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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
--------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
--------------------------------
FEBRUARY 23, 2005
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)
500 Shentel Way
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 2.02 Results of Operations and Financial Condition.
On February 23, 2005, the Company issued a press release reporting results for
the fourth quarter and year ending December 31, 2004. A copy of the press
release is included as Exhibit 99.1 to this report.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits The Company herewith files the following exhibits:
99.1 Press Release dated February 23, 2005
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, 2005 /S/CHRISTOPHER E. FRENCH
------------------------
Christopher E. French
President and Chief Executive Officer
2
NEWS RELEASE
Exhibit 99.1
For further information, please contact Earle A. MacKenzie at 540-984-5192.
SHENANDOAH TELECOMMUNICATIONS COMPANY
REPORTS FOURTH QUARTER AND FULL YEAR 2004 FINANCIAL RESULTS
EDINBURG, VA, (February 23, 2005) - Shenandoah Telecommunications Company
announced financial results for the fourth quarter of 2004 and year end results
as of December 31, 2004. Income from continuing operations for the fourth
quarter decreased to $1.9 million from $4.1 million in the same period in 2003
primarily due to favorable adjustments totaling $2.5 million to management's PCS
estimates in 2003 and an increase in 2004 depreciation expense of $0.5 million
resulting from a change in estimated lives of certain assets. Income from
continuing operations for the year ended December 31, 2004 was $10.2 million
compared to $9.8 million for 2003. Total fourth quarter revenues were $32.3
million, a growth of 14.4% from the same quarter the previous year, including a
14.5% increase in wireless revenues and $0.5 million wireline revenue
contribution from one month of operations of NTC Communications, purchased
December 1, 2004. Total 2004 revenues grew by 14.5%, including a 19.5% increase
in wireless revenues, to a total of $121.0 million.
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 twelve months ended December
31, 2004 was $10.2 million compared to $32.1 million in 2003.
Fourth Quarter Highlights
For the quarter ended December 31, 2004, income from continuing operations
was $1.9 million, compared to $4.1 million in fourth quarter 2003. The Company's
total revenues for the fourth quarter 2004 were $32.3 million, compared to $28.2
million in the same quarter 2003, an increase of $4.1 million or 14.4%. The
Company's revenue growth was driven by increases in its PCS business and the
inclusion of the December results of NTC Communications. Operating income for
the quarter was $3.8 million, a decrease of $3.3 million from fourth quarter
2003. The decrease in operating income is primarily due to favorable adjustments
to management's PCS estimates recorded in the fourth quarter of 2003 totaling
$2.5 million. These adjustments reflected the settlement of disputes with Sprint
and included recording additional PCS revenues and reductions in expenses
related to previous periods of operations. Additionally, operating expenses in
2004 increased due to a change in estimated lives of certain assets increasing
depreciation expense by $0.5 million, costs related to compliance of
Sarbanes-Oxley of $0.3 million and operating losses for NTC of $0.2 million.
Annual Highlights
For the year ended December 31, 2004, income from continuing operations
was $10.2 million or $1.34 per diluted share, compared to $9.8 million or $1.28
per diluted share in 2003. The Company's total revenues for 2004 were $121.0
million, compared to $105.6 million in 2003, an increase of $15.4 million or
14.5%. The Company's revenue growth was primarily driven by its PCS business.
Operating income for 2004 was $19.6 million, an increase of $1.0 million or 5.4%
from 2003. The increase is primarily a result
of continued growth in PCS operations offset by the adjustments recorded in the
fourth quarter 2003.
President and CEO, Christopher E. French commented, "We are very pleased
with our financial results for 2004. We were able to continue delivering
profitable growth despite incurring significant costs related to new
Sarbanes-Oxley requirements. The closing of the acquisition of NTC
Communications will also provide us with a new source of growth as we further
expand our services throughout the southeast United States."
PCS Operations
The Company continued to experience strong growth in wireless revenues as
a PCS Affiliate of Sprint, increasing its PCS subsidiary revenue by $2.7 million
to a total of $21.2 million for fourth quarter 2004 and increasing by $13.4
million to a total of $80.2 million for 2004, compared to the same periods last
year. The Company's Sprint retail wireless subscriber count increased during the
fourth quarter by 4,560, to approximately 102,600 subscribers. Although not
included in the Company's subscriber count, wholesale-prepaid subscribers
increased by 7,734 in the fourth quarter. The Company ended 2004 with 27,300
wholesale subscribers. The Company's fourth quarter churn was 2.22% and 2.15%
for all of 2004, comparable to the same periods last year. The PCS net income
was $0.2 million in fourth quarter 2004 compared to a net income of $1.8 million
in fourth quarter 2003. As stated previously, the 2003 fourth quarter included
adjustments of prior period estimates. The PCS net income of $2.9 million for
the year ended December 31, 2004, is a $2.6 million improvement over the same
period
in 2003. Prior period and settlement adjustments with Sprint totaled $1.1
million in 2003.
Telephone Operations
The local telephone operations net income for 2004 was $6.9 million, a
decrease of $0.2 million from 2003. The Company had 24,691 access lines at
December 31, 2004, a decrease of 186 from the previous year-end.
Other Operations
The Company ended the year with approximately 17,700 Internet customers of
which 2,646 access the service through Digital Subscriber Lines (DSL). This
represents a 104% increase in DSL customers, but a decrease of 1,000 overall
Internet customers as of December 31, 2004. Dial-up customers, primarily outside
of the Company's DSL footprint continue to migrate to high-speed alternatives.
DSL service is available to more than 97.0% of the subscribers of the Company's
local telephone serving area.
As previously reported, on December 1, 2004, the Company purchased the
83.9% of NTC Communications that it did not previously own. During December
2004, NTC generated an operating loss of $0.1 million after taxes, which has
been included in the consolidated results.
Results from 2004 included $1.1 million of revenue from the Company's
contract with the Virginia Department of Transportation for the 511Virginia
travel information service. As previously reported, this contract terminated on
February 13, 2005.
External Investments
In the quarter ended December 31, 2004, the Company recorded a loss of
$0.1 million on external investments compared to a loss of $0.2 million in 2003.
A loss of
$0.2 million was recorded for the year 2004, compared to a loss of $0.4 million
for the year 2003. At the end of the quarter, the Company's external investments
totaled $7.3 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 operations. Net income
for discontinued operations in 2003 was $22.4 million or $2.94 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.
The Company's 2004 capital expenditures were $33.8 million and it had cash
and cash equivalents of $14.2 million as of year-end. The Company's debt/equity
ratio at December 31, 2004 was 0.46; and debt as a percent of total assets was
25.0%.
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 and long distance telephone,
Internet and data services, cable television, wireless voice and data services,
alarm monitoring, and telecommunications equipment, along with many other
associated solutions in the Mid-Atlantic and Southeastern United States.
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 December 31, December 31,
- ------------------------ 2004 2003
---- ----
Cash and cash equivalents $ 14,172 $ 28,696
Other current assets 20,345 12,267
Total securities and investments 7,250 7,467
Property, plant and equipment 230,323 199,692
Less accumulated depreciation (74,071) (72,006)
--------- ---------
Net property, plant and equipment 156,252 127,686
Other assets, net 13,228 9,248
--------- ---------
Total assets $ 211,247 $ 185,364
========= =========
Current liabilities, exclusive of current
maturities of $4,372 and $4,230, respectively $ 17,474 $ 11,566
Long and short-term debt 52,830 43,346
Total other liabilities 27,146 24,244
Total shareholders' equity 113,797 106,208
--------- ---------
Total liabilities and shareholders' equity $ 211,247 $ 185,364
========= =========
SHENANDOAH TELECOMMUNICATIONS COMPANY
SUMMARY FINANCIAL INFORMATION
(unaudited)
Condensed Statements of Income
- ------------------------------ Three months ended Twelve months ended
(In thousands, except per share amounts) December 31, December 31,
2004 2003 2004 2003
---- ---- ---- ----
Operating Revenues-Wireless $ 22,015 $ 19,217 $ 83,238 $ 69,629
-Wireline 8,247 7,300 30,684 29,022
-Other 2,038 1,726 7,052 6,966
-------- -------- -------- --------
Total operating revenue 32,300 28,243 120,974 105,617
Cost of goods and services 4,926 4,853 15,793 13,386
Network operating costs 9,572 7,927 36,220 31,666
Depreciation and amortization 5,573 4,303 19,020 16,631
Selling, general and administrative 8,385 4,061 30,316 25,306
-------- -------- -------- --------
Total operating expenses 28,456 21,144 101,349 86,989
-------- -------- -------- --------
Operating income 3,844 7,099 19,625 18,628
Interest expense (802) (825) (3,129) (3,510)
Other income (expense) 41 (227) (175) (53)
Income tax provision (1,144) (1,978) (6,078) (5,304)
-------- -------- -------- --------
Income from continuing operations 1,939 4,069 10,243 9,761
Discontinued operations, net of income taxes -- (216) -- 22,389
Cumulative effect of a change in
accounting, net of income taxes -- -- -- (76)
-------- -------- -------- --------
Net income $ 1,939 $ 3,853 $ 10,243 $ 32,074
======== ======== ======== ========
Net earnings per share, basic
Continuing operations $ 0.25 $ 0.54 $ 1.35 $ 1.29
Discontinued operations, net of
income taxes -- (0.03) -- 2.95
Cumulative effect of a change in
accounting, net of taxes -- -- -- (0.01)
-------- -------- -------- --------
Total $ 0.25 $ 0.51 $ 1.35 $ 4.23
======== ======== ======== ========
Net earnings per share, diluted
Continuing operations $ 0.25 $ 0.53 $ 1.34 $ 1.28
Discontinued operations, net of
income taxes -- (0.03) -- 2.94
Cumulative effect of a change in
accounting, net of taxes -- -- -- (0.01)
-------- -------- -------- --------
Total $ 0.25 $ 0.50 $ 1.34 $ 4.22
======== ======== ======== ========
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