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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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April 15, 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 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
REPORTS FIRST QUARTER 2003 FINANCIAL RESULTS
EDINBURG, VA, (April 15, 2003) - Shenandoah Telecommunications Company
(Shentel; NASDAQ: SHEN) announced unaudited financial results for the quarter
ended March 31, 2003. Net income from continuing operations for the quarter was
$1.9 million, compared to $0.4 million for the same period in 2002. Discontinued
operations contributed an additional $22.7 million to first quarter 2003
results, compared to $1.8 million in first quarter 2002. Discontinued operations
for this quarter include a one-time, after-tax gain of $21.5 million on the sale
of the Company's interest in the Virginia RSA 10 Limited Partnership cellular
operation. With this previously announced sale, further discussed below, the
Company has classified its cellular operation as discontinued and it is
therefore presented separately from continuing operations in the Company's
results. Consolidated net income for the quarter was $24.5 million, compared to
$2.2 million in first quarter 2002.
Overall Highlights
For the quarter ended March 31, 2003 net income from continuing operations
was $1.9 million or $0.51 per diluted share, which included an after-tax loss of
$0.2 million from external investments. In first quarter 2002, net income from
continuing operations was $0.4 million or $0.10 per diluted share, which
included an after-tax loss of $0.4 million from external
April 15, 2003
News Release
Page 3 of 9
investments. On a consolidated net income basis, the first quarter net income of
$24.5 million was $6.45 per share on a diluted basis, compared to $2.2 million
and $0.57 per share in 2002.
From continuing operations, the Company's total revenues for the first
quarter were $24.9 million, compared to $20.7 million in first quarter 2002, an
increase of $4.2 million or 20 percent. The Company's revenue growth was
primarily driven by large increases in its PCS business. Operating income
increased to $4.2 million, an increase of $1.8 million or 79% over 2002. The
Company made capital expenditures of $2.0 million during the quarter, while also
decreasing its total debt by $8.3 million. With the addition of the proceeds
from the sale of its cellular partnership sale, the Company's temporary cash
investments were $36.3 million, an increase of $34.1 million during the quarter.
The Company's ratio of debt to total assets ended the quarter at 24%, compared
to 34% at the end of the year.
President and CEO, Christopher E. French, commented, "During the quarter
we successfully completed the sale of our 66% general partner interest in the
Virginia 10 RSA Limited Partnership, which resulted in a large one-time gain. In
addition to our one-time gain, we are again pleased with our operating financial
results, given the ongoing financial challenges within the telecommunications
industry. During the first quarter we were again able to increase our operating
income and further reduce our debt, without using proceeds from the Virginia 10
RSA sale for debt reduction. We have seen improvement in our wireless churn and
bad debt, but these levels are still unsatisfactory, and will continue to be an
area of focus."
Wireless Operations
The Company experienced strong growth in wireless revenues as a PCS
Affiliate of Sprint, increasing its PCS revenue by $3.8 million to a total of
$15.0 million for first quarter
April 15, 2003
News Release
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2003. The Company's base of Sprint wireless customers increased by more than
4,600, ending the quarter at approximately 72,500 customers. PCS travel revenue,
which is generated by use of the Company's network by Sprint wireless customers
residing outside of our territory, was $3.7 million, which was $1.3 million more
than the offsetting expense generated by the Company's base of Sprint wireless
customers. The PCS loss in the first quarter decreased by $0.7 million compared
to first quarter 2002.
The Company also received $0.6 million from outside parties for lease of
space on its wireless towers, compared to $0.5 million in first quarter 2002. 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 $0.2 million increase in net
income to $2.2 million. During the first quarter, increased access revenue was
partially offset by a decrease in fiber facility lease revenue (further
discussed below) and a slight increase in operating expense.
The Company's extensive interstate fiber optic network generated a total
of $1.3 million of lease revenue, a decrease of $0.5 million compared to first
quarter 2002, but an increase of $0.2 million compared to the fourth quarter of
2002. Competitive pricing pressure on fiber facility lease rates and the
financial difficulties of some telecommunications carrier customers were
principally responsible for recent decreases. 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.
April 15, 2003
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Other Operations
The ShenTel Service operation had a profit of $0.2 million, compared to a
negligible profit in first quarter 2002. Revenues associated with information
access services, including Internet access service revenues and contract work on
the 511Virgina travel information project, increased $0.2 million, to $1.4
million. The Company ended the quarter with approximately 19,000 Internet
customers of which 850 access the service through Digital Subscriber Line (DSL).
External Investments
First quarter results included after-tax losses of $0.2 million on
external investments. In first quarter 2002 the after-tax losses on investments
was $0.4 million, which was principally attributed to the Company's former
investment in VeriSign, Inc., as discussed in previous filings. At the end of
the quarter, the Company's external investments totaled $6.0 million.
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"),
which was held by the Company's subsidiary, Shenandoah Mobile Company. The sale
was completed at the close of business on February 28, 2003, resulting in the
$21.5 million gain described above. For January and February 2003, prior to the
closing, after-tax net income from this discontinued operation was $1.1 million.
Annual Meeting
The annual meeting of shareholders of Shenandoah Telecommunications
Company will be held at 11:00 a.m. on April 22, 2003 in the auditorium of the
Shentel Center at 500 Mill Road, Edinburg, VA.
April 15, 2003
News Release
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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 four 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.
April 15, 2003
News Release
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SHENANDOAH TELECOMMUNICATIONS COMPANY
SUMMARY FINANCIAL INFORMATION (unaudited)
(In thousands, except per share amounts)
Condensed Balance Sheets March 31, December 31,
2003 2002
--------- ------------
Cash and cash equivalents $ 36,288 $ 2,209
Other current assets 11,076 18,285
Total securities and investments 7,209 7,423
Property, plant and equipment 191,412 189,278
Less accumulated depreciation (61,145) (57,126)
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Net property, plant and equipment 130,267 132,152
Other assets, net 8,911 3,935
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Total assets $ 193,751 $ 164,004
========= =========
Current liabilities, exclusive of short-term debt
of $4,181 and $7,985, respectively $ 25,105 $ 11,915
Long- and short-term debt 47,209 55,546
Total other liabilities 20,159 18,300
Minority interests -- 1,666
Total stockholders' equity 101,278 76,577
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Total liabilities and stockholders' equity $ 193,751 $ 164,004
========= =========
Three months ended
Condensed Statements of Income March 31,
2003 2002
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Operating Revenues-Wireless $ 15,634 $ 11,754
-Wireline 7,639 7,421
-Other 1,674 1,521
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Total operating revenue 24,947 20,696
Cost of goods and services 2,289 2,649
Network operating costs 8,046 7,047
Depreciation 4,021 3,344
Selling, general and administrative 6,441 5,340
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Total operating expenses 20,797 18,380
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Operating income 4,150 2,316
Interest expense (954) (1,068)
Other income (expense) (124) (573)
Income tax provision (1,141) (305)
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Income from continuing operations $ 1,931 $ 370
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Discontinued operations, net of income taxes $ 22,628 $ 1,786
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Cumulative effect of a change in accounting,
net of income taxes $ (76) $ --
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Net income $ 24,483 $ 2,156
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April 15, 2003
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SHENANDOAH TELECOMMUNICATIONS COMPANY
SUMMARY FINANCIAL INFORMATION (unaudited) Three months ended
(In thousands, except per share amounts) March 31,
2003 2002
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Net earnings per share, basic
Continuing operations $ 0.51 $ 0.10
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Discontinued operations, net of
income taxes $ 5.98 $ 0.47
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Cumulative effect of a change in
accounting, net of taxes $ (0.02) $ --
-------- --------
Total $ 6.47 $ 0.57
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Net earnings per share, diluted
Continuing operations $ 0.51 $ 0.10
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Discontinued operations, net of
income taxes $ 5.96 $ 0.47
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Cumulative effect of a change in
accounting, net of taxes $ (0.02) $ --
-------- --------
Total $ 6.45 $ 0.57
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April 15, 2003
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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)
April 15, 2003 /S/ LAURENCE F. PAXTON
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Laurence F. Paxton, Vice President-
Finance