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 12, 2004
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
REPORTS FOURTH QUARTER AND FULL YEAR 2003 FINANCIAL RESULTS
EDINBURG, VA, (February 12, 2004) - Shenandoah Telecommunications Company
announced financial results for the fourth quarter of 2003 and year end results
as of December 31, 2003. Continued improvement in the wireless operations
resulted in improved results compared to same periods last year. Income from
continuing operations for the fourth quarter was $4.1 million, compared to $0.3
million for the same period in 2002. Income from continuing operations for the
year ended December 31, 2003 was $9.8 million versus a loss of $2.9 million for
2002, which included a previously reported net loss on external investments.
Total fourth quarter revenues grew by 11.9% from the same quarter the previous
year, including a 17.7% increase in wireless revenues. For 2003, revenue grew by
13.9% over the prior year, including a 20.7% 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 December 31,
2003 was $3.9 million compared to $2.3 million in 2002 and $32.1 million versus
$4.5 million for the year ended December 31, 2003 and 2002, respectively.
The Company previously announced a two-for-one stock split to shareholders
of record January 30, 2004. Certificates are expected to be mailed on or about
February 20, 2004, and it is expected the split will be reflected in quoted
prices starting on February 24, 2004. All per share amounts in this news release
are stated on a post-split basis.
Fourth Quarter Highlights
For the quarter ended December 31, 2003, income from continuing operations
was $4.1 million, compared to $0.3 million in fourth quarter 2002. The Company's
total revenues for the fourth quarter 2003 were $28.5 million, compared to $25.5
million in the same quarter 2002, an increase of $3.0 million or 11.9%. The
Company's revenue growth was driven by increases in its PCS business. Operating
income for the quarter was $7.1 million, an increase of $5.1 million from fourth
quarter 2002. The increase in operating income is primarily due to continued
growth in PCS operations, favorable adjustments to management's PCS estimates,
additional PCS revenue and expense reductions related to previous periods as a
result of settling disputed items with Sprint and other adjustments, all
totaling $2.5 million. In the fourth 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. The performance of the Company's other lines of business
was consistent with the same quarter last year.
Annual Highlights
For the year ended December 31, 2003, income from continuing operations
was $9.8 million or $1.29 per diluted share, compared to a loss of $2.9 million
or ($0.39) per diluted share in 2002. The Company's total revenues for 2003 were
$105.9 million, compared to $93.0 million in 2002, an increase of $12.9 million
or 13.9%. The Company's revenue growth was primarily driven by its PCS business.
Operating income for 2003 was $18.6 million, an increase of $9.3 million or 100%
from 2002. The increase is a result of continued growth in PCS
operations, favorable adjustments to management's PCS estimates, additional
revenue and expense reductions related to previous periods as a result of
settling disputed items with Sprint and the reduction in telephone access
charges previously reported in the second quarter of 2003, all totaling $0.5
million.
President and CEO, Christopher E. French commented, "Our employees have
worked diligently to construct and operate our PCS network, and to build our PCS
customer base. We are pleased to report a profit in the PCS operation for the
quarter. While this is a significant milestone in our wireless operations, we
recognize that much work remains to ultimately earn a reasonable return on our
wireless investment. Our recently announced signing of an addendum to our
management and services agreements with Sprint is expected to lead to cost
savings and greater certainty in fees paid to Sprint. These improvements and
more will be needed to sustain profitability in the highly competitive wireless
telecommunications industry."
PCS Operations
The Company continues to experience strong growth in wireless revenues as
a PCS Affiliate of Sprint, increasing its PCS subsidiary revenue by $2.8 million
to a total of $18.7 million for fourth quarter 2003 and increasing by $11.5
million to a total of $67.0 million for 2003 compared to the same periods last
year. The Company's Sprint wireless customer count increased during the fourth
quarter by 4,100, to approximately 85,100 customers. Although not included in
the Company's customer count, wholesale-prepaid customers used 5.0 million
minutes on the Company's network during the fourth quarter, compared to 0.4
million minutes in the same quarter in the prior year. The wholesale minutes for
2003 were 10.9 million compared to 0.5 million minutes in 2002. The Company's
fourth quarter churn was 2.0%, down from 2.8% in the fourth quarter 2002. The
PCS net income was $1.8 million in the fourth quarter 2003 compared to a net
loss of $1.6 million in the fourth quarter 2002. As stated previously, the
improvement in PCS net income during the fourth quarter is primarily the result
of improved
operating results and adjustments to prior period estimates. The PCS net income
of $0.3 million for the year ended December 31, 2003, is a $5.7 million
improvement over the same period in 2002. Prior period and settlement
adjustments with Sprint totaled $1.1 million in 2003.
Telephone Operations
The local telephone operations net income for 2003 was $7.1 million, an
increase of $0.3 million from 2002 when the Company recorded write-offs of more
than $0.5 million related to industry bankruptcy filings. The Company had 24,877
Access Lines at December 31, 2003, a decrease of 54 from the previous year-end.
Other Operations
The ShenTel Service operation had net income of $0.8 million in 2003,
compared to $0.3 million in 2002. Revenues in 2003 associated with information
access services, including Internet access service revenues and contract work on
the 511 Virginia Travel Information Project, increased $0.6 million, to $7.0
million. The Company ended the year with approximately 19,000 Internet customers
of which approximately 1,300 access the service through Digital Subscriber Lines
(DSL). This represents a 101% increase in DSL customers and the same overall
Internet customers as December 31, 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 December 31, 2003, the Company recorded a loss of
$0.2 million on external investments compared to a loss of $0.4 million in 2002.
A loss of $0.4 million was recorded for the year 2003, an improvement of $9.6
million from the year 2002. The loss on investments in 2002 was principally
attributed to the $9.0 million loss recorded during the year 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 $7.5 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 at the close of
business on February 28, 2003. That transaction resulted in a $21.3 million
after-tax gain, and the Company received $33.7 million in cash and $5.0 million
in escrow, subject to certain post-closing adjustments. The Company has
classified its prior cellular operation as discontinued. Net income for
discontinued operations in 2003 was $22.4 million or $2.95 per diluted share and
$7.4 million net income or $0.99 per diluted share. Incorporating these results
with those of continuing operations as described above in Annual Highlights,
2003 consolidated net income was $32.1 million or $4.22 per share on a diluted
basis, compared to $4.5 million or $0.60 per diluted share in 2002.
The Company's 2003 capital expenditures were $12.5 million and the Company
retired $12.2 million of debt during 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
remaining proceeds. The Company had cash and cash equivalents of $28.7 million
as of year-end. The Company's debt/equity ratio at December 31, 2003 was .41;
and debt as a percent of total assets was 23.4%.
About Shenandoah Telecommunications
Shenandoah Telecommunications Company is a holding company that provides a
broad range of telecommunications services through its operating subsidiaries.
The Company is traded on the NASDAQ National Market under the symbol "SHEN." The
Company's operating subsidiaries provide local telephone, cable television,
Internet access, interexchange facilities, and PCS 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
(In thousands, except per share amounts)
Condensed Balance Sheets December 31, December 31,
2003 2002
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Total current assets $ 40,963 $ 20,494
Total securities and investments 7,467 7,423
Property, plant and equipment 199,692 189,278
Less accumulated depreciation (72,006) (57,126)
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Net property, plant and equipment 127,686 132,152
Other assets, net 9,248 3,935
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Total assets $ 185,364 $ 164,004
========= =========
Current liabilities, exclusive of debt
of $4,230 and $7,985 $ 11,566 $ 11,915
Long and short-term debt 43,346 55,546
Total other liabilities 24,244 18,300
Minority interests in discontinued
operations -- 1,666
Total shareholders' equity 106,208 76,577
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Total liabilities and shareholders'
Equity $ 185,364 $ 164,004
========= =========
Condensed Statements of Income Fourth quarter
ended December 31, Year ended December 31,
2003 2002 2003 2002
-------- -------- --------- --------
Operating Revenues-Wireless $ 19,461 $ 16,528 $ 69,872 $ 57,867
-Wireline 7,300 7,314 29,022 28,755
-Other 1,727 1,617 6,967 6,352
-------- -------- --------- --------
Total operating revenue 28,488 25,459 105,861 92,974
Cost of goods and services 3,064 3,221 10,943 10,502
Network operating costs 8,455 8,797 33,630 32,511
Depreciation 4,303 3,890 16,631 14,482
Selling, general and
administrative 5,566 7,520 26,029 26,141
-------- -------- --------- --------
Total operating expenses 21,388 23,428 87,233 83,636
-------- -------- --------- --------
Operating income 7,100 2,031 18,628 9,338
Interest (expense) (825) (1,018) (3,510) (4,195)
Other income (expense) (227) (727) (53) (10,145)
Income tax (provision) benefit (1,979) 52 (5,304) 2,109
-------- -------- --------- --------
Income/(loss) from continuing
operations 4,069 338 9,761 (2,893)
Income from discontinued
operations (216) 1,915 22,389 7,412
Cumulative effect of a change
in accounting -- -- (76) --
-------- -------- --------- --------
Net income $ 3,853 $ 2,253 $ 32,074 $ 4,519
======== ======== ========= ========
Income/(loss) per share from
continuing operations, diluted $ 0.53 $ 0.04 $ 1.29 $ (0.39)
======== ======== ========= ========
Income per share from
discontinued operations, diluted $ (0.03) $ 0.26 $ 2.95 $ 0.99
======== ======== ========= ========
Loss per share from cumulative effect of change
in accounting, diluted -- -- $ (0.01) --
======== ======== ========= ========
Net earnings per share, diluted $ 0.50 $ 0.30 $ 4.22 $ 0.60
======== ======== ========= ========
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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 13, 2004 /S/ EARLE A. MACKENZIE
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Earle A. MacKenzie
Chief Financial Officer