SEC Filing - Shenandoah Telecommunications Co

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UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from__________ to __________

Commission File No.: 000-09881

SHENANDOAH TELECOMMUNICATIONS COMPANY

(Exact name of registrant as specified in its charter)

VIRGINIA		54-1162807
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Shentel Way, Edinburg, Virginia 22824

(Address of principal executive offices) (Zip Code)

(540) 984-4141

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares of the registrant’s common stock outstanding on July 24, 2014 was 24,113,100.

SHENANDOAH TELECOMMUNICATIONS COMPANY

INDEX

		Page
		Numbers

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets June 30, 2014 and December 31, 2013	3-4

	Unaudited Consolidated Statements of Income and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2014 and 2013	5

	Unaudited Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2014 and the Year Ended December 31, 2013	6

	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013	7-8

	Notes to Unaudited Consolidated Financial Statements	9-13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14-28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.	Exhibits	32

	Signatures	33

	Exhibit Index	34

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands)

ASSETS	June 30, 2014		December 31, 2013

Current Assets
Cash and cash equivalents	$	72,085	$	38,316
Accounts receivable, net		26,844		25,824
Income taxes receivable		-		16,576
Materials and supplies		7,595		10,715
Prepaid expenses and other		4,411		5,580
Deferred income taxes		866		963
Total current assets		111,801		97,974

Investments, including $2,656 and $2,528 carried at fair value		9,668		9,332

Property, plant and equipment, net		405,810		408,963

Other Assets
Intangible assets, net		69,165		70,816
Deferred charges and other assets, net		7,559		9,921
Net other assets		76,724		80,737
Total assets	$	604,003	$	597,006

See accompanying notes to unaudited consolidated financial statements.

(Continued)

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands)

LIABILITIES AND SHAREHOLDERS’ EQUITY	June 30, 2014		December 31, 2013

Current Liabilities
Current maturities of long-term debt	$	17,250	$	5,750
Accounts payable		8,478		12,604
Advanced billings and customer deposits		11,912		11,661
Accrued compensation		2,961		4,192
Income taxes payable		581		-
Accrued liabilities and other		8,333		9,787
Total current liabilities		49,515		43,994

Long-term debt, less current maturities		212,750		224,250

Other Long-Term Liabilities
Deferred income taxes		68,228		74,547
Deferred lease payable		6,658		6,156
Asset retirement obligations		6,763		6,485
Other liabilities		8,326		7,259
Total other long-term liabilities		89,975		94,447

Commitments and Contingencies

Shareholders’ Equity
Common stock		28,236		26,759
Accumulated other comprehensive income		1,334		2,594
Retained earnings		222,193		204,962
Total shareholders’ equity		251,763		234,315

Total liabilities and shareholders’ equity	$	604,003	$	597,006

See accompanying notes to unaudited consolidated financial statements.

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013


Operating revenues	$	81,416		$	77,454		$	161,868		$	153,463

Operating expenses:
Cost of goods and services, exclusive of depreciation and amortization shown separately below		32,403			30,528			64,639			61,229
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		16,625			16,355			33,773			32,484
Depreciation and amortization		16,595			16,071			31,983			30,042
Total operating expenses		65,623			62,954			130,395			123,755
Operating income		15,793			14,500			31,473			29,708

Other income (expense):
Interest expense		(2,065	)		(2,068	)		(4,112	)		(4,220	)
Gain on investments, net		114			30			96			178
Non-operating income, net		459			458			1,086			979
Income before taxes		14,301			12,920			28,543			26,645

Income tax expense		5,686			5,078			11,312			10,452
Net income	$	8,615		$	7,842		$	17,231		$	16,193

Other comprehensive income (loss):
Unrealized gain (loss) on interest rate hedge, net of tax		(913	)		2,775			(1,260	)		3,307
Comprehensive Income	$	7,702		$	10,617		$	15,971		$	19,500

Earnings per share:
Basic	$	0.36		$	0.33		$	0.72		$	0.67
Diluted	$	0.35		$	0.33		$	0.71		$	0.67

Weighted average shares outstanding, basic		24,102			23,996			24,080			23,985

Weighted average shares outstanding, diluted		24,320			24,078			24,271			24,055

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands, except per share amounts)

	Shares			Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2012		23,962		$	24,688		$	184,023		$	(863	)	$	207,848

Net income		-			-			29,586			-			29,586
Other comprehensive income, net of tax		-			-			-			3,457			3,457
Dividends declared ($0.36 per share)		-			-			(8,647	)		-			(8,647	)
Dividends reinvested in common stock		20			475			-			-			475
Stock based compensation		-			1,938			-			-			1,938
Common stock issued through exercise of incentive stock options		66			1,186			-			-			1,186
Common stock issued for share awards		68			-			-			-			-
Common stock issued		1			10			-			-			10
Common stock repurchased		(77	)		(1,600	)		-			-			(1,600	)
Net excess tax benefit from stock options exercised		-			62			-			-			62

Balance, December 31, 2013		24,040		$	26,759		$	204,962		$	2,594		$	234,315

Net income		-			-			17,231			-			17,231
Other comprehensive loss, net of tax		-			-			-			(1,260	)		(1,260	)
Stock based compensation		-			1,730			-			-			1,730
Stock options exercised		50			1,119			-			-			1,119
Common stock issued for share awards		81			-			-			-			-
Common stock issued		1			5			-			-			5
Common stock repurchased		(59	)		(1,771	)		-			-			(1,771	)
Net excess tax benefit from stock options exercised		-			394			-			-			394
Balance, June 30, 2014		24,113		$	28,236		$	222,193		$	1,334		$	251,763

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2014			2013

Cash Flows From Operating Activities
Net income	$	17,231		$	16,193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		30,325			27,714
Amortization		1,658			2,328
Provision for bad debt		550			952
Stock based compensation expense		1,730			1,045
Excess tax benefits on stock awards		(394	)		(61	)
Deferred income taxes		(4,983	)		253
Net (gain) loss on disposal of equipment		(313	)		167
Realized gain on disposal of investments		-			(2	)
Unrealized gains on investments		(74	)		(103	)
Net gains from patronage and equity investments		(289	)		(311	)
Other		263			1,152
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(1,570	)		(722	)
Materials and supplies		3,120			1,778
Income taxes receivable		16,576			(84	)
Increase (decrease) in:
Accounts payable		2,367			2,444
Deferred lease payable		502			679
Income taxes payable		581			-
Other prepaids, deferrals and accruals		(704	)		(1,267	)
Net cash provided by operating activities	$	66,576		$	52,155

Cash Flows From Investing Activities
Purchase and construction of property, plant and equipment	$	(32,804	)	$	(48,482	)
Proceeds from sale of assets		-			25
Proceeds from sale of equipment		223			290
(Purchase) sale of investment securities		-			(12	)
Proceeds from sale of investment securities		27			64
Net cash used in investing activities	$	(32,554	)	$	(48,115	)

(Continued)

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2014			2013

Cash Flows From Financing Activities
Principal payments on long-term debt	$	-		$	(1,460	)
Excess tax benefits on stock awards		394			61
Repurchases of stock		(1,771	)		(330	)
Proceeds from issuances of stock		1,124			5
Net cash used in financing activities	$	(253	)	$	(1,724	)

Net increase in cash and cash equivalents	$	33,769		$	2,316

Cash and cash equivalents:
Beginning		38,316			71,086
Ending	$	72,085		$	73,402

Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest	$	3,930		$	4,390

Income taxes (received) paid	$	(580	)	$	10,283

During the first six months of 2013, the Company traded in certain PCS equipment and received credits of $10,778 against the purchase price of new equipment.

At December 31, 2013, accounts payable included approximately $7.6 million associated with the capital expenditures related to the Network Vision project. These payables were disbursed during 2014.

See accompanying notes to unaudited consolidated financial statements.

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Presentation

The interim consolidated financial statements of Shenandoah Telecommunications Company and Subsidiaries (collectively, the “Company”) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the interim results have been reflected therein. All such adjustments were of a normal and recurring nature. These statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The balance sheet information at December 31, 2013 was derived from the audited December 31, 2013 consolidated balance sheet. Operating revenues and income from operations for any interim period are not necessarily indicative of results that may be expected for the entire year.

2.	Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):

	June 30, 2014		December 31, 2013
Plant in service	$	666,830	$	633,480
Plant under construction		16,118		23,181
		682,948		656,661
Less accumulated amortization and depreciation		277,138		247,698
Net property, plant and equipment	$	405,810	$	408,963

3.	Earnings per share

Basic net income per share was computed on the weighted average number of shares outstanding. Diluted net income per share was computed under the treasury stock method, assuming the conversion as of the beginning of the period, for all dilutive stock options. Of 694 thousand and 809 thousand shares and options outstanding at June 30, 2014 and 2013, respectively, zero and 345 thousand were anti-dilutive, respectively. These options have been excluded from the computations of diluted earnings per share for their respective period. There were no adjustments to net income for either period.

4.	Investments Carried at Fair Value

Investments include $2.7 million and $2.5 million of investments carried at fair value as of June 30, 2014 and December 31, 2013, respectively, consisting of equity, bond and money market mutual funds. These investments were acquired under a rabbi trust arrangement related to a non-qualified supplemental retirement plan maintained by the Company. During the six months ended June 30, 2014, the Company recognized $104 thousand in dividend and interest income from investments, and recorded net unrealized gains of $74 thousand on these investments. Fair values for these investments held under the rabbi trust were determined by Level 1 quoted market prices for the underlying mutual funds.

5.	Financial Instruments

Financial instruments on the consolidated balance sheets that approximate fair value include: cash and cash equivalents, receivables, investments carried at fair value, payables, accrued liabilities, interest rate swaps and variable rate long-term debt.

6.	Derivative Instruments, Hedging Activities and Accumulated Other Comprehensive Income

The Company’s objectives in using interest rate derivatives are to add stability to cash flows and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps (both those designated as cash flow hedges as well as those not designated as cash flow hedges) involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Index

The Company entered into a pay-fixed, receive-variable interest rate swap of $63.3 million of notional principal in August 2010. This interest rate swap was not designated as a cash flow hedge. Changes in the fair value of interest rate swaps not designated as cash flow hedges are recorded in interest expense each reporting period. The changes in fair value recorded in interest expense for the three and six months ended June 30, 2013 were decreases of $102 thousand and $206 thousand, respectively. This swap expired in July 2013.

The Company entered into a pay-fixed, receive-variable interest rate swap of $174.6 million of notional principal in September 2012. This interest rate swap was designated as a cash flow hedge. The total outstanding notional amount of cash flow hedges was $174.6 million as of June 30, 2014.

The effective portion of changes in the fair value of interest rate swaps designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company uses its derivatives to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivative is recognized directly in earnings through interest expense. No hedge ineffectiveness was recognized during any of the periods presented.

Amounts reported in accumulated other comprehensive income related to the interest rate swap designated and that qualify as a cash flow hedge are reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of June 30, 2014, the Company estimates that $1.6 million will be reclassified as an increase to interest expense during the next twelve months due to the interest rate swap since the hedge interest rate exceeds the variable interest rate on the debt.

The table below presents the fair value of the Company’s derivative financial instruments as well as its classification on the consolidated balance sheet as of June 30, 2014 and December 31, 2013 (in thousands; amounts in parentheses indicate debits):

	Derivatives
		Fair Value as of
	Balance Sheet	June 30,			December 31,
	Location	2014			2013

Derivatives designated as hedging instruments:
Interest rate swaps
	Accrued liabilities and other	$	1,613		$	1,590
	Deferred charges and other assets net		(3,846	)		(5,926	)
Total derivatives designated as hedging instruments		$	(2,233	)	$	(4,336	)

The fair value of interest rate swaps is determined using a pricing model with inputs that are observable in the market (level 2 fair value inputs).

Index

The table below presents change in accumulated other comprehensive income by component for the six months ended June 30, 2014 (in thousands):

	Gains and (Losses) on Cash Flow Hedges			Income Tax Expense (Benefit)			Accumulated Other Comprehensive Income (Loss)

Balance as of December 31, 2013	$	4,336		$	(1,742	)	$	2,594
Other comprehensive income before reclassifications		(2,957	)		1,184			(1,773	)
Amounts reclassified from accumulated other comprehensive income (to interest expense)		854			(341	)		513
Net current period other comprehensive income (loss)		(2,103	)		843			(1,260	)
Balance as of June 30, 2014	$	2,233		$	(899	)	$	1,334

7.	Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers. The Company has three reportable segments, which the Company operates and manages as strategic business units organized by lines of business: (1) Wireless, (2) Cable, and (3) Wireline. A fourth segment, Other, primarily includes Shenandoah Telecommunications Company, the parent holding company.

The Wireless segment provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, as a Sprint PCS Affiliate of Sprint. This segment also owns cell site towers built on leased land, and leases space on these towers to both affiliates and non-affiliated service providers.

The Cable segment provides video, internet and voice services in Virginia, West Virginia and Maryland. It does not include video, internet and voice services provided to customers in Shenandoah County, Virginia.

The Wireline segment provides regulated and unregulated voice services, DSL internet access, and long distance access services throughout Shenandoah County and portions of Rockingham, Frederick, Warren and Augusta counties, Virginia. The segment also provides video services in portions of Shenandoah County, and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia and adjacent areas along the Interstate 81 corridor through West Virginia and Maryland.

Three months ended June 30, 2014 (in thousands)	Wireless		Cable			Wireline		Other			Eliminations			Consolidated Totals
External revenues
Service revenues	$	47,868	$	17,416		$	5,120	$	-		$	-		$	70,404
Other		2,813		3,388			4,811		-			-			11,012
Total external revenues		50,681		20,804			9,931		-			-			81,416
Internal revenues		1,094		33			5,713		-			(6,840	)		-
Total operating revenues		51,775		20,837			15,644		-			(6,840	)		81,416

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		18,476		12,421			7,737		-			(6,231	)		32,403
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		7,657		4,735			1,493		3,349			(609	)		16,625
Depreciation and amortization		8,071		5,766			2,653		105			-			16,595
Total operating expenses		34,204		22,922			11,883		3,454			(6,840	)		65,623
Operating income (loss)		17,571		(2,085	)		3,761		(3,454	)		-			15,793

Index

Three months ended June 30, 2013 (in thousands)	Wireless		Cable			Wireline		Other			Eliminations			Consolidated Totals
External revenues
Service revenues	$	46,362	$	16,325		$	5,558	$	-		$	-		$	68,245
Other		2,328		2,357			4,524		-			-			9,209
Total external revenues		48,690		18,682			10,082		-			-			77,454
Internal revenues		1,076		53			5,169		-			(6,298	)		-
Total operating revenues		49,766		18,735			15,251		-			(6,298	)		77,454

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		17,854		11,239			7,198		-			(5,763	)		30,528
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		8,068		4,500			1,251		3,071			(535	)		16,355
Depreciation and amortization		7,781		5,479			2,802		9			-			16,071
Total operating expenses		33,703		21,218			11,251		3,080			(6,298	)		62,954
Operating income (loss)		16,063		(2,483	)		4,000		(3,080	)		-			14,500

Six months ended June 30, 2014 (in thousands)	Wireless		Cable			Wireline		Other			Eliminations			Consolidated Totals
External revenues
Service revenues	$	95,100	$	34,840		$	10,220	$	-		$	-		$	140,160
Other		5,569		6,418			9,721		-			-			21,708
Total external revenues		100,669		41,258			19,941		-			-			161,868
Internal revenues		2,184		59			11,478		-			(13,721	)		-
Total operating revenues		102,853		41,317			31,419		-			(13,721	)		161,868

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		37,132		24,811			15,219		-			(12,523	)		64,639
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		16,089		9,381			2,737		6,764			(1,198	)		33,773
Depreciation and amortization		15,268		11,170			5,350		195			-			31,983
Total operating expenses		68,489		45,362			23,306		6,959			(13,721	)		130,395
Operating income (loss)		34,364		(4,045	)		8,113		(6,959	)		-			31,473

Six months ended June 30, 2013 (in thousands)	Wireless		Cable			Wireline		Other			Eliminations			Consolidated Totals
External revenues
Service revenues	$	90,427	$	32,487		$	11,021	$	-		$	-		$	133,935
Other		5,347		4,659			9,522		-			-			19,528
Total external revenues		95,774		37,146			20,543		-			-			153,463
Internal revenues		2,149		102			9,808		-			(12,059	)		-
Total operating revenues		97,923		37,248			30,351		-			(12,059	)		153,463

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		35,385		22,461			14,364		-			(10,981	)		61,229
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		15,955		8,924			2,612		6,071			(1,078	)		32,484
Depreciation and amortization		13,809		10,684			5,532		17			-			30,042
Total operating expenses		65,149		42,069			22,508		6,088			(12,059	)		123,755
Operating income (loss)		32,774		(4,821	)		7,843		(6,088	)		-			29,708

Index

A reconciliation of the total of the reportable segments’ operating income to consolidated income before taxes is as follows:

	Three Months Ended June 30,
	2014			2013
Total consolidated operating income	$	15,793		$	14,500
Interest expense		(2,065	)		(2,068	)
Non-operating income (expense), net		573			488
Income before taxes	$	14,301		$	12,920

	Six Months Ended June 30,
	2014			2013
Total consolidated operating income	$	31,473		$	29,708
Interest expense		(4,112	)		(4,220	)
Non-operating income (expense), net		1,182			1,157
Income before taxes	$	28,543		$	26,645

The Company’s assets by segment are as follows:

(in thousands)	June 30, 2014			December 31, 2013

Wireless	$	233,637		$	229,038
Cable		208,092			199,184
Wireline		89,487			92,455
Other		417,790			435,804
Combined totals		949,006			956,481
Inter-segment eliminations		(345,003	)		(359,475	)
Consolidated totals	$	604,003		$	597,006

8.	Income Taxes

The Company files U.S. federal income tax returns and various state and local income tax returns. With few exceptions, years prior to 2010 are no longer subject to examination. The Company is under audit in the state of Maryland for the 2009, 2010 and 2011 tax years. No other state or federal income tax audits were in process as of June 30, 2014.

Index

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to Shenandoah Telecommunications Company or its management are intended to identify these forward-looking statements. All statements regarding Shenandoah Telecommunications Company’s expected future financial position and operating results, business strategy, financing plans, forecasted trends relating to the markets in which Shenandoah Telecommunications Company operates and similar matters are forward-looking statements. We cannot assure you that the Company’s expectations expressed or implied in these forward-looking statements will turn out to be correct. The Company’s actual results could be materially different from its expectations because of various factors, including those discussed below and under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2013. The following management’s discussion and analysis should be read in conjunction with the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2013, including the financial statements and related notes included therein.

General

Overview. Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated and unregulated telecommunications services through its wholly-owned subsidiaries. These subsidiaries provide wireless personal communications services (as a Sprint PCS Affiliate), local exchange telephone services, video, internet and data services, long distance, fiber optics facilities, and leased tower facilities. The Company has the following three reportable segments, which it operates and manages as strategic business units organized by lines of business:

The Wireless segment provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, as a Sprint PCS Affiliate. This segment also owns cell site towers built on leased land, and leases space on these towers to both affiliates and non-affiliated service providers.

The Cable segment provides video, internet and voice services in franchise areas in portions of Virginia, West Virginia and western Maryland, and leases fiber optic facilities throughout its service area. It does not include video, internet and voice services provided to customers in Shenandoah County, Virginia.

A fourth segment, Other, primarily includes Shenandoah Telecommunications Company, the parent holding company.

Index

Results of Operations

Three Months Ended June 30, 2014 Compared with the Three Months Ended June 30, 2013

Consolidated Results

The Company’s consolidated results for the second quarters of 2014 and 2013 are summarized as follows:

(in thousands)	Three Months Ended June 30,						Change
	2014			2013			$		%

Operating revenues	$	81,416		$	77,454		$	3,962	5.1
Operating expenses		65,623			62,954			2,669	4.2
Operating income		15,793			14,500			1,293	8.9

Interest expense		(2,065	)		(2,068	)		3	0.1
Other income (expense), net		573			488			85	17.4
Income before taxes		14,301			12,920			1,381	10.7
Income tax expense		5,686			5,078			608	12.0
Net income	$	8,615		$	7,842		$	773	9.9

Operating revenues

For the three months ended June 30, 2014, operating revenues increased $4.0 million, or 5.1%. Wireless segment revenues increased $2.0 million compared to the second quarter of 2013. Net postpaid service revenues increased $1.2 million, driven by growth of data revenue and 4.2% year-over-year growth in average postpaid subscribers. Other Wireless revenue increased $0.6 million, as the prior year period included a $0.5 million adjustment to straight-line rent accruals related to the termination of iDEN tower leases. Cable segment revenue grew $2.1 million. A $1.1 million increase in cable service revenue reflected 6.3% growth in average subscriber counts and an increase in revenue per subscriber, while growth in equipment revenue of $1.0 million resulted primarily from an increase in customer premise equipment rents. Wireline segment revenue increased $0.4 million due primarily to an increase in affiliate revenue, which is eliminated in consolidation.

Operating expenses

Total operating expenses were $65.6 million in the second quarter of 2014 compared to $63.0 million in the prior year period. Cost of goods and services sold increased $1.9 million, including increases of $0.7 million in cable programming costs, $0.7 million in network maintenance costs and $0.6 million in PCS handset costs. Selling, general and administrative expenses increased $0.3 million. Depreciation and amortization expense increased $0.5 million, primarily due to completion of the Network Vision upgrade project.

Other income (expense), net

Other income increased in the current year period due primarily to higher investment gains.

Income tax expense

The Company’s effective tax rate increased to 39.8% in the quarter ended June 30, 2014 from 39.3% in the 2013 quarter.

Net income

For the three months ended June 30, 2014, net income increased $0.8 million, or 9.9%, primarily reflecting growth in subscriber counts and revenue per subscriber in both the wireless and cable segments.

Index

Six Months Ended June 30, 2014 Compared with the Six Months Ended June 30, 2013

Consolidated Results

The Company’s consolidated results for the first six months of 2014 and 2013 are summarized as follows:

(in thousands)	Six Months Ended June 30,						Change
	2014			2013			$		%

Operating revenues	$	161,868		$	153,463		$	8,405	5.5
Operating expenses		130,395			123,755			6,640	5.4
Operating income		31,473			29,708			1,765	5.9

Interest expense		(4,112	)		(4,220	)		108	2.6
Other income (expense), net		1,182			1,157			25	2.2
Income before taxes		28,543			26,645			1,898	7.1
Income tax expense		11,312			10,452			860	8.2
Net income	$	17,231		$	16,193		$	1,038	6.4

Operating revenues

For the six months ended June 30, 2014, operating revenues increased $8.4 million, or 5.5%. Wireless segment revenues increased $4.9 million compared to the first six months of 2013. Net postpaid service revenues increased $2.4 million, driven by data fees and 4.3% year-over-year growth in average postpaid subscribers. Net prepaid service revenues grew $2.3 million, or 11.7%, due to 4.5% growth in average prepaid subscribers and higher average revenue per subscriber in 2014 over 2013. Cable segment revenues increased $4.1 million due to a 6.0% increase in average revenue generating units compared to the 2013 period and to a $1.1 million increase in rent revenues for customer premise equipment, due to a change in January 2014 of charging customers for their first set top box, which previously had been at no charge. Wireline segment revenue increased $1.1 million, due primarily to a $1.4 million increase in affiliate revenue, which is eliminated in consolidation.

Operating expenses

Total operating expenses were $130.4 million in the six months ended June 30, 2014 compared to $123.8 million in the prior year period. Cost of goods and services sold increased $3.4 million, including increases of $1.5 million in network maintenance costs, $1.3 million in PCS handset costs and $0.8 million in video programming costs. Selling, general and administrative expenses increased $1.3 million, due to higher personnel costs, partially offset by lower wireless prepaid and bad debt expenses. Depreciation and amortization expense increased $1.9 million, primarily due to completion of the Network Vision upgrade project.

Interest and other income (expense), net

Interest expense declined $0.1 million from the prior year period. During the first six months of 2013, the company recorded $0.1 million of interest expense charges to reflect changes in the fair value of an interest rate swap not designated as a cash flow hedge. This swap expired in July 2013.

Income tax expense

The Company’s effective tax rate increased to 39.6% in the six months ended June 30, 2014 from 39.2% in the 2013 period.

Net income

For the six months ended June 30, 2014, net income increased $1.0 million, or 6.4%, reflecting growth in subscriber counts and revenue per subscriber in both the Wireless and Cable segments, partially offset by increases in operating expenses incurred in support of this growth.

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Wireless

The Company’s Wireless segment provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, through Shenandoah Personal Communications LLC (“PCS”), a Sprint PCS Affiliate. This segment also leases land on which it builds Company-owned cell towers, which it leases to affiliated and non-affiliated wireless service providers, throughout the same four-state area described above, through Shenandoah Mobile LLC (“Mobile”).

PCS receives revenues from Sprint for postpaid and prepaid subscribers that obtain service in PCS’s network coverage area. PCS relies on Sprint to provide timely, accurate and complete information to record the appropriate revenue for each financial period. Through July 31, 2013, postpaid revenues received from Sprint were recorded net of certain fees totaling 20% of net postpaid billed revenue retained by Sprint. These fees included an 8% management fee and a 12% net service fee. Effective August 1, 2013, the net service fee increased to 14%, the maximum allowed by the current Sprint Affiliate contract. The management fee remained unchanged at 8%. Sprint also retains a 6% management fee on prepaid revenues.

During the second quarter of 2014, the Company’s PCS stores began participating in Sprint’s Easy Pay handset financing program, whereby Sprint enters into a financing agreement with the subscriber and the subscriber receives a handset from Sprint. The equipment revenue from the subscriber and the expense of the handset are Sprint’s responsibility.

The following tables show selected operating statistics of the Wireless segment as of the dates shown:

	June 30,		December 31,		June 30,		December 31,
	2014		2013		2013		2012
Retail PCS Subscribers – Postpaid		277,673		273,721		266,297		262,892
Retail PCS Subscribers – Prepaid		138,176		137,047		131,372		128,177
PCS Market POPS (000) (1)		2,406		2,397		2,393		2,390
PCS Covered POPS (000) (1)		2,100		2,067		2,063		2,057
CDMA Base Stations (sites)		528		526		525		516
Towers		154		153		151		150
Non-affiliate cell site leases (2)		195		217		219		216

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013

Gross PCS Subscriber Additions – Postpaid		15,898			15,184			31,483			31,088
Net PCS Subscriber Additions – Postpaid		2,648			2,340			3,952			3,405
Gross PCS Subscriber Additions – Prepaid		15,286			18,307			34,458			39,729
Net PCS Subscriber Additions (Losses) – Prepaid		(361	)		(3,032	)		1,129			3,195
PCS Average Monthly Retail Churn % - Postpaid (3)		1.60	%		1.62	%		1.67	%		1.74	%
PCS Average Monthly Retail Churn % - Prepaid (3)		3.78	%		5.33	%		4.03	%		4.62	%

POPS refers to the estimated population of a given geographic area and is based on information purchased from third party sources. Market POPS are those within a market area which the Company is authorized to serve under its Sprint PCS affiliate agreements, and Covered POPS are those covered by the Company’s network.

The decrease from December 31, 2013 to June 30, 2014 is primarily a result of termination of Sprint iDEN leases associated with the former Nextel network.

PCS Average Monthly Retail Churn is the average of the monthly subscriber turnover, or churn, calculations for the period.

Index

Three Months Ended June 30, 2014 Compared with the Three Months Ended June 30, 2013

(in thousands)	Three Months Ended June 30,					Change
	2014		2013			$			%

Segment operating revenues
Wireless service revenue	$	47,868	$	46,362		$	1,506		3.2
Tower lease revenue		2,466		2,576			(110	)	(4.3	)
Equipment revenue		1,306		1,270			36		2.8
Other revenue		135		(442	)		577		(130.5	)
Total segment operating revenues		51,775		49,766			2,009		4.0
Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		18,476		17,854			622		3.5
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		7,657		8,068			(411	)	(5.1	)
Depreciation and amortization		8,071		7,781			290		3.7
Total segment operating expenses		34,204		33,703			501		1.5
Segment operating income	$	17,571	$	16,063		$	1,508		9.4

Operating revenues

Wireless service revenue increased $1.5 million, or 3.2%, for the three months ended June 30, 2014, compared to the comparable 2013 period. Net postpaid service revenues increased $1.2 million, driven by data revenues and 4.2% year-over-year growth in average postpaid subscribers. As stated above, the net service fee increased from 12% of net billed revenues to 14% on August 1, 2013, reducing net postpaid service revenue by $0.9 million, approximately $0.3 million per month. Net prepaid service revenues grew $0.3 million, or 3.1%, due to 3.4% growth in average prepaid subscribers over 2013.

The decrease in tower lease revenue resulted from the termination of Sprint iDEN leases associated with the former Nextel network. Other revenue increased, as the prior year period included a $0.5 million unfavorable adjustment to straight-line rent accruals related to the termination of iDEN leases.

Cost of goods and services

Cost of goods and services increased $0.6 million, or 3.5%, in 2014 from the second quarter of 2013. Postpaid handset costs increased $1.0 million, as higher volume of handset upgrades drove a $0.6 million increase and higher volume of tablets drove $0.2 million of incremental cost. Prepaid handset subsidies decreased $0.5 million on lower volume of handsets sold.

Selling, general and administrative

Selling, general and administrative costs decreased $0.4 million, or 5.1%, in the second quarter of 2014 from the comparable 2013 period. Costs to add new prepaid subscribers decreased $0.7 million due to lower volume of gross additions in the current year. This decrease was partially offset by growth in advertising expense and general and administrative support.

Depreciation and amortization

Depreciation and amortization increased $0.3 million, or 3.7%, in the second quarter of 2014 over the comparable 2013 period, following completion of Network Vision upgrades.

Index

Six Months Ended June 30, 2014 Compared with the Six Months Ended June 30, 2013

(in thousands)	Six Months Ended June 30,					Change
	2014		2013			$			%

Segment operating revenues
Wireless service revenue	$	95,100	$	90,427		$	4,673		5.2
Tower lease revenue		5,030		5,137			(107	)	(2.1	)
Equipment revenue		2,503		2,602			(99	)	(3.8	)
Other revenue		220		(243	)		463		(190.5	)
Total segment operating revenues		102,853		97,923			4,930		5.0
Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		37,132		35,385			1,747		4.9
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		16,089		15,955			134		0.8
Depreciation and amortization		15,268		13,809			1,459		10.6
Total segment operating expenses		68,489		65,149			3,340		5.1
Segment operating income	$	34,364	$	32,774		$	1,590		4.9

Operating revenues

Wireless service revenue increased $4.7 million, or 5.2%, for the six months ended June 30, 2014, compared to the comparable 2013 period. Net postpaid service revenues increased $2.4 million, driven by data revenues and 4.3% year-over-year growth in average postpaid subscribers. As stated above, the net service fee increased from 12% of net billed revenues to 14% on August 1, 2013, reducing net postpaid service revenue by $1.8 million, approximately $0.3 million per month. Net prepaid service revenues grew $2.3 million, or 11.7%, compared to the six months ended June 30, 2013. Average prepaid subscribers increased 4.5% in 2014 over 2013, with changes in the mix of subscribers accounting for the remainder of the increase in prepaid service revenues.

Cost of goods and services

Cost of goods and services increased $1.7 million, or 4.9%, in 2014 from the first half of 2013. Postpaid handset costs increased $2.4 million, driven primarily by higher average cost per handset sold and a higher volume of handset upgrades. Prepaid handset subsidies decreased $1.1 million on lower volume of handsets sold. Network costs increased $0.7 million, primarily due to increases in rent and backhaul costs associated with the Network Vision project. Maintenance expense grew $0.7 million due to increases in maintenance contracts that support the upgraded wireless network. These increases were largely offset by a one-time $0.4 million gain related to actual disposal costs for the Network Vision project being less than the previously accrued amounts and by $0.3 million lower costs from Sprint to service prepaid customers who take advantage of the “top-up” program.

Selling, general and administrative

Selling, general and administrative costs increased $0.1 million in the first six months of 2014 over the comparable 2013 period. Several factors contributed to this increase. Costs to add new prepaid subscribers decreased $0.9 million on lower volume of gross additions. Advertising costs grew $0.4 million as the Company increased marketing of the 4G network that was completed in the fourth quarter of 2013. Commission costs grew $0.4 million as growth in sales of higher-tier rate plans resulted in higher commission rates, primarily during the first quarter of 2014.

Index

Depreciation and amortization

Depreciation and amortization increased $1.5 million, 10.6%, in 2014 over the 2013 first half, following completion of Network Vision upgrades

Cable

	June 30, 2014			December 31, 2013			June 30, 2013			December 31, 2012

Homes Passed (1)		171,147			170,470			168,523			168,475
Customer Relationships (2)
Video customers		50,159			51,197			51,591			52,676
Non-video customers		19,730			18,341			16,731			15,709
Total customer relationships		69,889			69,538			68,322			68,385
Video
Customers (3)		51,699			53,076			53,395			54,840
Penetration (4)		30.2	%		31.1	%		31.7	%		32.6	%
Digital video penetration (5)		63.6	%		49.2	%		40.2	%		39.5	%
High-speed Internet
Available Homes (6)		168,923			168,255			166,675			163,273
Customers (3)		48,096			45,776			42,519			40,981
Penetration (4)		28.5	%		27.2	%		25.5	%		25.1	%
Voice
Available Homes (6)		166,186			163,282			161,709			154,552
Customers (3)		16,426			14,988			13,576			12,262
Penetration (4)		9.9	%		9.2	%		8.4	%		8.0	%
Total Revenue Generating Units (7)		116,221			113,840			109,490			108,083
Fiber Route Miles		2,463			2,446			2,234			2,077
Total Fiber Miles (8)		70,772			69,715			41,394			39,418

Homes and businesses are considered passed (“homes passed”) if we can connect them to our distribution system without further extending the transmission lines. Homes passed is an estimate based upon the best available information.

Customer relationships represent the number of customers who receive at least one of our services.

Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer. Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.

Penetration is calculated by dividing the number of customers by the number of homes passed or available homes, as appropriate.

Digital video penetration is calculated by dividing the number of digital video customers by total video customers. Digital video customers are video customers who receive any level of video service via digital transmission. A dwelling with one or more digital set-top boxes counts as one digital video customer.

Homes and businesses are considered available (“available homes”) if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area.

Revenue generating units are the sum of video, voice and high-speed internet customers.

Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles. Fiber counts were recalculated after a fiber audit and deployment of enhanced mapping software in the fourth quarter of 2013.

Index

Three Months Ended June 30, 2014 Compared with the Three Months Ended June 30, 2013

(in thousands)	Three Months Ended June 30,						Change
	2014			2013			$		%

Segment operating revenues
Service revenue	$	17,416		$	16,325		$	1,091	6.7
Equipment and other revenue		3,421			2,410			1,011	42.0
Total segment operating revenues		20,837			18,735			2,102	11.2

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		12,421			11,239			1,182	10.5
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		4,735			4,500			235	5.2
Depreciation and amortization		5,766			5,479			287	5.2
Total segment operating expenses		22,922			21,218			1,704	8.0
Segment operating loss	$	(2,085	)	$	(2,483	)	$	398	16.0

Operating revenues

Cable segment service revenue increased $1.1 million, or 6.7%, due to a 6.3% increase in average revenue generating units, a video rate increase in January 2014, and customers selecting higher-priced digital TV services and higher-speed data access packages.

Growth in equipment and other revenue was driven primarily by a $0.6 million increase in customer premise equipment rents, due to a change in January 2014 of charging customers for their first set top box, which previously had been at no charge. Facility lease revenue grew $0.2 million due to new fiber to the tower contracts with third parties.

Operating expenses

Cable segment cost of goods and services increased $1.2 million, or 10.5%, in the second quarter of 2014 over the comparable 2013 period. Video programming costs increased $0.7 million as the impact of rising rates per subscriber outpaced declining video subscriber counts. Maintenance costs increased $0.3 million due to costs to support network growth.

Selling, general and administrative expenses grew $0.2 million due to increases in costs related to customer service and administrative functions.

The increase in depreciation and amortization expense consists of $0.6 million of higher depreciation expense on assets placed in service, offset by lower amortization on the customer base intangible asset recorded when the cable markets were acquired. The amortization of this asset declines on the anniversary of the acquisitions.

Index

Six Months Ended June 30, 2014 Compared with the Six Months Ended June 30, 2013

(in thousands)	Six Months Ended June 30,						Change
	2014			2013			$		%

Segment operating revenues
Service revenue	$	34,840		$	32,487		$	2,353	7.2
Equipment and other revenue		6,477			4,761			1,716	36.0
Total segment operating revenues		41,317			37,248			4,069	10.9

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		24,811			22,461			2,350	10.5
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		9,381			8,924			457	5.1
Depreciation and amortization		11,170			10,684			486	4.5
Total segment operating expenses		45,362			42,069			3,293	7.8
Segment operating loss	$	(4,045	)	$	(4,821	)	$	776	16.1

Operating revenues

Cable segment service revenue increased $2.4 million, or 7.2%, due to a 6.0% increase in average revenue generating units, a video rate increase in January 2014, and customers selecting higher-priced digital TV services and higher-speed data access packages.

Growth in equipment and other revenue was driven primarily by a $1.1 million increase in customer premise equipment rents, due to a change in January 2014 of charging customers for their first set top box, which previously had been at no charge. Also, facility lease revenue grew $0.3 million due to new fiber to the tower contracts with third parties.

Operating expenses

Cable segment cost of goods and services increased $2.4 million, or 10.5%, in the six months ended June 30, 2014 over the comparable 2013 period. Video programming costs increased $1.1 million as the impact of rising rates per subscriber outpaced declining video subscriber counts. Personnel costs increased $0.5 million due to incremental costs for health care claims and stock compensation. Maintenance costs increased $0.5 million due to costs to support network growth.

Selling, general and administrative expenses grew $0.5 million against the prior year period as increases in costs related to customer service and administrative functions were partially offset by reductions of $0.2 million in commission expense and $0.2 million in bad debt expense.

The increase in depreciation and amortization expense consists of $1.1 million of higher depreciation expense on network upgrades, offset by lower amortization on the customer base intangible asset recorded when the cable markets were acquired. The amortization of this asset declines on the anniversary of the acquisitions.

Index

Wireline

	June 30,		Dec. 31,		June 30,		Dec. 31,
	2014		2013		2013		2012

Telephone Access Lines		21,842		22,106		22,465		22,342
Long Distance Subscribers		9,730		9,851		10,065		10,157
Video Customers		5,904		6,342		6,534		6,719
DSL Subscribers		12,707		12,632		12,621		12,611
Fiber Route Miles		1,455		1,452		1,430		1,420
Total Fiber Miles (1)		85,348		85,135		84,414		84,107

(1)

Total fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

Three Months Ended June 30, 2014 Compared with the Three Months Ended June 30, 2013

(in thousands)	Three Months Ended June 30,				Change
	2014		2013		$			%

Segment operating revenues
Service revenue	$	5,627	$	5,558	$	69		1.2
Access revenue		2,903		3,066		(163	)	(5.3	)
Facilities lease revenue		6,241		5,642		599		10.6
Equipment revenue		15		13		2		15.4
Other revenue		858		972		(114	)	(11.7	)
Total segment operating revenues		15,644		15,251		393		2.6

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		7,737		7,198		539		7.5
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		1,493		1,251		242		19.3
Depreciation and amortization		2,653		2,802		(149	)	(5.3	)
Total segment operating expenses		11,883		11,251		632		5.6
Segment operating income	$	3,761	$	4,000	$	(239	)	(6.0	)

Operating revenues

Total operating revenues in the quarter ended June 30, 2014 increased $0.4 million against the comparable 2013 period. Facilities lease revenue increased $0.4 million due primarily to affiliate billings associated with Network Vision upgrades on the Wireless segment. New service contracts with third parties generated an additional $0.2 million of facilities lease revenue. The decrease in Access revenue is the result of 2013 changes in certain intrastate access charges.

Index

Operating expenses

Operating expenses overall increased $0.6 million in the quarter ended June 30, 2014, compared to the 2013 quarter. The increase in cost of goods and services resulted primarily from a $0.4 million increase in costs to provide services to affiliates and to other customers, related to the increases in revenue shown above. Selling, general and administrative expenses increased $0.2 million due primarily to increases in costs to support sales of fiber leases and other administrative functions.

Six Months Ended June 30, 2014 Compared with the Six Months Ended June 30, 2013

(in thousands)	Six Months Ended June 30,				Change
	2014		2013		$			%
Segment operating revenues
Service revenue	$	11,211	$	11,021	$	190		1.7
Access revenue		5,831		6,315		(484	)	(7.7	)
Facilities lease revenue		12,685		10,790		1,895		17.6
Equipment revenue		26		23		3		13.0
Other revenue		1,666		2,202		(536	)	(24.3	)
Total segment operating revenues		31,419		30,351		1,068		3.5

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		15,219		14,364		855		6.0
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		2,737		2,612		125		4.8
Depreciation and amortization		5,350		5,532		(182	)	(3.3	)
Total segment operating expenses		23,306		22,508		798		3.5
Segment operating income	$	8,113	$	7,843	$	270		3.4

Operating revenues

Total operating revenues in the six months ended June 30, 2014 increased $1.1 million against the comparable 2013 period. Increases in service revenue resulted primarily from increases in affiliate revenues. Facilities lease revenue increased $1.4 million due primarily to affiliate billings associated with Network Vision upgrades on the Wireless segment. New service contracts with third parties generated an additional $0.5 million of facilities lease revenue. The decrease in access revenue is the result of 2013 changes in certain intrastate access charges. Other revenue decreased $0.4 million due to the conclusion of billings for transition services to buyers of Converged Services’ properties.

Operating expenses

Operating expenses overall increased $0.8 million in the six months ended June 30, 2014, compared to the 2013 period. The increase in cost of goods and services resulted primarily from the $0.9 million increase in costs to provide services to affiliates and to other customers, related to the increases in revenue shown above. A $0.3 million increase in network maintenance expense was offset by a $0.3 million decrease in video programming costs.

Index

Non-GAAP Financial Measure

In managing our business and assessing our financial performance, management supplements the information provided by financial statement measures prepared in accordance with GAAP with adjusted OIBDA, which is considered a “non-GAAP financial measure” under SEC rules.

Adjusted OIBDA is defined by us as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of: certain non-recurring transactions; impairment of assets; gains and losses on asset sales; and share-based compensation expense. Adjusted OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.

In a capital-intensive industry such as telecommunications, management believes that adjusted OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance. We use adjusted OIBDA as a supplemental performance measure because management believes it facilitates comparisons of our operating performance from period to period and comparisons of our operating performance to that of other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made. In the future, management expects that the Company may again report adjusted OIBDA excluding these items and may incur expenses similar to these excluded items. Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes. By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes adjusted OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors. In addition, we believe that adjusted OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. These limitations include the following:

it does not reflect capital expenditures;

many of the assets being depreciated and amortized will have to be replaced in the future and adjusted OIBDA does not reflect cash requirements for such replacements;

it does not reflect costs associated with share-based awards exchanged for employee services;

it does not reflect interest expense necessary to service interest or principal payments on indebtedness;

it does not reflect gains, losses or dividends on investments;

it does not reflect expenses incurred for the payment of income taxes; and

other companies, including companies in our industry, may calculate adjusted OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers adjusted OIBDA as a financial performance measure that supplements but does not replace the information reflected in our GAAP results.

The following table shows adjusted OIBDA for the three and six months ended June 30, 2014 and 2013.

(in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Adjusted OIBDA	$	33,043	$	31,260	$	64,773	$	60,894

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The following table reconciles adjusted OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure, for the three and six months ended June 30, 2014 and 2013:

Consolidated: (in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
Operating income	$	15,793	$	14,500	$	31,473		$	29,708
Plus depreciation and amortization		16,595		16,071		31,983			30,042
Plus (gain) loss on asset sales		123		152		(243	)		234
Plus share based compensation expense		532		537		1,560			910
Adjusted OIBDA	$	33,043	$	31,260	$	64,773		$	60,894

The following tables reconcile adjusted OIBDA to operating income by major segment for the three and six months ended June 30, 2014 and 2013:

Wireless Segment: (in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
Operating income	$	17,571	$	16,063	$	34,364		$	32,774
Plus depreciation and amortization		8,071		7,781		15,268			13,809
Plus (gain) loss on asset sales		59		11		(293	)		100
Plus share based compensation expense		112		152		328			262
Adjusted OIBDA	$	25,813	$	24,007	$	49,667		$	46,945

Cable Segment: (in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Operating income (loss)	$	(2,085	)	$	(2,483	)	$	(4,045	)	$	(4,821	)
Plus depreciation and amortization		5,766			5,479			11,170			10,684
Plus (gain) loss on asset sales		39			28			16			9
Plus share based compensation expense		196			236			584			398
Adjusted OIBDA	$	3,916		$	3,260		$	7,725		$	6,270

Wireline Segment: (in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Operating income	$	3,761	$	4,000	$	8,113	$	7,843
Plus depreciation and amortization		2,653		2,802		5,350		5,532
Plus loss on asset sales		26		113		35		124
Plus share based compensation expense		102		114		280		191
Adjusted OIBDA	$	6,542	$	7,029	$	13,778	$	13,690

Index

Liquidity and Capital Resources

The Company has four principal sources of funds available to meet the financing needs of its operations, capital projects, debt service, investments and potential dividends. These sources include cash flows from operations, existing balances of cash and cash equivalents, the liquidation of investments and borrowings. Management routinely considers the alternatives available to determine what mix of sources are best suited for the long-term benefit of the Company.

Sources and Uses of Cash. The Company generated $66.6 million of net cash from operations in the first six months of 2014, compared to $52.2 million in the first six months of 2013, driven primarily by utilization of excess tax payments carried over to 2014 from 2013.

Indebtedness. As of June 30, 2014, the Company’s indebtedness totaled $230.0 million, with an annualized overall weighted average interest rate of approximately 3.40% after considering the impact of the swap contract. Patronage credits provided by the lender reduce the effective cost of our debt by approximately 69 basis points to an effective rate of approximately 2.71%. The Company has $50 million available under the Revolving Facility, and the right to borrow up to $100 million under one or more Incremental Term Loan facilities, subject to certain restrictions. The Revolving Facility and Incremental Term Loan Facility are both subject to the terms of the Restated and Amended Credit Agreement entered into in September 2012.

The Company is bound by certain financial covenants under its Credit Agreement. Noncompliance with any one or more of the debt covenants may have an adverse effect on our financial condition or liquidity in the event such noncompliance cannot be cured or should we be unable to obtain a waiver from the lenders. As of June 30, 2014, the Company was in compliance with all debt covenants, and ratios at June 30, 2014 were as follows:

	Actual			Covenant Requirement at June 30, 2014
Total Leverage Ratio		1.84		2.50 or Lower
Debt Service Coverage Ratio		13.87		2.50 or Higher
Equity to Assets Ratio		41.7	%	32.5% or Higher

In accordance with the Credit Agreement, the total leverage and debt service coverage ratios noted above are based on the twelve months ended June 30, 2014. In addition to the covenants above, the Company is required to supply the lender with quarterly financial statements and other reports as defined by the Credit Agreement. The Company was in compliance with all reporting requirements at June 30, 2014.

The Company has no off-balance sheet arrangements (other than operating leases) and has not entered into any transactions involving unconsolidated, limited purpose entities or commodity contracts.

Capital Commitments. Capital expenditures budgeted for 2014 total $74 million. Approximately $18 million of this will be spent to maintain current networks and an additional $18 million will be spent on capacity, in wireless and cable, primarily to keep up with the growing demand for broadband. The budget contemplates $22 million for network expansion. These expenditures are to build new cell sites, additional fiber routes, fiber to tower sites and to expand the cable network footprint. The budget includes $16 million of success-based spending that will only be spent if there are new revenues to support the expenditures. This would include building a fiber extension to connect a new customer or premise equipment for a new cable customer. Approximately $17 million of the $74 million budget for 2014 are projects that were delayed from 2013.

For the first six months of 2014, the Company spent $32.8 million on capital projects, compared to $48.5 million in the comparable 2013 period. Spending related to Wireless projects accounted for $15.7 million in the first six months of 2014, primarily for continued network expansion and upgrades of 4G LTE capacity. Cable capital spending of $9.7 million related to network expansion and upgrades to support new services or customers. Wireline projects accounted for $4.8 million, driven primarily by fiber builds and switching/routing capability. Other projects totaled $2.6 million, largely related to information technology projects.

Index

The Company believes that cash on hand, cash flow from operations and borrowings expected to be available under the Company’s existing credit facilities will provide sufficient cash to enable the Company to fund planned capital expenditures, make scheduled principal and interest payments, meet its other cash requirements and maintain compliance with the terms of its financing agreements for at least the next twelve months. Thereafter, capital expenditures will likely continue to be required to provide increased capacity to meet the Company’s expected growth in demand for its products and services. The actual amount and timing of the Company’s future capital requirements may differ materially from the Company’s estimate depending on the demand for its products and new market developments and opportunities.

The Company’s cash flows from operations could be adversely affected by events outside the Company’s control, including, without limitation, changes in overall economic conditions, regulatory requirements, changes in technologies, demand for its products, availability of labor resources and capital, changes in the Company’s relationship with Sprint, and other conditions. The Wireless segment’s operations are dependent upon Sprint’s ability to execute certain functions such as billing, customer care, and collections; the subsidiary’s ability to develop and implement successful marketing programs and new products and services; and the subsidiary’s ability to effectively and economically manage other operating activities under the Company's agreements with Sprint. The Company's ability to attract and maintain a sufficient customer base, particularly in the acquired cable markets, is also critical to its ability to maintain a positive cash flow from operations. The foregoing events individually or collectively could affect the Company’s results.

Recently Issued Accounting Standards

On May 28, 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

Index

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risks relate primarily to changes in interest rates on instruments held for other than trading purposes. The Company’s interest rate risk generally involves three components. The first component is outstanding debt with variable rates. As of June 30, 2014, the Company had $230.0 million of variable rate debt outstanding, bearing interest at a rate of 2.65% as determined on a monthly basis. An increase in market interest rates of 1.00% would add approximately $2.3 million to annual interest expense, excluding the effect of the interest rate swap. In 2012, the Company entered into a swap agreement that covers notional principal equal to approximately 76% of the outstanding variable rate debt through maturity in 2019, requiring the Company to pay a fixed rate of 1.13% and receive a variable rate based on one month LIBOR, to manage a portion of its interest rate risk. The 2012 swap currently adds approximately $1.6 million to annual interest expense, based on the spread between the fixed rate and the variable rate currently in effect on our debt.

The second component of interest rate risk consists of temporary excess cash, which can be invested in various short-term investment vehicles such as overnight repurchase agreements and Treasury bills with a maturity of less than 90 days. The cash is currently invested in a combination of a commercial checking account that has limited interest rate risk, and three money market mutual funds that contain a total investment of $40 million. Management continues to evaluate the most beneficial use of these funds.

The third component of interest rate risk is marked increases in interest rates that may adversely affect the rate at which the Company may borrow funds for growth in the future. If the Company should borrow additional funds under any Incremental Term Loan Facility to fund its capital investment needs, repayment provisions would be agreed to at the time of each draw under the Incremental Term Loan Facility. If the interest rate margin on any draw exceeds, by more than 0.25%, the applicable interest rate margin on the Term Loan A Facility, the applicable interest rate margin on the Term Loan A Facility shall be increased to equal the interest rate margin on the Incremental Term Loan Facility. If interest rates increase generally, or if the rate applied under the Company’s Incremental Term Loan Facility causes the Company’s outstanding debt to be repriced, the Company’s future interest costs could increase.

Management views market risk as having a potentially significant impact on the Company's results of operations, as future results could be adversely affected if interest rates were to increase significantly for an extended period, or if the Company’s need for additional external financing resulted in increases to the interest rates applied to all of its new and existing debt. As of June 30, 2014, the Company has $55.4 million of variable rate debt with no interest rate protection. The Company’s investments in publicly traded stock and bond mutual funds under the rabbi trust, which are subject to market risks and could experience significant swings in market values, are offset by corresponding changes in the liabilities owed to participants in the Executive Supplemental Retirement Plan. General economic conditions affected by regulatory changes, competition or other external influences may pose a higher risk to the Company’s overall results.

As of June 30, 2014, the Company has $7.0 million of cost and equity method investments. Approximately $4.3 million consists of illiquid required investments related to business, regulatory or lending arrangements necessary to access services. An additional $0.3 million consists of investments in telephone-related business consortiums. The remaining $2.4 million is invested in privately held companies through an investment with a portfolio manager. Most of the companies are in an early stage of development and significant increases in interest rates could have an adverse impact on their results, ability to raise capital and viability. The Company’s market risk is limited to the funds previously invested.

Index

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our President and Chief Executive Officer, who is the principal executive officer, and the Vice President - Finance and Chief Financial Officer, who is the principal financial officer, conducted an evaluation of our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on criteria established in Internal Control – Integrated Framework (1992), issued by the Committee of Sponsoring Organizations of the Treadway Commission, the Company's principal executive officer and its principal financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2014.

Changes in Internal Control Over Financial Reporting

During the second quarter of 2014, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Other Matters Relating to Internal Control Over Financial Reporting

Under the Company’s agreements with Sprint, Sprint provides the Company with billing, collections, customer care, certain network operations and other back-office services for the PCS operation. As a result, Sprint remits to the Company approximately 59% of the Company’s total operating revenues. Due to this relationship, the Company necessarily relies on Sprint to provide accurate, timely and sufficient data and information to properly record the Company’s revenues and accounts receivable, which underlie a substantial portion of the Company’s periodic financial statements and other financial disclosures.

Information provided by Sprint includes reports regarding the subscriber accounts receivable in the Company’s markets. Sprint provides the Company with monthly accounts receivable, billing and cash receipts information on a market level, rather than a subscriber level. The Company reviews these various reports to identify discrepancies or errors. Under the Company’s agreements with Sprint, the Company is entitled to only a portion of the receipts, net of items such as taxes, government surcharges, certain allocable write-offs and the 22.0% of revenue retained by Sprint. Because of the Company’s reliance on Sprint for financial information, the Company must depend on Sprint to design adequate internal controls with respect to the processes established to provide this data and information to the Company and Sprint’s other Sprint PCS affiliate network partners. To address this issue, Sprint engages an independent registered public accounting firm to perform a periodic evaluation of these controls and to provide a “Report on Controls Placed in Operation and Tests of Operating Effectiveness” under guidance provided in Statements on Standards for Attestation Engagements No. 16 (“SSAE 16”). The report is provided to the Company on an annual basis and covers a nine-month period. The most recent report covered the period from January 1, 2013 to September 30, 2013. The most recent report indicated there were no material issues which would adversely affect the information used to support the recording of the revenues provided by Sprint related to the Company’s relationship with them.

Index

PART II.

OTHER INFORMATION

ITEM 1A.

Risk Factors

As previously discussed, our actual results could differ materially from our forward-looking statements. There have been no material changes in the risk factors from those described in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The Company maintains a dividend reinvestment plan (the “DRIP”) for the benefit of its shareholders. When shareholders remove shares from the DRIP, the Company issues a certificate for whole shares, pays out cash for any fractional shares, and cancels the fractional shares purchased. In conjunction with exercises of stock options and distributions of vested share awards, the Company periodically repurchases shares from recipients to cover some of the exercise price of the options being exercised or taxes payable associated with the distribution of shares. The following table provides information about the Company’s repurchases of shares during the three months ended June 30, 2014:

	Number of Shares Purchased		Average Price Paid per Share
April 1 to April 30		314	$	28.07
May 1 to May 31		5,822	$	25.85
June 1 to June 30		2,559	$	27.94

Total		8,694	$	26.55

Index

ITEM 6.

Exhibits

(a)	The following exhibits are filed with this Quarterly Report on Form 10-Q:

31.1	Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2	Certification of Vice President - Finance and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32	Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. § 1350.

(101)

Formatted in XBRL (Extensible Business Reporting Language )

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

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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)

	/s/Adele M. Skolits
	Adele M. Skolits
	Vice President - Finance and Chief Financial Officer
	Date: August 1, 2014

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EXHIBIT INDEX

Exhibit No.

Exhibit

31.1

Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2

Certification of Vice President - Finance and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. 1350.

(101)

Formatted in XBRL (Extensible Business Reporting Language)

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

EXHIBIT 31.1

CERTIFICATION

I, Christopher E. French, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Shenandoah Telecommunications Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d‑15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/S/ CHRISTOPHER E. FRENCH

Christopher E. French, President and Chief Executive Officer

Date: August 1, 2014

EXHIBIT 31.2

CERTIFICATION

I, Adele M. Skolits, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Shenandoah Telecommunications Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ADELE M. SKOLITS

Adele M. Skolits, Vice President - Finance and Chief Financial Officer

Date: August 1, 2014

EXHIBIT 32

Written Statement of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Each of the undersigned, the President and Chief Executive Officer and the Vice President - Finance and Chief Financial Officer, of Shenandoah Telecommunications Company (the “Company”), hereby certifies that, on the date hereof:

(1) The quarterly report on Form 10-Q of the Company for the three months ended June 30, 2014 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) Information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	/S/ CHRISTOPHER E. FRENCH
	Christopher E. French
	President and Chief Executive Officer
	August 1, 2014

	/S/ADELE M. SKOLITS
	Adele M. Skolits
	Vice President - Finance and
	Chief Financial Officer
	August 1, 2014

The foregoing certification is being furnished solely pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. This certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act except to the extent this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.