-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Dm2G4bNc3rDTj2Iuo0xtSFmXwYTTJ8RIzVALtPZPtmQjbhTBtviq0u6uRnKxvzuD vB5z7QWYvFxqUgMLggcrGg== 0000354963-95-000009.txt : 19950517 0000354963-95-000009.hdr.sgml : 19950516 ACCESSION NUMBER: 0000354963-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHENANDOAH TELECOMMUNICATIONS CO/VA/ CENTRAL INDEX KEY: 0000354963 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 541162807 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09881 FILM NUMBER: 95538284 BUSINESS ADDRESS: STREET 1: PO BOX 459 STREET 2: 124 SOUTH MAIN ST CITY: EDINBURG STATE: VA ZIP: 22824 BUSINESS PHONE: 7039845247 MAIL ADDRESS: STREET 1: P O BOX 459 CITY: EDINBURG STATE: VA ZIP: 22824 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 30, 1995 Commission File Number 0-9881 SHENANDOAH TELECOMMUNICATIONS COMPANY (Exact name of registrant as specified in its charter) Virginia 54-1162807 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification organization) Number) P. O. Box 459, Edinburg, Virginia 22824 (Address of principal executive office and zip code) Registrant's telephone number, including area code: (703) 984-4141 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 X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the close of the period covered by this report. Class Outstanding at March 1, 1995 Common Stock, No Par Value 3,760,760 Shares PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I, FINANCIAL INFORMATION ITEM I, FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS ASSETS March 31, 1995 December 31, 1994 CURRENT ASSETS Cash & Cash Equivalents $6,772,797 $6,270,849 Certificates of Deposit 1,136,166 930,911 Investments Held to Maturity 3,210,865 3,254,460 Accounts Receivable 2,288,021 2,880,428 Leases Receivable (Net) 81,140 81,140 Materials 1,444,217 1,511,006 Prepaid and Other Current Assets 263,488 236,191 --------- --------- Total Current Assets 15,196,694 15,164,985 ---------- ---------- NONCURRENT ASSETS Other Securities and Investments 3,977,790 4,615,689 Securities Available for Sale 1,571,977 0 Investments Held to Maturity 1,998,175 499,687 Investment in Direct Financing Leases 290,356 287,584 --------- --------- Total Noncurrent Assets 7,838,298 5,402,960 --------- --------- PLANT, PROPERTY AND EQUIPMENT Plant in Service 49,535,272 49,102,832 Plant Under Construction 228,501 248,717 Less Accumulated Depreciation 17,298,556 17,455,344 ---------- ---------- Net Plant, Property, and Equipment 32,465,217 31,896,205 ---------- ---------- TOTAL ASSETS $55,500,209 $52,464,150 ========== ========== See accompanying notes to consolidated financial statements. PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I, FINANCIAL INFORMATION ITEM I, FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ March 31, 1995 December 31, 1994 CURRENT LIABILITIES Current Maturities of Long-Term Debt $423,329 $423,329 Accounts Payable 339,180 307,691 Advance Billing 480,563 526,105 Customer Deposits 112,582 137,793 Other Current Liabilities 730,176 910,968 Income Taxes Payable 949,008 26,618 Other Accrued Taxes 138,740 53,739 --------- --------- Total Current Liabilities 3,173,578 2,386,243 --------- --------- LONG-TERM DEBT, LESS CURRENT MATURITIES 9,414,369 9,517,880 ---------- --------- OTHER LIABILITIES AND DEFERRED CREDITS Deferred Investment Tax Credits 424,434 442,844 Deferred Income Taxes 3,711,656 3,535,014 Pension and Other 777,234 745,935 --------- --------- Total Other Liabilities and Deferred Credits 4,913,324 4,723,793 --------- --------- Minority interests 1,329,329 1,219,493 --------- --------- STOCKHOLDERS' EQUITY Common Stock, no par, 8,000,000 shares authorized (3,760,760 shares issued and outstanding) 4,740,677 4,740,677 Retained Earnings 31,810,497 29,876,064 Unrealized Gain on Securities Available for Sale, Net 118,435 0 ---------- ---------- Total Stockholders' Equity 36,669,609 34,616,741 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $55,500,209 $52,464,150 ========== ========== See accompanying notes to consolidated financial statements. PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I, FINANCIAL INFORMATION ITEM I, FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three months ended March 31 ----------------------------- 1995 1994 OPERATING REVENUES ---- ---- Telephone Revenues Local Service $751,840 $673,038 Access 1,615,985 1,723,085 Toll 3,474 2,602 Miscellaneous: Directory 293,115 264,287 Facility Leases 418,503 225,832 Billing & Collection 106,069 113,372 Other Miscellaneous 27,511 55,755 --------- --------- Total Telephone Revenues 3,216,497 3,057,971 Cable Television Revenues 214,642 168,739 ShenTel Service Revenues 417,438 281,645 Leasing Revenues 6,093 4,055 Mobile Revenues 1,051,865 905,827 Long Distance Revenues 288,608 293,253 Network revenues 123,843 80,198 --------- --------- Total Revenues and Sales 5,318,986 4,791,688 --------- --------- OPERATING EXPENSES Cost of Products and Services Sold 211,960 91,645 Line Costs 131,264 131,583 Plant Specific 434,202 425,476 Plant Non-Specific: Network & Other 410,550 433,723 Depreciation and Amortization 683,470 654,702 Customer Operations 555,888 580,251 Corporate Operations 468,047 444,254 Other Operating Income & Expense 45,451 35,461 Taxes Other Than Income 85,344 75,069 --------- --------- Total Operating Expenses 3,026,176 2,872,164 --------- --------- Operating Income 2,292,810 1,919,524 See accompanying notes to consolidated financial statements. PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I, FINANCIAL INFORMATION ITEM I, FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three months ended March 31 ----------------------------- 1995 1994 OPERATING EXPENSES (Cont'd) Gain on Sale of Investment 872,125 0 Non-Operating Income less Expenses 1,058,937 6,570 Interest Expense (179,033) (172,760) --------- --------- Income Before Income Taxes 3,172,714 1,753,334 Provision for Income Taxes 1,128,444 605,014 --------- --------- Net Income Before Minority Interest 2,044,270 1,148,320 Minority Interest (109,836) (58,275) Net Income $1,934,434 $1,090,045 ============ ============ EARNINGS PER SHARE Weighted Average Common Shares Outstanding 3,760,760 3,760,760 ============ =========== Net Income per share $0.51 $0.29 ============ =========== See accompanying notes to consolidated financial statements. PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I, FINANCIAL INFORMATION ITEM I, FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) THREE MONTHS ENDED MARCH 31 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $1,934,434 $1,090,045 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and Amortization 683,470 654,702 Deferred taxes 166,610 (18,925) Gain on Sale of Equity investment (872,125) 0 Investment (Gains)/Losses (38,725) 53,889 Minority Share of Income 109,836 58,275 Other 8,379 24,794 Decrease (increase) in Accounts receivable 217,407 198,159 Materials and Supplies 66,789 (5,909) Increase (decrease) in Accounts Payable (2,954) (189,760) Income taxes payable 922,390 224,320 Other current liabilities (166,544) (212,689) Net cash provided by operating activities 3,028,967 1,876,901 See accompanying notes to consolidated financial statements. PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES PART I, FINANCIAL INFORMATION ITEM I, FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) THREE MONTHS ENDED MARCH 31 1995 1994 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment (1,227,733) (663,599) Investment in Direct Financing Leases (26,378) (175,394) Payments Received on Direct Financing Leases 23,606 18,602 Purchase of Investments Securities (1,725,956) (25,471) Sale of Investments Securities 157,954 156,375 Proceeds from matured note receivable 375,000 0 Net cash provided by investing activities (2,423,507) (689,487) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Notes Payable 0 (92,481) Payment of notes payable (103,512) (875,000) ------------ ------------ Net cash provided by financing activities (103,512) (967,481) ------------ ------------ NET INCREASE/(DECREASE) IN CASH 501,948 219,933 CASH AND CASH EQUIVALENTS: Beginning 6,270,849 5,695,891 ------------ ------------ Ending $6,772,797 $5,915,824 ============ ============ See accompanying notes to consolidated financial statements. PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly Shenandoah Telecommunications Company's financial position as of March 31, 1995 and the results of operations and cash flows for the three month periods ended March 31, 1994 and 1993. While the Company believes that the disclosures presented are adequate, to make the information not misleading, it is suggested that these condensed financial statements be read in conjunction with the financial statements and notes included in the Company's annual report in Form 10-K. 2. Earnings per share of common stock have been determined by using the weighted average number of shares outstanding during the period. 3. The results of operations for the three-month period ended March 31, 1995 are not necessarily indicative of the results to be expected for the full year. SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES ITEM II, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Summary The following tables set forth, for the periods indicated, the percentages which certain items reflected in the financial data bear to total operating revenues and the percentage increase of such items as compared to the indicated prior period: RELATIONSHIP TO PERIOD TO PERIOD TOTAL OPERATING REVENUES INCREASE OR DECREASE --------------------------------- - ------------------------- Three months ended Three months ended March 31 March 31 1995 1994 1995-94 1994-93 OPERATING REVENUES Telephone Revenues Local Service 14.1% 14.0% 11.7% 4.6% Access 30.4% 36.0% -6.2% 15.2% Toll 0.1% 0.1% 33.5% -167.6% Miscellaneous: Directory 5.5% 5.5% 10.9% 12.0% Facility Leases 7.9% 4.7% 85.3% -18.5% Billing & Collection 2.0% 2.4% -6.4% 6.6% Other Miscellaneous 0.5% 1.2% -50.7% 74.1% Total Telephone Revenues 60.5% 63.8% 5.2% 9.7% Cable Television Revenues 4.0% 3.5% 27.2% 3.8% ShenTel Service Revenues 7.8% 5.9% 48.2% 28.2% Leasing Revenues 0.1% 0.1% 50.3% -90.8% Mobile Revenues 19.9% 18.9% 16.1% 54.2% Long Distance Revenues 5.4% 6.1% -1.6% -9.9% Network revenues 2.3% 1.7% 54.4% -15.9% ------- ------ -------- - -------- Total Revenues and Sales 100.0% 100.0% 11.0% 13.5% PAGE
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARY COMPANIES ITEM II, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RELATIONSHIP TO PERIOD TO PERIOD TOTAL OPERATING REVENUES INCREASE OR DECREASE --------------------------------- - ------------------------- Three months ended Three months ended March 31 March 31 1995 1994 1995-94 1994-93 OPERATING EXPENSES Cost of Products and Services Sold 4.0% 1.9% 131.3% 34.2% Line Costs 2.5% 2.7% -0.2% 6.7% Plant Specific 8.2% 8.9% 2.1% 2.3% Plant Non-Specific: Network & Other 7.7% 9.1% -5.3% 22.6% Depreciation and Amortization 12.8% 13.7% 4.4% 5.4% Customer Operations 10.5% 12.1% -4.2% 8.9% Corporate Operations 8.8% 9.3% 5.4% -3.7% Other Operating Income & Expense 0.9% 0.7% 28.2% 5.7% Taxes Other Than Income 1.6% 1.6% 13.7% 25.8% ------- ------ -------- - -------- Total Operating Expenses 57.0% 60.0% 5.4% 7.6% Operating Income 43.0% 40.0% 19.4% 23.7% Gain on Sale of Investment 16.4% 0.0% N/A N/A Non-Operating Income less Expenses 3.5% 0.1% 2743.4% -83.2% Interest Expense -3.4% -3.6% 3.6% 14.7% Income Before Income Taxes 43.1% 36.5% 81.0% 21.8% Provision for Income Taxes 21.2% 12.6% 86.5% 19.1% Net Income Before Minority Interest 21.9% 23.9% 78.0% 23.2% Minority Interest -2.1% -1.2% 88.5% - -1037.3% Net Income 19.8% 22.7% 77.5% 16.2% ======= ====== ======== ======== PAGE SHENANDOAH TELECOMMUNICATIONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Shenandoah Telecommunications Company is a diversified telecommunications holding company providing both regulated and unregulated telecommunications services through its seven wholly-owned subsidiaries. The regulated local exchange telephone company is the largest subsidiary, accounting for over 60.0% of revenue and 78.5% of net income (excluding the gain on the sale of equity security). This industry is in a period of transition from a regulated monopoly to a competitive environment with changing technology. As a result, Shenandoah Telecommunications has made and plans to continue to make significant investments in new and emerging technologies. Other significant services provided are cellular, cable television, long distance, and facilities leased to interexchange carriers on a Company owned fiber optic cable network. The Company also sells and leases equipment, mainly related to services provided. The Company also participates in emerging technologies by direct investment in non-affiliated companies. RESULTS OF OPERATIONS The Company's largest source of revenue continues to be for access to the Company's local exchange network by interexchange carriers. The volume for these access revenues is measured in minutes of use. The minutes of use during the first three months of 1995 increased 2.71% compared to the same period in 1994. Changes in NECA settlement procedures, effective July 1, 1994, offset the increases in minutes of use. The increase in the ShenTel Service revenues category for the first quarter of 1995, compared to the same period in 1994, is due to an increase in retail equipment sales. The increase equaled $118,946 or 129.0%. The increase in Mobile Company revenues was due to growth in our cellular operation. Cellular revenues increased 16.9% in the first quarter of 1995 compared to the same period in 1994. For the first three months of 1995, net additions of customers were approximately the same as net additions for the same period in 1994. PAGE SHENANDOAH TELECOMMUNICATIONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) On September 1, 1994, the cable television company restructured its rates by increasing its rates for basic and premium service and decreasing or eliminating its charges for other services such as rental of converters. As a result, total revenue for cable television services for the final four months of 1994 increased 17.3% over the previous four months' total, and 26.0% over the final four months of 1993. The number of Cable subscribers increased 7.8% from March 31, 1994. The Company estimates that our cable rates are within the limits prescribed by the FCC for cable systems of our size. None of the local governments within the Company's cable television serving area have indicated that they will exercise any authority they may have to regulate rates. The Company also leases capacity on fiber optic facilities in West Virginia and Maryland to interexchange carriers. The revenue for this activity appears as Network revenues on the income statement. This service experienced a revenue increase of 54.4% in 1994. The increase is due to new contracts being added. For the first quarter of 1995, operating expenses account for 57% of revenues compared to 60% of revenues for the first quarter of 1994. Two categories of expenses show significant decreases compared to the year earlier period. The first category showing a significant decrease is Network and Other. Over 55% of this category is for facilities costs for the Cellular operations. During the first quarter of 1995, these costs were 8.1% less than the first quarter of 1994 when two software implementations were in progress. The Company's cost for billing operations decreased 22.5% compared to the first quarter of 1994. This is responsible for the decrease in the customer service category. PAGE SHENANDOAH TELECOMMUNICATIONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) Another factor was that depreciation, still our largest expense category, increased at a slower rate than the previous year. This is due to putting less equipment in service during the past year than prior years. Management expects this to change during the second half of 1995 due to accelerated network construction plans. The Company, along with other telecommunications providers, founded an organization that built a fiber optic network in the Richmond, Virginia metropolitan area to provide competitive access to businesses. As a result of a strategic change, it was agreed to sell this business to Metropolitan Fiber Systems. The Company recognized a gain on the sale in January of 1995. The amount of the gain was $872,125. The Company recognized losses of $51,191 during the first quarter of 1994 as our portion of the operations of this organization. These losses are included in the Non-Operating Income Less Expenses category. LIQUIDITY AND CAPITAL RESOURCES The Company continues to generate a strong cash flow from operations that adequately meets the Company's need for cash. Other available sources of liquidity are $4,500,000 unsecured lines of credit with two local banks. No advances have been made from these lines of credit in 1995. The Company has a loan agreement with the Rural Telephone Bank (RTB) in the amount of $9,240,000. Advances on this note may be taken until February 1996. The Company expects to receive an additional advance during the second or third quarter of 1995. As of December 31, 1994, the Company has received advances in the amount of $3,386,000. Expenditure of these loan funds is limited to approved capital projects for the regulated local exchange carrier. The Company has reached an agreement in principle to construct and manage part of a network that will provide Personal Communications Services (PCS). The service will be provided under a license held by an unaffiliated company. This will require significant investment in new plant and equipment. The Company has budgeted approximately $6,000,000 for new plant in 1995. It is estimated that up to 50.0% of this amount may be financed with loans from external services. PAGE SHENANDOAH TELECOMMUNICATIONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (Continued) Due to the competition coming from new sources, management is unable to predict the potential impact on the Company's cash flow. The Company has no material contractual commitments for capital expenditures, however, the Company's Board of Directors has approved a construction budget of approximately $14,000,000 in 1995. This budget includes the expenditures for PCS discussed above. The remaining amounts are primarily for telephone central office equipment and fiber optic cable facilities. The Company expects to finance these expenditures through internally generated cash flows as well as additional advances from the RTB note. PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY PART II OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders. ITEM 6. Exhibits and Reports on Form 8-K Reported memorandum of understanding with American Personal Communications ("APC") pursuant to which the Registrant will act as manager of a portion of APC's personal communications service ("PCS") system in portions of rural northwestern Virginia, West Virginia, Maryland, and south central Pennsylvania. The Registrant is currently evaluating the possible purchase of cable television systems within its local telephone service area. It is not clear whether the Registrant will be able to reach a definitive agreement. PAGE SHENANDOAH TELECOMMUNICATIONS COMPANY 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) May 12, 1995 CHRISTOPHER E. FRENCH Christopher E. French President May 12, 1995 LAURENCE F. PAXTON Laurence F. Paxton Vice President - Finance
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