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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July 17, 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
The information contained in this report on Form 8-K is being furnished pursuant
to Item 12 under Item 9 as directed by the Securities and Exchange Commission in
Release No. 34-47583 and shall not be deemed to be "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that Section.
NEWS RELEASE
For further information, please contact Earle A. MacKenzie at 540-984-5192.
SHENANDOAH TELECOMMUNICATIONS COMPANY
REPORTS SECOND QUARTER 2003 FINANCIAL RESULTS
EDINBURG, VA, (July 17, 2003) - Shenandoah Telecommunications Company
(Shentel; NASDAQ: SHEN) announced unaudited financial results for the second
quarter ended June 30, 2003. Second quarter total revenues grew by 12% from the
same quarter last year, including a 22% increase in wireless revenues. Income
from continuing operations for the quarter was $1.0 million, compared to a loss
of $4.0 million for the same period in 2002. Income from continuing operations
for the six-month period ended June 30, 2003, was $3.0 million versus a loss of
$3.6 million for the same period last year. Income from continuing operations
for the six months ended 2002 reflects a previously reported loss of $5.5
million on external investments.
As previously announced, with the sale of the Company's interest in the
Virginia 10 RSA Limited Partnership cellular operation on February 28, 2003, the
Company classified its prior cellular operation as discontinued, as is further
discussed below. Net income including discontinued operations for the six months
ended June 30, 2003, was $25.5 million versus $42,000 for the first six months
of 2002.
Overall Highlights
For the quarter ended June 30, 2003, income from continuing operations was
$1.0 million or $0.27 per diluted share. In second quarter 2002, continuing
operations resulted in a loss of $4.0 million or $1.05 per diluted share, which
included an after-tax loss of $4.8 million from external investments. The
Company's total revenues for the second quarter 2003 were $24.8 million,
compared to $22.2 million in the second quarter 2002, an increase of $2.6
million or 12%. The Company's revenue growth was primarily driven by an increase
in its PCS business. Operating income for the quarter decreased to $2.4 million,
a decrease of $0.2 million or 8% from 2002 due primarily to a $1.5 million
reduction in access revenues in the Wireline Operations for charges disputed by
long distance carriers.
President and CEO, Christopher E. French, commented, "We are again pleased
with our operating financial results, given the ongoing financial challenges
within the telecommunications industry. During the second quarter we experienced
healthy revenue growth and improvements in our wireless churn and bad debt
charges. Our strong operating results have allowed us to accelerate debt
repayment and fund construction from continuing operations."
Wireless Operations
The Company continues to experience strong growth in wireless revenues as
a PCS Affiliate of Sprint, increasing its PCS subsidiary revenue by $2.9 million
to a total of $16.1 million for second quarter 2003; and, increasing by $6.7
million to a total of $31.0 million for the first six months of 2003. The
Company's base of Sprint wireless customers increased by 4,900,
ending the quarter with approximately 77,400 customers. The Company's second
quarter churn was 1.9%, down from 2.3% in first quarter 2003 and 2.8% in second
quarter 2002. The PCS net loss of $0.8 million in the second quarter 2003
decreased by $0.1 million compared to second quarter 2002. The net loss of $1.5
million for the six months ended June 30, 2003, is a decrease of $1.0 million
from the same period last year.
Wireline Operations
The local telephone operations experienced a $0.4 million decrease in
second quarter net income of $1.5 million in 2002 to $1.1 million in 2003,
resulting in a decrease of $0.2 million for the six months ended June 30, 2003,
compared to the same period last year. During the second quarter the Company
recorded a reduction of $1.5 million to access revenues.
Other Operations
The ShenTel Service operation had a second quarter net income of $0.2
million, compared to a negligible net income in second quarter 2002. Revenues
associated with information access services, including Internet access service
revenues and contract work on the 511Virginia Travel Information Project,
increased $0.3 million, to $1.5 million. The Company ended the quarter with
approximately 19,000 Internet customers of which more than 1,000 access the
service through Digital Subscriber Line (DSL). This represents a 4% increase in
Internet customers, with a 150% increase in DSL customers from June 30, 2002.
DSL service is available to approximately 80% of the subscribers of the local
telephone serving area.
External Investments
Second quarter 2003 results on external investments were immaterial. In
second quarter 2002 the after-tax losses on investments was $4.8 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 $7.0 million.
Discontinued Operations and Consolidated Results
As previously disclosed, the Company completed the sale of its general
partner interest in the Virginia 10 RSA Limited Partnership ("VA 10"), at the
close of business on February 28, 2003. That transaction resulted in a $21.5
million after-tax gain, and the Company received $33.7 million, subject to
certain post-closing adjustments. . The Company has classified its prior
cellular operation as discontinued. The second quarter net income for
discontinued operations in 2002 was $1.9 million or $0.49 per share.
Incorporating these results with those of continuing operations as described
above in Overall Highlights, second quarter 2002 consolidated net income was a
loss of $2.1 million or $0.56 per share on a diluted basis. Second quarter 2003
consolidated net income of $1.1 million or $0.27 per diluted share, is the same
as net income from continuing operations, as identified above.
Strong operating results for 2003 have allowed the Company to add $4.7
million in Plant in Service and retire $4.5 million in debt prior to its due
date. The Company has the proceeds from the sale of its cellular operations,
less applicable taxes paid, in temporary cash investments. No decision has been
made for the use of these proceeds. The Company's debt /equity ratio at
June 30, 2003 was 30/70, debt as a percent of total assets of 24.3%, with cash
and cash equivalents of $31.7 million.
About Shenandoah Telecommunications
Shenandoah Telecommunications Company is a holding company that 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, and PCS services, along with many other
associated services, to the four-state region from Harrisonburg, Virginia to
Harrisburg and Altoona, Pennsylvania.
/S/ EARLE A. MACKENZIE
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Earle A. MacKenzie
Chief Financial Officer
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.
SHENANDOAH TELECOMMUNICATIONS COMPANY
SUMMARY FINANCIAL INFORMATION (unaudited)
(In thousands, except per share amounts)
Condensed Balance Sheets June 30, December 31,
2003 2002
---- ----
Cash and cash equivalents $ 31,735 $ 2,209
Other current assets 10,979 18,285
Total securities and investments 7,188 7,423
Property, plant and equipment 193,507 189,278
Less accumulated depreciation (65,037) (57,126)
--------- ---------
Net property, plant and equipment 128,470 132,152
Other assets, net 8,876 3,935
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Total assets $ 187,248 $ 164,004
========= =========
Current liabilities, exclusive of short-term
debt of $4,154 and $7,985, respectively $ 18,655 $ 11,915
Long- and short-term debt 45,410 55,546
Total other liabilities 20,741 18,300
Minority interests -- 1,666
Total shareholders' equity 102,442 76,577
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Total liabilities and shareholders' equity $ 187,248 $ 164,004
========= =========
Condensed Statements of Income Three months ended Six months ended
(In thousands, except per share amounts) June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Operating Revenues-Wireless $ 16,769 $ 13,793 $ 32,403 $ 25,547
-Wireline 6,309 6,899 13,948 14,320
-Other 1,766 1,495 3,440 3,016
-------- -------- -------- --------
Total operating revenue 24,844 22,187 49,791 42,883
Cost of goods and services 2,624 1,919 4,913 4,569
Network operating costs 8,680 8,341 16,727 15,388
Depreciation 4,127 3,489 8,148 6,833
Selling, general and administrative 7,011 5,819 13,451 11,159
-------- -------- -------- --------
Total operating expenses 22,442 19,568 43,239 37,949
-------- -------- -------- --------
Operating income 2,402 2,619 6,552 4,934
Interest expense (897) (1,052) (1,851) (2,120)
Other income (expense) 150 (8,153) 926 (8,726)
Income tax provision (611) 2,602 (1,752) 2,298
-------- -------- -------- --------
Income (loss) from continuing operations $ 1,044 $ (3,984) $ 2,975 $ (3,614)
Discontinued operations, net of income taxes $ -- $ 1,870 $ 22,628 $ 3,656
-------- -------- -------- --------
Cumulative effect of a change in accounting,
net of income taxes $ -- $ -- $ (76) $ --
-------- -------- -------- --------
Net income $ 1,044 $ (2,114) $ 25,527 $ 42
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SHENANDOAH TELECOMMUNICATIONS COMPANY
SUMMARY FINANCIAL INFORMATION (unaudited)
(In thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Net earnings per share, basic
Continuing operations $0.28 $(1.06) $ 0.79 $(0.96)
----- ------ ------ ------
Discontinued operations, net of
income taxes $ -- $ 0.50 $ 5.97 $ 0.97
----- ------ ------ ------
Cumulative effect of a change in
accounting, net of taxes $ -- $ -- $(0.02) $ --
----- ------ ------ ------
Total $0.28 $(0.56) $ 6.74 $ 0.01
===== ====== ====== ======
Net earnings per share, diluted
Continuing operations $0.27 $(1.05) $ 0.78 $(0.95)
----- ------ ------ ------
Discontinued operations, net of
income taxes $ -- $ 0.49 $ 5.95 $ 0.96
----- ------ ------ ------
Cumulative effect of a change in
accounting, net of taxes $ -- $ -- $(0.02) $ --
----- ------ ------ ------
Total $0.27 $(0.56) $ 6.71 $ 0.01
===== ====== ====== ======
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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)
July 18, 2003 /S/ EARLE A. MACKENZIE
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Earle A. MacKenzie
Chief Financial Officer