
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 (I.R.S. Employer
incorporation or organization) File Number) 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 9. Regulation FD Disclosure
NEWS RELEASE
For further information, please contact Laurence F. Paxton at 540-984-5222.
SHENANDOAH TELECOMMUNICATIONS COMPANY
REPORTS 2002 FINANCIAL RESULTS
EDINBURG, VA, (February 24, 2003) - Shenandoah Telecommunications Company
(Shentel; NASDAQ: SHEN) announced financial results for the year ended December
31, 2002. The results reflected improvements in its wireline operations (which
includes its local telephone, cable television, and fiber optic networks);
continued growth of its wireless businesses (which includes its PCS and tower
operations); and, increases in other services, primarily Internet and
information access services. With the previously announced sale of its interest
in the Virginia 10 RSA Limited Partnership, further discussed below, the Company
has classified its cellular operation as discontinued for all periods and it is
therefore presented separately from continuing operations in the Company's
results.
Overall Highlights
For the year 2002, total consolidated net income was $4.5 million or $1.20
per share on a diluted basis, a decrease of $11.9 million or 72 percent compared
to $16.4 million and $4.34 per share in 2001. Results from continuing operations
were a loss of $2.9 million in 2002, which included an after tax loss of $6.3
million from external investments. In 2001, results from continuing operations
were a positive $9.7 million, which included after tax gains of $8.1 million
from external investments.
The Company's total revenues for continuing operations were $93.0 million,
compared to $68.7 million in 2001, an increase of $24.3 million or 35 percent.
The Company's revenue growth was driven by large increases in its wireless
businesses. Operating income increased to $9.3 million, an increase of $2.9
million or 45% over 2001. The Company made capital expenditures of $23.5 million
during the year, while also decreasing its total debt by $7.1 million.
President and CEO, Christopher E. French, commented, "We are pleased with
the operating financial results of 2002, given the continued financial
challenges of the telecommunications industry. During the year, we incurred
higher than expected churn and bad debt expense in our base of Sprint wireless
customers, as well as elevated bad debt in our wireline operations due to
financial difficulties of some of our carrier customers. Nonetheless, we were
able to increase our operating income and further reduce our debt. In addition
to our financial results, we continued to enhance our portion of Sprint's
nationwide PCS network, including the launching of 3G services throughout our
covered service area. During the
year we were also able to successfully negotiate an agreement to sell our 66%
general partner interest in the Virginia 10 RSA Limited Partnership for $37.0
million."
Wireless Operations
The Company experienced strong growth in revenues as a PCS Affiliate of
Sprint, which increased by $21.5 million to a total of $55.5 million for 2002.
The Company's base of Sprint wireless customers increased by more than 20,000,
and ended the year at approximately 68,000 customers. PCS Affiliate travel
revenue, which is generated by use of the Company's network by PCS customers
located in Sprint and its other affiliate markets, was $16.5 million, which was
$6.3 million more than the offsetting expense generated by Sprint wireless
customers located in Shentel's territory.
The Company also received $2.1 million from outside parties for lease of
space on its wireless towers, compared to $1.7 million in 2001. In addition to
this external revenue, the Company's towers are also used in the provision of
the Company's own wireless services.
Wireline Operations
The local telephone operation experienced a $0.4 million decrease in net
income to $6.8 million. In 2002, increased access revenue was more than offset
by a decrease in fiber facility lease revenue (further discussed below) and an
increase in operating expense due to greater bad debt expense associated with
other telecommunications providers.
The Company's extensive interstate fiber optic network generated a total
of $5.7 million of lease revenue, a decrease of $0.9 million. Competitive
pricing pressure on fiber facility lease rates and the financial difficulties of
some telecommunications carrier customers were principally responsible for this
decrease. 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 $0.3 million, compared to a
loss of $0.5 million in 2001. The Company implemented a general increase in CATV
service rates on December 1, 2001, and with accounting rule changes effective
January 1, 2002, the Company no longer amortizes goodwill. There was $0.4
million of goodwill amortization expense recognized in 2001's results.
Other Operations
The ShenTel Service operation had a profit of $0.3 million, compared to a
loss of $0.1 million in 2001. Revenues associated with information access
services, including contract work on 511Virgina performed for the Commonwealth
of Virginia, increased by approximately $0.3 million to $0.6 million. Internet
access service revenues increased $0.5 million,
to $4.1 million. The Company ended the year with approximately 18,700 Internet
customers of which 650 access the service through Digital Subscriber Lines
(DSL).
Investment in Illuminet/VeriSign
Total consolidated results for 2002 included pre-tax losses on investments
of $10.0 million, compared to the $12.9 million gain recognized in 2001. This
change is principally attributed to the Company's former investment in VeriSign,
Inc., as discussed in previous filings.
Discontinued Operations
As previously disclosed, on November 21, 2002 the Company signed an
agreement to sell to Verizon Wireless, for $37.0 million, the Company's 66%
general partner interest in the Virginia 10 RSA Limited Partnership ("VA 10"),
currently held by the Company's subsidiary, Shenandoah Mobile Company. Among
other conditions, closing of the sale is subject to the approval of Alltel
Communications, a limited partner of VA 10, and to the approval from the Federal
Communications Commission ("FCC"). Alltel Communications has granted its
approval to the proposed transaction, and on January 15, 2003, the FCC placed on
public notice its consent to the proposed transfer of control of VA 10. Absent
any appeals of the FCC's consent, the consent will become final on February 24,
2003.
For 2002, net income from this discontinued operation was $7.4 million,
compared to $6.7 million in 2001. Revenues from the analog cellular operation
increased by $0.9 million to a total of $20.9 million, with a $1.8 million
increase in roaming revenue partially offset by a $0.9 million decrease in local
service and equipment revenues. Due to increased competition from digital
carriers, as well as to enable the Company to focus its wireless efforts on it
digital PCS operation, the Company negotiated the sale of its cellular general
partnership interest.
Annual Meeting
The annual meeting of shareholders of Shenandoah Telecommunications
Company will be held at 11:00 a.m. on April 15, 2003 in the auditorium of the
Shentel Center at 500 Mill Road, Edinburg, VA.
About Shenandoah Telecommunications
Shenandoah Telecommunications Company is a holding company which provides
a broad range of telecommunications services through its 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.
---------------------------------
Laurence F. Paxton
Vice President - Finance
LFP:jt
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 December 31, December 31,
----------- ----------
2002 2001
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Total current assets 20,494 16,609
Total securities and investments 7,423 18,463
Property, plant and equipment 189,278 169,305
Less accumulated depreciation (57,126) (44,473)
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Net property, plant and equipment 132,152 124,832
Long term assets held for sale -- 3,272
Other assets, net 3,935 4,196
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Total assets $ 164,004 $ 167,372
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Current liabilities, exclusive of debt of $7,985
and $10,587 $ 11,915 $ 11,054
Long and short-term debt 55,546 62,636
Total other liabilities 18,300 17,242
Minority interests in discontinued operations 1,666 1,838
Total stockholders' equity 76,577 74,602
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Total liabilities and stockholders' equity $ 164,004 $ 167,372
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Condensed Statements of Income Year ended December 31,
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2002 2001
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Operating Revenues-Wireless $ 57,867 $ 36,132
-Wireline 28,738 27,469
-Other 6,352 5,103
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Total operating revenue 92,957 68,704
Cost of goods and services 10,485 7,392
Network operating costs 32,511 26,756
Depreciation 14,482 11,263
Selling, general and administrative 26,141 16,869
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Total operating expenses 83,619 62,280
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Operating income 9,338 6,424
Interest (expense) (4,195) (4,127)
Other income (expense) (10,145) 13,208
Income tax provision (benefit) (2,109) 5,811
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Income/(loss) from continuing operations (2,893) 9,694
Income from discontinued operations 7,412 6,678
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Net income $ 4,519 $ 16,372
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Income/(loss) per share from continuing
operations, diluted $ (0.77) $ 2.57
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Income per share from discontinued operations,
diluted $ 1.97 $ 1.77
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Net earnings per share, diluted $ 1.20 $ 4.34
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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)
February 24, 2003 /s/ LAURENCE F. PAXTON
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Laurence F. Paxton
Vice President-Finance