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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OCTOBER 22, 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 9.
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 INCREASES CASH
DIVIDEND, DECLARES 2-FOR-1 STOCK SPLIT, AND
REPORTS THIRD QUARTER 2003 FINANCIAL RESULTS
EDINBURG, VA, (October 22, 2003) - The Board of Directors of Shenandoah
Telecommunications Company (Shentel; NASDAQ: SHEN) declared a cash dividend of
$0.78 per share. The dividend will be payable December 1, 2003, to shareholders
of record on November 14, 2003. The dividend is an increase of $0.04 per share
or 5.4 % over the 2002 dividend. Total payout to shareholders will be
approximately $3.0 million.
The Board of Directors also declared a two-for-one stock split with a
record date of January 30, 2004. Shareholders will receive one additional share
of common stock of the Company for each share of common stock held on the record
date. Certificates representing the additional shares will be mailed on or about
February 20, 2004.
Shenandoah Telecommunications Company also announced unaudited financial
results for the third quarter ended September 30, 2003. Income from continuing
operations for the quarter was $2.7 million, compared to $0.4 million for the
same period in 2002. Income from continuing operations for the nine-month period
ended September 30, 2003 was $5.7 million versus a loss of $3.2 million for the
same period last year. Income from continuing operations for 2002's nine-month
period reflects a previously reported net loss of $5.5 million on external
investments. Total third quarter revenues grew by 12% from the same quarter last
year, including a 14% increase in wireless revenues. For the nine months ended
September 30, 2003, revenue grew by 15% from the same period last year,
including a 22% increase in wireless revenue.
As previously announced, the Company sold its interest in the Virginia 10
RSA Limited Partnership cellular operation on February 28, 2003, and classified
its prior cellular operation as discontinued, as is further discussed below. Net
income including discontinued operations for the three months ended September
30, 2003 was $2.7 million compared to $2.2 million in 2002 and $28.2 million
versus $2.3 million for the nine months ended September 30, 2003 and 2002
respectively.
Overall Highlights
For the quarter ended September 30, 2003, income from continuing
operations was $2.7 million or $0.71 per diluted share, compared to $0.4 million
or $0.10 per diluted share in third quarter 2002. The Company's total revenues
for the third quarter 2003 were $27.6 million, compared to $24.6 million in the
third quarter 2002, an increase of $3.0 million or 12%. The Company's revenue
growth was primarily driven by an increase in its PCS business. Operating income
for the quarter increased to $5.1 million, an increase of $2.7 million or 115%
from 2002 due primarily to continued growth in wireless operations, a reduction
of $1.2 million of bad debt expense in PCS operations and an increase in access
revenues in telephone operations. In the third quarter of 2002, the Company
recorded a significant allowance to cover the write-off of non-paying credit
challenged PCS customers that qualified for a no-deposit service promotion which
is no longer offered by the Company.
President and CEO, Christopher E. French, commented, "We have had another
good quarter with strong operating results across all business lines. In
particular, our PCS operation greatly improved its operating net income with
strong revenue growth. Increasing our cash dividend to shareholders reflects our
continued profitable growth, and our prospects for this growth to continue."
Wireless Operations
The Company continues to experience strong growth in wireless revenues as
a PCS Affiliate of Sprint, increasing its PCS subsidiary revenue by $2.2 million
to a total of $18.0 million for third quarter 2003 and increasing by $9.1
million to a total of $50.4 million for the first nine months of 2003 compared
to the same periods last year. The Company's Sprint wireless customer count
increased by 3,600 to approximately 81,000 customers. Although not included in
the Company's customer count, wholesale-prepaid customers used 2.9 million
minutes on the Company's network during the quarter, compared to 0.1 million
minutes in the same quarter last year. The Company's third quarter churn was
2.2%, down from 3.4% in third quarter 2002. The PCS net income was $8,000 in the
third quarter 2003 compared to a net loss of $1.3 million in the third quarter
2002. The PCS net income during the third quarter is the result of improved
operating results and $0.5 million true up of accruals recorded in previous
periods. The loss from continuing operations of $1.5 million for the nine months
ended September 30, 2003, is a $2.3 million improvement over the same period
last year.
Wireline Operations
The local telephone operations net income for the third quarter was $2.0
million, a $0.4 million increase compared to the same quarter last year. The
local telephone operations net
income for the nine months ended September 30, 2003 was $5.3 million, an
increase of $0.3 from 2002. As reported previously, during the second quarter
the Company recorded a reduction of $1.5 million to access revenues from
Interexchange carriers for a period covering two years. Upon completion of the
analysis during the third quarter, the net effect was $1.2 million, with the
$0.3 million difference recorded in the third quarter.
Other Operations
The Shentel Service operation had third quarter net income of $0.2
million, compared to $0.1 million in the third quarter 2002. Revenues associated
with information access services, including Internet access service revenues and
contract work on the 511 Virginia Travel Information Project, increased $0.1
million, to $1.9 million. The Company ended the quarter with approximately
19,000 Internet customers of which more than 1,100 access the service through
Digital Subscriber Lines (DSL). This represents a 1.1% increase in Internet
customers, with a 117% increase in DSL customers from September 30, 2002. DSL
service is available to more than 80% of the subscribers of the Company's local
telephone serving area.
External Investments
In the quarter ended September 30, 2003, the Company recorded a nominal
loss on investments compared to a loss of $0.7 million in 2002. A loss of $0.6
million was recorded for the nine months ended September 30, 2003, a decrease of
$8.6 million from the same period in 2002. The loss on investments in 2002 was
principally attributed to the $9.0 million loss in 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 $7.4 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 third quarter net income for discontinued
operations in 2002 was $1.8 million or $0.49 per share. Incorporating these
results with those of continuing operations as described above in Overall
Highlights, third quarter 2002 consolidated net income was $2.2 million or $0.59
per share on a diluted basis. Third quarter 2003 consolidated net income was
$2.7 million or $0.71 per diluted share.
The Company added $4.1 million in Plant in Service and retired $1.0
million of scheduled debt during the third quarter of 2003. The Company has
invested 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 had cash and cash equivalents of $31.7 million as
of the end of the quarter. The Company's debt/equity ratio at September 30, 2003
was 30/70; and debt as a percent of total assets was 23.7%.
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.
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 September 30, December 31,
2003 2002
------------- ------------
Cash and cash equivalents $ 31,690 $ 2,209
Other current assets 10,764 18,285
Total securities and investments 7,393 7,423
Property, plant and equipment 197,807 189,278
Less accumulated depreciation (68,844) (57,126)
--------- ---------
Net property, plant and equipment 128,963 132,152
Other assets, net 8,845 3,935
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Total assets $ 187,655 $ 164,004
========= =========
Current liabilities, exclusive of short-term debt
of $4,186 and $7,985, respectively $ 16,801 $ 11,915
Long- and short-term debt 44,382 55,546
Total other liabilities 21,279 18,300
Minority interests -- 1,666
Total shareholders' equity 105,193 76,577
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Total liabilities and shareholders' equity $ 187,655 $ 164,004
========= =========
Condensed Statements of Income Three months ended Nine months ended
(In thousands, except per share amounts) September 30, September 30,
2003 2002 2003 2002
-------- -------- -------- --------
Operating Revenues-Wireless $ 18,008 $ 15,792 $ 50,411 $ 41,339
-Wireline 7,774 7,121 21,722 21,441
-Other 1,800 1,718 5,240 4,734
-------- -------- -------- --------
Total operating revenue 27,582 24,631 77,373 67,514
Cost of goods and services 2,966 2,712 7,879 7,281
Network operating costs 8,318 8,327 25,045 23,715
Depreciation 4,180 3,759 12,328 10,592
Selling, general and administrative 7,012 7,462 20,463 18,621
-------- -------- -------- --------
Total operating expenses 22,476 22,260 65,715 60,209
-------- -------- -------- --------
Operating income 5,106 2,371 11,658 7,305
Interest expense 835 1,057 2,686 3,177
Other income (expense) 18 (692) 44 (9,418)
Income tax provision (1,572) (239) (3,324) 2,059
-------- -------- -------- --------
Income (loss) from continuing operations 2,717 383 5,692 (3,231)
-------- -------- -------- --------
Discontinued operations, net of income taxes (23) 1,841 22,605 5,497
-------- -------- -------- --------
Cumulative effect of a change in accounting, net
of income taxes -- -- (76) --
-------- -------- -------- --------
Net income $ 2,694 $ 2,224 $ 28,221 $ 2,266
======== ======== ======== ========
SHENANDOAH
TELECOMMUNICATIONS COMPANY
SUMMARY FINANCIAL INFORMATION
(unaudited)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
-------- -------- -------- --------
Net earnings (loss) per share, basic
Continuing operations $ 0.72 $ 0.10 $ 1.50 $ (0.85)
Discontinued operations, net of
income taxes (0.01) $ 0.49 5.97 1.45
-------- -------- -------- --------
Cumulative effect of a change in
accounting, net of taxes -- -- (0.02) --
-------- -------- -------- --------
Total $ 0.71 $ 0.59 $ 7.45 $ 0.60
======== ======== ======== ========
Net earnings per share, diluted
Continuing operations $ 0.71 $ 0.10 $ 1.49 $ (0.85)
Discontinued operations, net of
income taxes (0.01) 0.49 5.95 1.45
-------- -------- -------- --------
Cumulative effect of a change in
accounting, net of taxes -- -- (0.02) --
-------- -------- -------- --------
Total $ 0.71 $ 0.59 $ 7.43 $ 0.60
======== ======== ======== ========
* EPS calculations may not foot due to rounding.
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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)
October 23, 2003 /S/ EARLE A. MACKENZIE
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Earle A. MacKenzie
Chief Financial Officer