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
Date of Report (Date of earliest event Reported): February 28, 2019
Shenandoah Telecommunications Company
(Exact Name of Registrant as Specified in Charter)
| Virginia | 0-9881 | 54-1162807 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 500 Shentel Way P.O. Box 459, Edinburg, Virginia 22824 |
| (Address of Principal Executive Offices) (Zip Code) |
(540) 984-4141
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On February 28, 2019, Shenandoah Telecommunications Company (the “Company”) issued a press release announcing its financial position as of December 31, 2018, results of operations for the three and twelve months ended December 31, 2018, and other related information. The Company also posted supplemental earnings presentation materials on the investor section of the Company’s website at www.Shentel.com. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference. These materials may contain forward-looking statements about Shenandoah Telecommunications Company regarding, among other things, our business strategy, our prospects and our financial position. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “should,” “could,” or “anticipates” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. Shenandoah Telecommunications Company undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits The following exhibit is furnished with this Current Report on Form 8-K. 99.1* Fourth Quarter 2018 Earnings Press Release * Furnished herewith
SIGNATURE
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 hereunto duly authorized.
| Shenandoah Telecommunications Company | ||
| Date: February 28, 2019 | By: | /s/ James F. Woodward |
| James F. Woodward | ||
| Senior Vice President - Finance and Chief Financial Officer | ||
EXHIBIT 99.1
Shenandoah Telecommunications Company Reports Fourth Quarter and Full Year 2018 Results
Quarterly Operating Income Increases to $27.0 million
Annual Operating Income More Than Doubled to $93.2 million
EDINBURG, Va., Feb. 28, 2019 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN) announced strong fourth quarter financial and operating results, reflecting record subscriber additions in both the Wireless and Cable segments. The net addition of 9,639 postpaid wireless customers during the quarter set an all-time high during Shentel's nearly two-decade relationship with Sprint. Growth in the Cable segment was led by strong sales of the Company's newly introduced PowerHouse broadband service. These successes drove quarterly operating income to $27.0 million.
Shentel's solid fourth quarter performance closed out a strong fiscal 2018, with significant increases in consolidated revenue and operating income, and improved OIBDA. Consolidated revenue increased to $630.9 million, compared to $612.0 million in 2017. Operating income more than doubled from $46.5 million in 2017 to $93.2 million in 2018. Adjusted OIBDA was $285.7 million for 2018 compared with $280.9 million in 2017.
Fourth Quarter 2018 Highlights
- Operating revenue of $161.5 million grew 6.5%
- Operating income up 49.1% to $27.0 million
- Net income of $14.9 million, or $0.31 per basic share
- Adjusted OIBDA of $73.2 million
Full Year 2018 Highlights
- Operating revenue of $630.9 million grew 3.1%
- Operating income more than doubles to $93.2 million
- Net income of $46.6 million, or $0.94 per basic share
- Adjusted OIBDA of $285.7 million
Please refer to our Fourth Quarter 2018 Earnings Presentation Supplement available at https://investor.shentel.com/ for additional information, including matters that will be referenced during the Company’s conference call. Included in this release are certain non-GAAP financial measures that are not determined in accordance with US generally accepted accounting principles. Please refer to page 10 for additional information for non-GAAP measures.
Results
Consolidated Fourth Quarter 2018 Results
- Net income for the three months ended December 31, 2018 was $14.9 million, or $0.31 per share, compared with net income of $60.6 million, or $1.23 per share, in the fourth quarter of 2017.
- Effective January 1, 2018, the Company adopted the new revenue recognition standard (Topic 606) that requires the Company to record costs such as commissions for the national sales channel that are settled separately with Sprint as reductions of revenue. The impact of adopting Topic 606 is detailed in the section titled "Impact of Topic 606".
- Fourth quarter 2017 included a one-time non-cash tax benefit of approximately $53.4 million as a result of the enactment of the Tax Cuts and Jobs Act in December of 2017.
- Effective January 1, 2018, the Company adopted the new revenue recognition standard (Topic 606) that requires the Company to record costs such as commissions for the national sales channel that are settled separately with Sprint as reductions of revenue. The impact of adopting Topic 606 is detailed in the section titled "Impact of Topic 606".
- Operating revenue for the fourth quarter of 2018 was $161.5 million, representing a year-over-year increase of 6.5%, driven by growth in Wireless and Cable subscribers.
- Operating expenses for the three months ended December 31, 2018 were $134.5 million, compared with $133.5 million for the equivalent quarter in the prior year.
- Operating income increased 49.1% in the fourth quarter of 2018 to $27.0 million from $18.1 million in the equivalent quarter of the prior year.
- Adjusted OIBDA increased 3.1% to $73.2 million for the three months ended December 31, 2018, driven by subscriber based revenue growth in Wireless and Cable.
Wireless
· Wireless operating revenue increased $7.5 million, to $119.0 million compared with the three months ended December 31, 2017, primarily driven by growth in postpaid and prepaid PCS subscribers, improvements in average monthly churn, and was partially offset by a decline in postpaid average revenue per subscriber primarily related to promotions and discounts.
· Wireless operating expenses decreased 8.0% in the fourth quarter of 2018 to $93.0 million, compared with $99.6 million for the three months ended December 31, 2017, primarily due to reducing back-office expenses that were required to support former nTelos subscribers that migrated to Sprint's back-office in 2017 and a reduction in acquisition, integration and migration expenses as the integration of the acquired nTelos business was completed during 2017.
· Wireless Adjusted OIBDA for the three months ended December 31, 2018 was $63.2 million, compared with $56.6 million for the three months ended December 31, 2017. Wireless Continuing OIBDA for the three months ended December 31, 2018 was $53.6 million, compared with $47.6 million for the three months ended December 31, 2017.
Cable
· Cable operating revenue for the fourth quarter of 2018 was $32.9 million, representing a quarter over quarter increase of 7.9% compared with $30.5 million for the prior year fourth quarter. This growth was primarily due to increases in our broadband and voice subscribers, higher video rates and our customers selecting or upgrading to higher-speed data access packages.
· Cable operating expenses for the fourth quarter of 2018 were $26.6 million, a quarter over quarter increase of 5.9% compared with $25.1 million for the three months ended December 31, 2017. The increase was primarily due to new fiber contracts and installation services that were driven by growth in our customer base. The Company lost 3,013 video users while adding 4,261 broadband users and 811 voice users, since December 31, 2017.
· Cable Adjusted OIBDA for the three months ended December 31, 2018 was $12.6 million, compared with $11.3 million for the three months ended December 31,
2017.
Wireline
· Wireline operating revenue for the three months ended December 31, 2018 was $18.7 million, compared with $20.7 million for the prior year fourth quarter. The decrease in operating revenue was primarily attributable to repricing Wireless backhaul circuits to market rates and migrating Wireless voice traffic from traditional circuit-switched facilities to more cost effective Voice over IP ("VoIP") facilities.
· Wireline operating expenses for the three months ended December 31, 2018 were $15.5 million, compared with $15.3 million for the three months ended December 31, 2017. This increase was primarily attributable to the expansion of the underlying network assets and investments in infrastructure necessary to support the growth in our fiber network.
· Wireline Adjusted OIBDA for the three months ended December 31, 2018 was $6.7 million, compared with $8.8 million for the prior year equivalent quarter.
Consolidated Full Year 2018 Results
- Net income in 2018 was $46.6 million, or $0.94 per share, compared with net income of $66.4 million, or $1.35 per share, in 2017.
- The impact of adopting Topic 606 is detailed in the section titled "Impact of Topic 606".
- 2017 included a one-time non-cash tax benefit of approximately $53.4 million as a result of the enactment of the Tax Cuts and Jobs Act in December of 2017.
- The impact of adopting Topic 606 is detailed in the section titled "Impact of Topic 606".
- Operating revenue in 2018 was $630.9 million, representing a year-over-year increase of 3.1%, compared with $612.0 million in 2017 driven by Wireless and Cable operations.
- Operating expenses in 2018 were $537.6 million, compared with $565.5 million in 2017 primarily due to the absence of acquisition, integration and migration costs related to the completion of the transformation of the nTelos network in 2017 as well as lower depreciation and amortization costs due to the retirement of assets acquired with nTelos, partially offset by increased costs necessary to support our continued growth and expansion.
- Operating income increased 100.5% in 2018 to $93.2 million from $46.5 million in 2017.
- Adjusted OIBDA increased 1.7% in 2018 to $285.7 million, fueled by the continued expansion of our Wireless segment and growth in Cable's broadband subscribers.
Wireless
· Wireless operating revenue increased $7.6 million, to $462.7 million compared with 2017, primarily driven by growth in postpaid and prepaid PCS subscribers, improvements in average monthly churn, and was partially offset by a decline in postpaid average revenue per subscriber primarily related to promotions and discounts.
· Wireless operating expenses in 2018 were $369.8 million, compared with $420.9 million in 2017, a year over year decrease of 12.1%, primarily due to repricing Wireless backhaul circuits to market rates, migrating Wireless voice traffic from traditional circuit-switched facilities to more cost effective VoIP facilities, reducing back-office expenses that were required to support former nTelos subscribers that migrated to Sprint's back-office in 2017, and a reduction in acquisition, integration and migration expenses as the integration of the acquired nTelos business was completed during 2017.
· Wireless Adjusted OIBDA in 2018 was $243.4 million, compared with $230.4 million in 2017. Wireless Continuing OIBDA in 2018 was $205.7 million, compared with $194.3 million in 2017.
Cable
· Cable operating revenue in 2018 was $128.9 million, representing a year over year increase of 8.2% compared with $119.2 million in 2017. This growth was primarily due to increases in our broadband and voice subscribers, higher video rates, and our customers selecting or upgrading to higher-speed data access packages.
· Cable operating expenses in 2018 were $105.1 million, a year over year increase of 1.8% compared with $103.3 million in 2017. The increase was primarily due to new fiber contracts and installation services that were driven by growth in our customer base. The Company lost 3,013 video users while adding 4,261 broadband users and 811 voice users, since December 31, 2017.
· Cable Adjusted OIBDA in 2018 was $48.3 million, compared with $40.5 million in 2017.
Wireline
· Wireline operating revenue in 2018 was $77.1 million, compared with $79.3 million in 2017. The decrease in operating revenue was primarily attributable to repricing Wireless backhaul circuits to market rates and migrating Wireless voice traffic from traditional circuit-switched facilities to more cost effective Voice over IP ("VoIP") facilities.
· Wireline operating expenses in 2018 were $59.3 million, compared with $58.3 million in 2017. This increase was primarily attributable to the expansion of the underlying network assets and investments in infrastructure necessary to support the growth in our fiber network.
· Wireline Adjusted OIBDA in 2018 was $31.3 million, compared with $34.3 million in 2017.
"2018 was a strong year for Shentel, as demonstrated by solid consolidated revenue growth, significantly increased operating income and improved OIBDA," said President and CEO Christopher E. French. "During the past few years, we've strategically expanded our geographic reach and upgraded our network to ensure that we provide the most reliable coverage and highest data speeds and bandwidth in the areas we serve. Throughout 2018 we saw the benefits of these efforts as distribution levels and activation rates steadily increased. We believe our state-of-the-art network and expanded market coverage competitively position us to continue to capture market share and to grow our leadership position as the telecommunications provider of choice in the communities in which we operate."
"We achieved customer growth in all of our operating segments during fiscal 2018, highlighted by record customer adds in both our Wireless and our Cable segments during the fourth quarter," French continued. "Consumer reliance on wireless connectivity continues to increase exponentially, and our robust network meets and exceeds customer expectations for reliability and capacity. Likewise, in the Cable segment our high bandwidth capabilities are attractive to new customers and play a key role in our ability to transition existing customers to upgraded service packages. We're pleased with our achievements in 2018 and with our visibility today we believe we are well positioned to leverage our extensive coverage area, high caliber network and exceptional service to cultivate continued momentum as we move through 2019."
Other Information
Capital expenditures were $136.6 million for the year ended December 31, 2018 compared with $146.5 million in the comparable 2017 period.
The Company declared a cash dividend of $0.27 per share. The dividend was an increase of $0.01 per share or 3.8% over the 2017 dividend and was paid on November 30, 2018, to shareholders of record as of the close of business on November 12, 2018. The total payout to shareholders, before reinvestment, was approximately $13.4 million. The Company has paid an annual dividend every year since 1960, when its predecessor Shenandoah Telephone Company declared its first dividend.
Outstanding debt at December 31, 2018 totaled $770.2 million, net of unamortized loan costs, compared to $822.0 million as of December 31, 2017. As of December 31, 2018, no amounts were outstanding under the revolving line of credit. The total leverage ratio as of December 31, 2018 was 2.54.
On November 9, 2018, the Company amended its credit agreement resulting in a 25 basis point reduction in the applicable base interest rate, extended maturity of both term loans and reduced near-term principle payments. Including our first quarter credit agreement amendment we reduced our base interest rate by 75 basis points in 2018.
Conference Call and Webcast
Teleconference Information:
Date: February 28, 2019
Time: 10:00 A.M. (ET)
Dial in number: 1-888-695-7639
Password: 3786506
Audio webcast: http://investor.shentel.com/
An audio replay of the call will be available approximately two hours after the call is complete, through March 28, 2019 by calling (855) 859-2056.
About Shenandoah Telecommunications
Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States. The Company’s services include: wireless voice and data; cable video, internet and digital voice; fiber network and services; and regulated local and long distance telephone. Shentel is the exclusive personal communications service (“PCS”) Affiliate of Sprint in a multi-state area covering large portions of central and western Virginia, south-central Pennsylvania, West Virginia, and portions of Maryland, North Carolina, Kentucky, and Ohio. For more information, please visit www.shentel.com.
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’s filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.
CONTACTS:
Shenandoah Telecommunications, Inc.
James F. Woodward
Senior Vice President, Finance and Chief Financial Officer
540-984-5990
James.Woodward@emp.shentel.com
Or
John Nesbett/Jennifer Belodeau
IMS Investor Relations
203-972-9200
jnesbett@institutionalms.com
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||||||
| Operating revenue | |||||||||||||||||||||||||||||||
| Service revenue and other | $ | 142,637 | $ | 149,602 | $ | 562,456 | $ | 601,673 | |||||||||||||||||||||||
| Equipment revenue | 18,847 | 2,015 | 68,398 | 10,318 | |||||||||||||||||||||||||||
| Total operating revenue | 161,484 | 151,617 | 630,854 | 611,991 | |||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||
| Cost of services | 47,660 | 42,977 | 194,022 | 188,721 | |||||||||||||||||||||||||||
| Cost of goods sold | 17,952 | 5,554 | 63,959 | 22,786 | |||||||||||||||||||||||||||
| Selling, general and administrative | 27,105 | 40,563 | 113,222 | 165,937 | |||||||||||||||||||||||||||
| Acquisition, integration and migration expenses | — | 1,157 | — | 11,030 | |||||||||||||||||||||||||||
| Depreciation and amortization | 41,773 | 43,256 | 166,405 | 177,007 | |||||||||||||||||||||||||||
| Total operating expenses | 134,490 | 133,507 | 537,608 | 565,481 | |||||||||||||||||||||||||||
| Operating income (loss) | 26,994 | 18,110 | 93,246 | 46,510 | |||||||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||||||
| Interest expense | (7,663 | ) | (9,925 | ) | (34,847 | ) | (38,237 | ) | |||||||||||||||||||||||
| Gain (loss) on investments, net | (387 | ) | 169 | (275 | ) | 564 | |||||||||||||||||||||||||
| Non-operating income (loss), net | 1,218 | 938 | 3,988 | 4,420 | |||||||||||||||||||||||||||
| Income (loss) before income taxes | 20,162 | 9,292 | 62,112 | 13,257 | |||||||||||||||||||||||||||
| Income tax expense (benefit) | 5,310 | (51,303 | ) | 15,517 | (53,133 | ) | |||||||||||||||||||||||||
| Net income (loss) | $ | 14,852 | $ | 60,595 | $ | 46,595 | $ | 66,390 | |||||||||||||||||||||||
| Net income (loss) per share, basic and diluted: | |||||||||||||||||||||||||||||||
| Basic net income (loss) per share | $ | 0.31 | $ | 1.23 | $ | 0.94 | $ | 1.35 | |||||||||||||||||||||||
| Diluted net income (loss) per share | $ | 0.30 | $ | 1.21 | $ | 0.93 | $ | 1.33 | |||||||||||||||||||||||
| Weighted average shares outstanding, basic | 49,587 | 49,298 | 49,542 | 49,150 | |||||||||||||||||||||||||||
| Weighted average shares outstanding, diluted | 50,112 | 50,043 | 50,063 | 50,026 | |||||||||||||||||||||||||||
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| December 31, 2018 | December 31, 2017 | ||||||
| Cash and cash equivalents | $ | 85,086 | $ | 78,585 | |||
| Other current assets | 125,116 | 94,310 | |||||
| Total current assets | 210,202 | 172,895 | |||||
| Investments | 10,788 | 11,472 | |||||
| Property, plant and equipment, net | 701,359 | 686,327 | |||||
| Intangible assets, net | 366,029 | 380,979 | |||||
| Goodwill | 146,497 | 146,497 | |||||
| Deferred charges and other assets, net | 49,891 | 13,690 | |||||
| Total assets | $ | 1,484,766 | $ | 1,411,860 | |||
| Total current liabilities | 88,539 | 137,584 | |||||
| Long-term debt, less current maturities | 749,624 | 757,561 | |||||
| Other liabilities | 204,356 | 166,493 | |||||
| Total shareholders’ equity | 442,247 | 350,222 | |||||
| Total liabilities and shareholders’ equity | $ | 1,484,766 | $ | 1,411,860 | |||
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| 2018 | 2017 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | 46,595 | $ | 66,390 | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation | 142,111 | 151,063 | |||||||||
| Amortization | 24,294 | 25,944 | |||||||||
| Amortization reflected as rent expense in cost of services | 342 | 1,528 | |||||||||
| Bad debt expense | 1,983 | 2,179 | |||||||||
| Stock based compensation expense, net of amount capitalized | 4,959 | 3,580 | |||||||||
| Waived management fee | 37,763 | 36,056 | |||||||||
| Deferred income taxes | 6,208 | (54,055 | ) | ||||||||
| Other adjustments | (1,135 | ) | 311 | ||||||||
| Changes in assets and liabilities | 2,527 | (10,066 | ) | ||||||||
| Net cash provided by (used in) operating activities | $ | 265,647 | $ | 222,930 | |||||||
| Cash flows from investing activities: | |||||||||||
| Acquisition of property, plant and equipment | (136,641 | ) | (146,489 | ) | |||||||
| Proceeds from sale of assets | 840 | 980 | |||||||||
| Cash disbursed for acquisition, net of cash acquired | (52,000 | ) | (6,000 | ) | |||||||
| Release of restricted cash | — | — | |||||||||
| Cash distributions (contributions) from investments and other | 1 | 14 | |||||||||
| Net cash provided by (used in) investing activities | $ | (187,800 | ) | $ | (151,495 | ) | |||||
| Cash flows from financing activities: | |||||||||||
| Principal payments on long-term debt | (51,264 | ) | (36,375 | ) | |||||||
| Proceeds from revolving credit facility borrowings | 15,000 | — | |||||||||
| Proceeds from credit facility borrowings | — | 25,000 | |||||||||
| Principal payments on revolving credit facility | (15,000 | ) | — | ||||||||
| Payments for debt issuance costs | (3,971 | ) | — | ||||||||
| Dividends paid, net of dividends reinvested | (12,866 | ) | (12,257 | ) | |||||||
| Taxes paid for equity award issuances | (3,245 | ) | (5,411 | ) | |||||||
| Net cash provided by (used in) financing activities | $ | (71,346 | ) | $ | (29,043 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 6,501 | 42,392 | |||||||||
| Cash and cash equivalents, beginning of period | $ | 78,585 | $ | 36,193 | |||||||
| Cash and cash equivalents, end of period | 85,086 | 78,585 | |||||||||
| Supplemental Disclosures of Cash Flow Information | |||||||||||
| Cash payments for: | |||||||||||
| Interest, net of capitalized interest of $1,556, $1,559 and $1,374 in 2018, 2017 and 2016, respectively | $ | 33,034 | $ | 33,495 | |||||||
| Income tax (refunds received) paid, net | $ | (2,721 | ) | $ | 20,066 | ||||||
| Capital expenditures payable | $ | 23,501 | $ | 7,254 | |||||||
Impact of Topic 606
The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), effective January 1, 2018, using the modified retrospective method. The following tables identify the impact that the application of Topic 606 had on the Company for the fourth quarter and full year 2018:
| Three Months Ended December 31, 2018 | |||||||||||||||
| Topic 606 Impact - CONSOLIDATED | |||||||||||||||
| ($ in thousands, except per share amounts) | Prior to Adoption of Topic 606 | Changes in Presentation (1) | Equipment Revenue (2) | Deferred Costs (3) | As Reported 12/31/2018 | ||||||||||
| Service revenue and other | $ | 161,185 | $ | (22,568 | ) | $ | — | $ | 4,020 | $ | 142,637 | ||||
| Equipment revenue | 2,262 | — | 16,585 | — | 18,847 | ||||||||||
| Total operating revenue | 163,447 | (22,568 | ) | 16,585 | 4,020 | 161,484 | |||||||||
| Cost of services | 47,661 | — | — | (1 | ) | 47,660 | |||||||||
| Cost of goods sold | 8,061 | (6,694 | ) | 16,585 | — | 17,952 | |||||||||
| Selling, general & administrative | 43,042 | (15,874 | ) | — | (63 | ) | 27,105 | ||||||||
| Depreciation and amortization | 41,773 | — | — | — | 41,773 | ||||||||||
| Total operating expenses | 140,537 | (22,568 | ) | 16,585 | (64 | ) | 134,490 | ||||||||
| Operating income (loss) | 22,910 | — | — | 4,084 | 26,994 | ||||||||||
| Other income (expense) | (6,832 | ) | — | — | — | (6,832 | ) | ||||||||
| Income tax expense (benefit) | 4,186 | — | — | 1,124 | 5,310 | ||||||||||
| Net income (loss) | $ | 11,892 | $ | — | $ | — | $ | 2,960 | $ | 14,852 | |||||
| Earnings (loss) per share | |||||||||||||||
| Basic | $ | 0.24 | $ | 0.07 | $ | 0.31 | |||||||||
| Diluted | $ | 0.24 | $ | 0.06 | $ | 0.30 | |||||||||
| Weighted average shares outstanding, basic | 49,587 | 49,587 | |||||||||||||
| Weighted average shares outstanding, diluted | 50,112 | 50,112 | |||||||||||||
| Year Ended December 31, 2018 | |||||||||||||||
| Topic 606 Impact - CONSOLIDATED | |||||||||||||||
| ($ in thousands, except per share amounts) | Prior to Adoption of Topic 606 | Changes in Presentation (1) | Equipment Revenue (2) | Deferred Costs (3) | As Reported 12/31/2018 | ||||||||||
| Service revenue and other | $ | 632,340 | $ | (86,637 | ) | $ | — | $ | 16,753 | $ | 562,456 | ||||
| Equipment revenue | 8,298 | — | 60,100 | — | 68,398 | ||||||||||
| Total operating revenue | 640,638 | (86,637 | ) | 60,100 | 16,753 | 630,854 | |||||||||
| Cost of services | 193,860 | — | — | 162 | 194,022 | ||||||||||
| Cost of goods sold | 28,377 | (24,518 | ) | 60,100 | — | 63,959 | |||||||||
| Selling, general & administrative | 175,753 | (62,119 | ) | — | (412 | ) | 113,222 | ||||||||
| Depreciation and amortization | 166,405 | — | — | — | 166,405 | ||||||||||
| Total operating expenses | 564,395 | (86,637 | ) | 60,100 | (250 | ) | 537,608 | ||||||||
| Operating income (loss) | 76,243 | — | — | 17,003 | 93,246 | ||||||||||
| Other income (expense) | (31,134 | ) | — | — | — | (31,134 | ) | ||||||||
| Income tax expense (benefit) | 10,926 | — | — | 4,591 | 15,517 | ||||||||||
| Net income (loss) | $ | 34,183 | $ | — | $ | — | $ | 12,412 | $ | 46,595 | |||||
| Earnings (loss) per share | |||||||||||||||
| Basic | $ | 0.69 | $ | 0.25 | $ | 0.94 | |||||||||
| Diluted | $ | 0.68 | $ | 0.25 | $ | 0.93 | |||||||||
| Weighted average shares outstanding, basic | 49,542 | 49,542 | |||||||||||||
| Weighted average shares outstanding, diluted | 50,063 | 50,063 | |||||||||||||
| (1) | Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs for both postpaid and prepaid, and to provide on-going support to their prepaid customers in our territory were historically recorded as expense when incurred. Under Topic 606, these amounts represent consideration payable to our customer, Sprint, and are recorded as a reduction of revenue. In 2017, these amounts were approximately $44.8 million for the postpaid national commissions, previously recorded in selling, general and administrative, $18.7 million for national device costs previously recorded in cost of goods and services, and $16.9 million for the on-going service to Sprint's prepaid customers, previously recorded in selling, general and administrative. |
| (2) | Costs incurred by the Company for the sale of devices under Sprint’s device financing and lease programs were previously recorded net against revenue. Under Topic 606, the revenue and related costs from device sales are recorded gross. These amounts were approximately $63.8 million in 2017. |
| (3) | Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, which historically have been expensed when incurred and presented net of revenue, are deferred and amortized against revenue over the expected period of benefit of approximately 21 to 53 months. In Cable and Wireline, installation revenues are recognized over a period of approximately 10-11 months. The deferred balance as of December 31, 2018 is approximately $75.8 million and is classified on the balance sheet as current and non-current assets, as applicable. |
The following tables identify the impact that the application of Topic 606 had on the Company's Wireless operations for the fourth quarter and full year 2018:
| Three Months Ended December 31, 2018 | |||||||||||||||
| Topic 606 Impact - WIRELESS | |||||||||||||||
| ($ in thousands) | Prior to Adoption of Topic 606 | Changes in Presentation (1) | Equipment Revenue (2) | Deferred Costs (3) | As Reported 12/31/2018 | ||||||||||
| Service revenue | $ | 115,187 | $ | (22,568 | ) | $ | — | $ | 4,045 | $ | 96,664 | ||||
| Equipment revenue | 2,066 | — | 16,585 | — | 18,651 | ||||||||||
| Tower and other revenue | 3,684 | — | — | — | 3,684 | ||||||||||
| Total operating revenue | 120,937 | (22,568 | ) | 16,585 | 4,045 | 118,999 | |||||||||
| Cost of services | 31,675 | — | — | — | 31,675 | ||||||||||
| Cost of goods sold | 7,943 | (6,694 | ) | 16,585 | — | 17,834 | |||||||||
| Selling, general & administrative | 27,719 | (15,874 | ) | — | — | 11,845 | |||||||||
| Depreciation and amortization | 31,668 | — | — | — | 31,668 | ||||||||||
| Total operating expenses | 99,005 | (22,568 | ) | 16,585 | — | 93,022 | |||||||||
| Operating income (loss) | $ | 21,932 | $ | — | $ | — | $ | 4,045 | $ | 25,977 | |||||
| Year Ended December 31, 2018 | |||||||||||||||
| Topic 606 Impact - WIRELESS | |||||||||||||||
| ($ in thousands) | Prior to Adoption of Topic 606 | Changes in Presentation (1) | Equipment Revenue (2) | Deferred Costs (3) | As Reported 12/31/2018 | ||||||||||
| Service revenue | $ | 450,735 | $ | (86,637 | ) | $ | — | $ | 16,720 | $ | 380,818 | ||||
| Equipment revenue | 7,410 | — | 60,100 | — | 67,510 | ||||||||||
| Tower and other revenue | 14,327 | — | — | — | 14,327 | ||||||||||
| Total operating revenue | 472,472 | (86,637 | ) | 60,100 | 16,720 | 462,655 | |||||||||
| Cost of services | 131,166 | — | — | — | 131,166 | ||||||||||
| Cost of goods sold | 28,001 | (24,518 | ) | 60,100 | — | 63,583 | |||||||||
| Selling, general & administrative | 109,657 | (62,119 | ) | — | — | 47,538 | |||||||||
| Depreciation and amortization | 127,521 | — | — | — | 127,521 | ||||||||||
| Total operating expenses | 396,345 | (86,637 | ) | 60,100 | — | 369,808 | |||||||||
| Operating income (loss) | $ | 76,127 | $ | — | $ | — | $ | 16,720 | $ | 92,847 | |||||
| (1) | Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs for both postpaid and prepaid, and to provide on-going support to their prepaid customers in our territory were historically recorded as expense when incurred. Under Topic 606, these amounts represent consideration payable to our customer, Sprint, and are recorded as a reduction of revenue. In 2017, these amounts were approximately $44.8 million for the postpaid national commissions, previously recorded in selling, general and administrative, $18.7 million for national device costs previously recorded in cost of goods and services, and $16.9 million for the on-going service to Sprint's prepaid customers, previously recorded in selling, general and administrative. |
| (2) | Costs incurred by the Company for the sale of devices under Sprint’s device financing and lease programs were previously recorded net against revenue. Under Topic 606, the revenue and related costs from device sales are recorded gross. These amounts were approximately $63.8 million in 2017. |
| (3) | Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, which historically have been expensed when incurred and presented net of revenue, are deferred and amortized against revenue over the expected period of benefit of approximately 21 to 53 months. The deferred balance as of December 31, 2018 is approximately $75.8 million and is classified on the balance sheet as current and non-current assets, as applicable. |
Non-GAAP Financial Measures
In managing our business and assessing our financial performance, management supplements the information provided by the financial statement measures prepared in accordance with GAAP with Adjusted OIBDA and Continuing OIBDA, which are considered “non-GAAP financial measures” under SEC rules.
Adjusted OIBDA is defined 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; actuarial gains and losses on pension and other post-retirement benefit plans; and share-based compensation expense, amortization of deferred costs related to the impacts of the adoption of Topic 606, and adjusted to include the benefit received from the waived management fee by Sprint. Continuing OIBDA is defined as Adjusted OIBDA, less the benefit received from the waived management fee by Sprint. Adjusted OIBDA and Continuing 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 Continuing OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance. We use Adjusted OIBDA and Continuing OIBDA as supplemental performance measures because management believes these measures facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of our peers and 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 and Continuing 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 and Continuing 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 Continuing 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 and Continuing OIBDA have 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, but are not limited to, the following:
- they do not reflect capital expenditures;
- they do not reflect the impacts of adoption of Topic 606;
- many of the assets being depreciated and amortized will have to be replaced in the future and Adjusted OIBDA and Continuing OIBDA do not reflect cash requirements for such replacements;
- they do not reflect costs associated with share-based awards exchanged for employee services;
- they do not reflect interest expense necessary to service interest or principal payments on indebtedness;
- they do not reflect gains, losses or dividends on investments;
- they do not reflect expenses incurred for the payment of income taxes; and
- other companies, including companies in our industry, may calculate Adjusted OIBDA and Continuing OIBDA differently than we do, limiting its usefulness as a comparative measure.
In light of these limitations, management considers Adjusted OIBDA and Continuing OIBDA as a financial performance measure that supplements but does not replace the information reflected in our GAAP results.
The adoption of the new revenue standard did not impact Adjusted OIBDA.
The following tables reconcile Adjusted OIBDA and Continuing OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure, for the fourth quarter and full year 2018 and 2017:
Adjusted OIBDA and Continuing OIBDA
| Three Months Ended December 31, 2018 (in thousands) | Wireless | Cable | Wireline | Other | Consolidated | |||||||||||||||
| Operating income | $ | 25,977 | $ | 6,311 | $ | 3,178 | $ | (8,472 | ) | $ | 26,994 | |||||||||
| Impact of ASC topic 606 | (4,026 | ) | (17 | ) | (58 | ) | — | (4,101 | ) | |||||||||||
| Depreciation and amortization | 31,668 | 6,339 | 3,604 | 162 | 41,773 | |||||||||||||||
| Share-based compensation expense | — | — | — | 381 | 381 | |||||||||||||||
| Benefit received from the waived management fee (1) | 9,599 | — | — | — | 9,599 | |||||||||||||||
| Amortization of intangibles netted in rent expense | (30 | ) | — | — | — | (30 | ) | |||||||||||||
| Actuarial (gains) losses on pension plans | — | — | — | (1,441 | ) | (1,441 | ) | |||||||||||||
| Adjusted OIBDA | 63,188 | 12,633 | 6,724 | (9,370 | ) | 73,175 | ||||||||||||||
| Waived management fee | (9,599 | ) | — | — | — | (9,599 | ) | |||||||||||||
| Continuing OIBDA | $ | 53,589 | $ | 12,633 | $ | 6,724 | $ | (9,370 | ) | $ | 63,576 | |||||||||
| Three Months Ended December 31, 2017 (in thousands) | Wireless | Cable | Wireline | Other | Consolidated | |||||||||||||||
| Operating income | $ | 11,907 | $ | 5,386 | $ | 5,393 | $ | (4,576 | ) | $ | 18,110 | |||||||||
| Depreciation and amortization | 33,922 | 5,898 | 3,293 | 142 | 43,255 | |||||||||||||||
| (Gain) loss on asset sales | 6 | (128 | ) | 53 | 90 | 21 | ||||||||||||||
| Share-based compensation expense | 233 | 146 | 63 | 88 | 530 | |||||||||||||||
| Benefit received from the waived management fee (1) | 8,988 | — | — | — | 8,988 | |||||||||||||||
| Amortization of intangibles netted in rent expense | (645 | ) | — | — | — | (645 | ) | |||||||||||||
| Temporary back-office costs to support the billing operations through migration (2) | 964 | — | — | — | 964 | |||||||||||||||
| Actuarial gains on pension plans | — | — | — | (1,391 | ) | (1,391 | ) | |||||||||||||
| Integration and acquisition related expenses, and other | 1,187 | — | — | (30 | ) | 1,157 | ||||||||||||||
| Adjusted OIBDA | 56,562 | 11,302 | 8,802 | (5,677 | ) | 70,989 | ||||||||||||||
| Waived management fee | (8,988 | ) | — | — | — | (8,988 | ) | |||||||||||||
| Continuing OIBDA | $ | 47,574 | $ | 11,302 | $ | 8,802 | $ | (5,677 | ) | $ | 62,001 | |||||||||
| Year Ended December 31, 2018 (in thousands) | Wireless | Cable | Wireline | Other | Consolidated | |||||||||||||||
| Operating income | $ | 92,847 | $ | 23,755 | $ | 17,865 | $ | (41,221 | ) | $ | 93,246 | |||||||||
| Impact of ASC topic 606 | (15,048 | ) | (74 | ) | (197 | ) | — | (15,319 | ) | |||||||||||
| Depreciation and amortization | 127,521 | 24,644 | 13,673 | 567 | 166,405 | |||||||||||||||
| Share-based compensation expense | — | — | — | 4,959 | 4,959 | |||||||||||||||
| Benefit received from the waived management fee (1) | 37,763 | — | — | — | 37,763 | |||||||||||||||
| Amortization of intangibles netted in rent expense | 342 | — | — | — | 342 | |||||||||||||||
| Actuarial (gains) losses on pension plans | — | — | — | (1,688 | ) | (1,688 | ) | |||||||||||||
| Adjusted OIBDA | 243,425 | 48,325 | 31,341 | (37,383 | ) | 285,708 | ||||||||||||||
| Waived management fee | (37,763 | ) | — | — | — | (37,763 | ) | |||||||||||||
| Continuing OIBDA | $ | 205,662 | $ | 48,325 | $ | 31,341 | $ | (37,383 | ) | $ | 247,945 | |||||||||
| Year Ended December 31, 2017 (in thousands) | Wireless | Cable | Wireline | Other | Consolidated | |||||||||||||||
| Operating income | $ | 34,139 | $ | 15,846 | $ | 20,965 | $ | (24,440 | ) | $ | 46,510 | |||||||||
| Depreciation and amortization | 139,610 | 23,968 | 12,829 | 600 | 177,007 | |||||||||||||||
| (Gain) loss on asset sales | 214 | (243 | ) | 79 | 68 | 118 | ||||||||||||||
| Share-based compensation expense | 1,579 | 916 | 384 | 701 | 3,580 | |||||||||||||||
| Benefit received from the waived management fee (1) | 36,056 | — | — | — | 36,056 | |||||||||||||||
| Amortization of intangibles netted in rent expense | 1,528 | — | — | — | 1,528 | |||||||||||||||
| Temporary back-office costs to support the billing operations through migration (2) | 6,459 | — | — | 1 | 6,460 | |||||||||||||||
| Actuarial gains on pension plans | — | — | — | (1,387 | ) | (1,387 | ) | |||||||||||||
| Integration and acquisition related expenses, and other | 10,793 | — | — | 237 | 11,030 | |||||||||||||||
| Adjusted OIBDA | 230,378 | 40,487 | 34,257 | (24,220 | ) | 280,902 | ||||||||||||||
| Waived management fee | (36,056 | ) | — | — | — | (36,056 | ) | |||||||||||||
| Continuing OIBDA | $ | 194,322 | $ | 40,487 | $ | 34,257 | $ | (24,220 | ) | $ | 244,846 | |||||||||
________________________________
| (1) | Under our amended affiliate agreement, Sprint agreed to waive the Management Fees charged on both postpaid and prepaid revenues, up to $4.2 million per month, until the total amount waived reaches approximately $255.6 million, which is expected to occur in 2022. |
| (2) | Represents back-office expenses required to support former nTelos subscribers that migrated to Sprint back-office systems. |
Segment Results
| Three Months Ended December 31, 2018 | ||||||||||||||||||||||||
| (in thousands) | Wireless | Cable | Wireline | Other | Eliminations | Consolidated | ||||||||||||||||||
| External revenue | ||||||||||||||||||||||||
| Service revenue | $ | 96,664 | $ | 29,120 | $ | 5,469 | $ | — | $ | — | $ | 131,253 | ||||||||||||
| Equipment revenue | 18,651 | 158 | 38 | — | — | 18,847 | ||||||||||||||||||
| Other | 2,414 | 2,309 | 6,661 | — | — | 11,384 | ||||||||||||||||||
| Total external revenue | 117,729 | 31,587 | 12,168 | — | — | 161,484 | ||||||||||||||||||
| Internal revenue | 1,270 | 1,312 | 6,533 | — | (9,115 | ) | — | |||||||||||||||||
| Total operating revenue | 118,999 | 32,899 | 18,701 | — | (9,115 | ) | 161,484 | |||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Cost of services | 31,675 | 14,817 | 9,615 | — | (8,447 | ) | 47,660 | |||||||||||||||||
| Cost of goods sold | 17,834 | 98 | 20 | — | — | 17,952 | ||||||||||||||||||
| Selling, general and administrative | 11,845 | 5,334 | 2,284 | 8,310 | (668 | ) | 27,105 | |||||||||||||||||
| Depreciation and amortization | 31,668 | 6,339 | 3,604 | 162 | — | 41,773 | ||||||||||||||||||
| Total operating expenses | 93,022 | 26,588 | 15,523 | 8,472 | (9,115 | ) | 134,490 | |||||||||||||||||
| Operating income (loss) | $ | 25,977 | $ | 6,311 | $ | 3,178 | $ | (8,472 | ) | $ | — | $ | 26,994 | |||||||||||
| Three Months Ended December 31, 2017 | ||||||||||||||||||||||||
| (in thousands) | Wireless | Cable | Wireline | Other | Eliminations | Consolidated | ||||||||||||||||||
| External revenue | ||||||||||||||||||||||||
| Service revenue | $ | 106,468 | $ | 27,109 | $ | 5,087 | $ | — | $ | — | $ | 138,664 | ||||||||||||
| Equipment revenue | 1,801 | 177 | 37 | — | — | 2,015 | ||||||||||||||||||
| Other | 2,011 | 2,119 | 6,808 | — | — | 10,938 | ||||||||||||||||||
| Total external revenue | 110,280 | 29,405 | 11,932 | — | — | 151,617 | ||||||||||||||||||
| Internal revenue | 1,242 | 1,092 | 8,740 | — | (11,074 | ) | — | |||||||||||||||||
| Total operating revenue | 111,522 | 30,497 | 20,672 | — | (11,074 | ) | 151,617 | |||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Cost of services | 28,881 | 14,379 | 10,060 | 39 | (10,382 | ) | 42,977 | |||||||||||||||||
| Cost of goods sold | 5,569 | (82 | ) | 67 | — | — | 5,554 | |||||||||||||||||
| Selling, general and administrative | 30,056 | 4,916 | 1,858 | 4,425 | (692 | ) | 40,563 | |||||||||||||||||
| Integration and acquisition expenses | 1,186 | — | — | (29 | ) | — | 1,157 | |||||||||||||||||
| Depreciation and amortization | 33,925 | 5,898 | 3,293 | 140 | — | 43,256 | ||||||||||||||||||
| Total operating expenses | 99,617 | 25,111 | 15,278 | 4,575 | (11,074 | ) | 133,507 | |||||||||||||||||
| Operating income (loss) | $ | 11,905 | $ | 5,386 | $ | 5,394 | $ | (4,575 | ) | $ | — | $ | 18,110 | |||||||||||
| Year Ended December 31, 2018 | ||||||||||||||||||||||||
| (in thousands) | Wireless | Cable | Wireline | Other | Eliminations | Consolidated | ||||||||||||||||||
| External revenue | ||||||||||||||||||||||||
| Service revenue | $ | 380,818 | $ | 114,917 | $ | 21,521 | $ | — | $ | — | $ | 517,256 | ||||||||||||
| Equipment revenue | 67,510 | 695 | 193 | — | — | 68,398 | ||||||||||||||||||
| Other | 9,311 | 8,585 | 27,304 | — | — | 45,200 | ||||||||||||||||||
| Total external revenue | 457,639 | 124,197 | 49,018 | — | — | 630,854 | ||||||||||||||||||
| Internal revenue | 5,016 | 4,706 | 28,124 | — | (37,846 | ) | — | |||||||||||||||||
| Total operating revenue | 462,655 | 128,903 | 77,142 | — | (37,846 | ) | 630,854 | |||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Cost of services | 131,166 | 59,935 | 38,056 | — | (35,135 | ) | 194,022 | |||||||||||||||||
| Cost of goods sold | 63,583 | 295 | 81 | — | — | 63,959 | ||||||||||||||||||
| Selling, general and administrative | 47,538 | 20,274 | 7,467 | 40,654 | (2,711 | ) | 113,222 | |||||||||||||||||
| Depreciation and amortization | 127,521 | 24,644 | 13,673 | 567 | — | 166,405 | ||||||||||||||||||
| Total operating expenses | 369,808 | 105,148 | 59,277 | 41,221 | (37,846 | ) | 537,608 | |||||||||||||||||
| Operating income (loss) | $ | 92,847 | $ | 23,755 | $ | 17,865 | $ | (41,221 | ) | $ | — | $ | 93,246 | |||||||||||
| Year Ended December 31, 2017 | ||||||||||||||||||||||||
| (in thousands) | Wireless | Cable | Wireline | Other | Eliminations | Consolidated | ||||||||||||||||||
| External revenue | ||||||||||||||||||||||||
| Service revenue | $ | 431,184 | $ | 107,338 | $ | 20,388 | $ | — | $ | — | $ | 558,910 | ||||||||||||
| Equipment revenue | 9,467 | 724 | 127 | — | — | 10,318 | ||||||||||||||||||
| Other | 9,478 | 7,855 | 25,430 | — | — | 42,763 | ||||||||||||||||||
| Total external revenue | 450,129 | 115,917 | 45,945 | — | — | 611,991 | ||||||||||||||||||
| Internal revenue | 4,949 | 3,245 | 33,308 | — | (41,502 | ) | — | |||||||||||||||||
| Total operating revenue | 455,078 | 119,162 | 79,253 | — | (41,502 | ) | 611,991 | |||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Cost of services | 129,626 | 59,335 | 38,417 | 39 | (38,696 | ) | 188,721 | |||||||||||||||||
| Cost of goods sold | 22,653 | 14 | 119 | — | — | 22,786 | ||||||||||||||||||
| Selling, general and administrative | 118,257 | 19,999 | 6,923 | 23,564 | (2,806 | ) | 165,937 | |||||||||||||||||
| Integration and acquisition expenses | 10,793 | — | — | 237 | — | 11,030 | ||||||||||||||||||
| Depreciation and amortization | 139,610 | 23,968 | 12,829 | 600 | — | 177,007 | ||||||||||||||||||
| Total operating expenses | 420,939 | 103,316 | 58,288 | 24,440 | (41,502 | ) | 565,481 | |||||||||||||||||
| Operating income (loss) | $ | 34,139 | $ | 15,846 | $ | 20,965 | $ | (24,440 | ) | $ | — | $ | 46,510 | |||||||||||
Supplemental Information
Subscriber Statistics
The following tables indicate selected operating statistics of Wireless, including Sprint subscribers, as of the dates shown:
| December 31, 2018 (3) | December 31, 2017 (4) | |||||||
| Postpaid: | ||||||||
| Retail PCS subscribers - postpaid | 795,176 | 736,597 | ||||||
| Gross PCS subscriber additions - postpaid | 190,334 | 173,871 | ||||||
| Net PCS subscriber additions (losses) - postpaid | 58,579 | 14,035 | ||||||
| PCS average monthly retail churn % - postpaid | 1.82 | % | 2.04 | % | ||||
| Prepaid: | ||||||||
| Retail PCS subscribers - prepaid (1) | 258,704 | 225,822 | ||||||
| Gross PCS subscriber additions - prepaid (1) | 150,662 | 151,926 | ||||||
| Net PCS subscriber additions (losses) - prepaid (1) | 32,882 | 19,150 | ||||||
| PCS average monthly retail churn % - prepaid (1) | 4.45 | % | 5.07 | % | ||||
| PCS market POPS (000) (2) | 7,023 | 5,942 | ||||||
| PCS covered POP (000) (2) | 6,109 | 5,272 | ||||||
| CDMA base stations (sites) | 1,853 | 1,623 | ||||||
| Towers owned | 208 | 192 | ||||||
| Non-affiliate cell site leases | 193 | 192 | ||||||
_______________________________________________________
| (1) | As of September 2017, the Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts have been adjusted accordingly. |
| (2) | "POPS" refers to the estimated population of a given geographic area. Market POPS are those within a market area which we are authorized to serve under our Sprint PCS affiliate agreements, and Covered POPS are those covered by our network. The data source for POPS is U.S. census data. Historical periods previously referred to other third party population data and have been recast to refer to U.S. census data. |
| (3) | Beginning February 1, 2018 includes Richmond Expansion Area except for gross PCS subscriber additions. |
| (4) | Beginning April 6, 2017 includes Parkersburg Expansion Area except for gross PCS subscriber additions. |
The subscriber statistics shown above include the following:
| February 1, 2018 | April 6, 2017 | |||||||
| Expansion Area | Expansion Area | |||||||
| PCS subscribers - postpaid | 38,343 | 19,067 | ||||||
| PCS subscribers - prepaid (1) | 15,691 | 4,517 | ||||||
| Acquired PCS market POPS (000) | 1,082 | 511 | ||||||
| Acquired PCS covered POPS (000) | 602 | 244 | ||||||
| Acquired CDMA base stations (sites) (2) | 105 | — | ||||||
_______________________________________________________
| (1) | Excludes Lifeline subscribers. |
| (2) | As of December 31, 2018 we have shut down 107 overlap sites associated with the nTelos Area. |
The following table shows selected operating statistics for Cable as of the dates shown:
| December 31, 2018 | December 31, 2017 | |||||||
| Homes passed (1) | 185,133 | 184,910 | ||||||
| Customer relationships (2) | ||||||||
| Video users | 41,269 | 44,269 | ||||||
| Non-video customers | 38,845 | 33,559 | ||||||
| Total customer relationships | 80,114 | 77,828 | ||||||
| Video | ||||||||
| Customers (3) | 43,600 | 46,613 | ||||||
| Penetration (4) | 23.6 | % | 25.2 | % | ||||
| Digital video penetration (5) | 78.8 | % | 76.2 | % | ||||
| Broadband | ||||||||
| Available homes (6) | 185,133 | 184,910 | ||||||
| Users (3) | 68,179 | 63,918 | ||||||
| Penetration (4) | 36.8 | % | 34.6 | % | ||||
| Voice | ||||||||
| Available homes (6) | 185,133 | 182,379 | ||||||
| Users (3) | 23,366 | 22,555 | ||||||
| Penetration (4) | 12.6 | % | 12.4 | % | ||||
| Total revenue generating units (7) | 135,145 | 133,086 | ||||||
| Fiber route miles | 3,514 | 3,356 | ||||||
| Total fiber miles (8) | 138,648 | 122,011 | ||||||
| Average revenue generating units | 133,109 | 132,759 | ||||||
| (1) | 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. |
| (2) | Customer relationships represent the number of billed customers who receive at least one of our services. |
| (3) | 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. |
| (4) | Penetration is calculated by dividing the number of users by the number of homes passed or available homes, as appropriate. |
| (5) | Digital video penetration is calculated by dividing the number of digital video users by total video users. Digital video users are video customers who receive any level of video service via digital transmission. A dwelling with one or more digital set-top boxes or digital adapters counts as one digital video user. |
| (6) | 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. |
| (7) | Revenue generating units are the sum of video, voice and high-speed internet users. |
| (8) | 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. |
The following table shows selected operating statistics for Wireline as of the dates shown:
| December 31, 2018 | December 31, 2017 | |||||||
| Long distance subscribers | 9,452 | 9,078 | ||||||
| Video customers (1) | 4,742 | 5,019 | ||||||
| Broadband customers | 14,464 | 14,353 | ||||||
| Fiber route miles | 2,127 | 2,073 | ||||||
| Total fiber miles (2) | 161,552 | 154,165 | ||||||
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| (1) | Wireline's video service passes approximately 16,500 homes. |
| (2) | 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. |