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 September 30, 1994 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 October 1, 1994
Common Stock, No Par Value 1,880,380 Shares<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
Sept 30, 1994 December 31, 1993
------------------ -----------------
CURRENT ASSETS
Cash & cash equivalents $6,306,702 $5,695,891
Short Term Investments 4,125,616 3,684,281
Accounts Receivable 2,564,809 2,284,197
Income Taxes Receivable 63,612 0
Leases Receivable (Net) 63,243 63,243
Materials 1,622,412 1,545,082
Prepaid Expenses 200,075 356,678
--------- ---------
Total Current Assets $14,946,469 $13,629,372
--------- ---------
NONCURRENT ASSETS
Marketable Securities $6,600 $6,600
Investment in Direct Financing
Leases 191,213 55,620
Other Investments 4,556,521 4,456,621
--------- ---------
Total Noncurrent Assets $4,754,334 $4,518,841
--------- ---------
PLANT, PROPERTY AND EQUIPMENT
Plant in Service $49,166,929 $47,290,763
Plant Under Construction 413,211 476,378
Less Accumulated Depreciation 17,726,746 16,263,290
---------- ----------
Net Plant, Property, and
Equipment $31,853,394 $31,503,851
---------- ----------
TOTAL ASSETS $51,554,197 $49,652,064
========== ==========
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Sept 30, 1994 December 31, 1993
------------------ -----------------
CURRENT LIABILITIES
Accounts Payable $376,279 $537,884
Advance Billing 215,988 550,413
Customer Deposits 145,492 147,952
Accrued Vacation 225,899 207,491
Current Maturities of
Long-Term Debt 379,394 329,891
Income Taxes Payable 0 462,325
Other Accrued Taxes 228,119 43,294
Other Current Liabilities 850,839 963,752
Notes Payable 0 875,000
--------- --------
Total Current Liabilities $2,422,010 $4,118,002
--------- --------
LONG TERM DEBT $8,719,446 $9,051,922
---------- ----------
OTHER LIABILITIES AND DEFERRED CREDITS
Deferred Investment Credits $462,284 $518,545
Deferred Income Taxes 3,067,199 2,983,069
Other 879,803 808,343
--------- ---------
Total Other Liabilities and
Deferred Credits $4,409,286 $4,309,957
--------- ---------
Minority interest in
subsidiaries $1,267,968 $996,176
--------- ---------
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Sept 30, 1994 December 31, 1993
------------------ -----------------
STOCKHOLDERS' EQUITY
Common Stock, no par,
4,000,000 shares authorized
(1,880,380 shares issued and
outstanding) $4,700,950 $4,700,950
Additional Paid-in Capital 39,727 39,727
Retained Earnings 29,994,810 26,435,330
---------- ----------
Total Stockholders' Equity $34,735,487 $31,176,007
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $51,554,197 $49,652,064
========== ==========
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION> Three months ended Nine months ended
Sept 30 Sept 30
------------------------- ---------------------------
<S> 1994 1993 1994 1993
OPERATING REVENUES ---- ---- ---- ----
Telephone Revenues <C> <C> <C> <C>
Local Service $730,827 $671,370 $2,125,290 $1,968,076
Access 1,595,298 1,680,092 4,870,847 4,722,569
Toll (14,219) 2,421 (31,768) 4,297
Miscellaneous:
Directory 249,358 241,245 764,398 738,712
Facility Leases 312,653 229,807 915,946 761,058
Billing & Collection 120,504 114,047 342,663 330,104
Other Miscellaneous 14,776 27,355 122,082 87,681
--------- --------- --------- ---------
Total Telephone Revenues 3,009,197 2,966,337 9,109,458 8,612,497
Cable Television Revenues 190,442 167,829 533,762 520,756
ShenTel Service Revenues 432,134 241,454 1,183,839 761,600
Leasing Revenues 5,074 39,857 14,585 125,544
Mobile Revenues 1,124,254 898,886 3,080,368 2,300,452
Long Distance Revenues 295,906 331,063 863,731 976,309
Network Revenues 80,197 94,042 240,592 294,854
--------- --------- --------- ---------
Total Revenues and Sales 5,137,204 4,739,468 15,026,335 13,592,012
--------- --------- --------- ---------
See accompanying notes to consolidated financial statements
PAGE
<PAGE>
</TABLE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION> Three months ended Nine months ended
Sept 30 Sept 30
------------------------- ---------------------------
<S> 1994 1993 1994 1993
OPERATING EXPENSES ---- ---- ---- ----
<C> <C> <C> <C>
Cost of Products and Services Sold 201,034 112,284 535,175 427,339
Line Costs 137,986 130,119 395,441 389,852
Plant Specific 431,834 485,695 1,218,587 1,322,388
Plant Non-Specific:
Network & Other 407,515 438,818 1,236,553 1,203,377
Depreciation and Amortization 710,501 638,876 2,037,272 1,881,296
Customer Operations 611,345 550,665 1,738,944 1,605,627
Corporate Operations 524,438 466,965 1,430,902 1,373,366
Other Operating Income & Expense 39,858 34,090 113,143 101,844
Taxes other than income 82,332 57,900 246,885 180,983
--------- --------- --------- ---------
Total Operating Expenses 3,146,843 2,915,412 8,952,902 8,486,072
--------- --------- --------- ---------
Operating income 1,990,361 1,824,056 6,073,433 5,105,940
Non-operating income less expenses 73,483 36,174 118,899 (67,098)
Interest expense 171,257 151,669 493,520 453,454
--------- --------- --------- ---------
Income before taxes 1,892,587 1,708,561 5,698,812 4,585,388
Provision for income taxes 561,700 587,166 1,867,540 1,594,081
--------- --------- --------- ---------
Net income before minority interest 1,330,887 1,121,395 3,831,272 2,991,307
See accompanying notes to consolidated financial statements
PAGE
<PAGE>
</TABLE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION> Three months ended Nine months ended
Sept 30 Sept 30
------------------------- ---------------------------
<S> 1994 1993 1994 1993
OPERATING EXPENSES ---- ---- ---- ----
<C> <C> <C> <C>
Minority interest (110,597) (53,170) (271,792) (56,806)
Net Income $1,220,290 $1,068,225 $3,559,480 $2,934,501
<S> ======== ======== ========= =========
EARNINGS PER SHARE
Weighted Average Common
Shares Outstanding 1,880,380 1,880,380 1,880,380 1,880,380
======= ======= ======= =======
Net Earnings per Share $0.65 $0.57 $1.89 $1.56
======= ======= ======= =======
See accompanying notes to consolidated financial statements
PAGE
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
NINE MONTHS ENDED SEPT 30
1994 1993
OPERATING ACTIVITIES:
Cash received from customers $14,807,173 $13,629,133
Dividends received 746 3,815
Interest received 223,099 130,148
---------- ---------
Cash Received from Operations 15,031,018 13,763,096
Cash paid to suppliers
and employees 6,797,007 6,353,901
Interest paid 495,096 454,720
Income taxes paid 2,359,778 1,885,341
----------- ----------
Cash Disbursed for Operations 9,651,881 8,693,962
Net Cash Provided by
Operating Activities 5,379,137 5,069,134
INVESTMENT ACTIVITIES:
Additions to property, plant,
and equipment (2,579,252) (2,974,402)
Cash received from equipment sales 20,223 16,048
Investment in Direct
Financing Leases (187,550) (67,897)
Payments Received on Direct
Financing Leases 51,955 264,086
Payment received on note 0 103,000
Issuance of note receivable (250,000) 0
Sale of short-term investments 1,407,165 582,898
Purchase of short-term investments (1,848,500) (1,521,071)
Purchase of long-term
investment in stock (200,000) (604,200)
Return of investment in partnerships 50,697 8,118
Purchase of other investments (75,090) (289,042)
---------- ---------
Net Cash Provided (Consumed) by
Investment Activities (3,610,352) (4,482,462)
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
NINE MONTHS ENDED SEPT 30
1994 1993
FINANCING ACTIVITIES:
Payments of short-term debt (875,000) 0
Proceeds from issuance of
long-term debt 0 975,450
Principal payments on long-term debt (282,974) (257,417)
---------- ----------
Net Cash Provided (Consumed) by
Financing Activities (1,157,974) 718,033
---------- ---------
Net Increase (Decrease) in Cash 610,811 1,304,705
Cash & Cash Equivalents-Beginning
of the Year 5,695,891 2,528,610
---------- ---------
Cash & Cash Equivalents-End
of the Period $6,306,702 $3,833,315
========== =========
See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
RECONCILIATION OF EARNINGS TO
NET CASH FLOW FROM OPERATING
ACTIVITIES NINE MONTHS ENDED SEPT 30
1994 1993
Net Income $3,559,480 $2,934,501
Adjustments to reconcile
Net Income to net cash
provided by operating activities:
Depreciation 2,037,272 1,881,296
Amortization of debt issue cost 1,082 1,082
Change in deferred ITC (56,261) (56,776)
Change in deferred taxes 89,961 (92,317)
Loss on equity method investments 112,271 89,998
Minority interest in subsidiary 271,792 56,807
Partial writeoff of cost
method investment 0 93,750
Decrease (Increase) in:
Accounts receivable (30,612) 11,222
Materials & supplies (77,329) 90,750
Reclass from Plant to Inventory 149,773 117,507
Other current assets 161,681 185,693
Increase (Decrease) in:
Accounts payable (138,931) (2,168)
Interest payable (1,576) (1,266)
Advance billing and payments (334,425) (324,687)
Customer deposits (2,460) 21,997
Income taxes payable (525,937) (142,167)
Other taxes payable 184,825 115,959
Other current liabilities (92,928) (105,389)
Other liabilities & deferrals 71,459 193,342
---------- ----------
Net Cash Provided by Operating
Activities $5,379,137 $5,069,134
========= =========
Non-cash Investment & Financing
activities:
Plant financed through accounts
payable was $11,769 $50,417 $34,443
and $243,348 at 9/30/94, 9/30/93, 12/31/93,
and 12/31/92 respectively.
See accompanying notes to consolidated financial statements.
PAGE
<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 September 30, 1994 and the results of operations and cash
flows for the six and nine month periods ended September 30,
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 nine month period ended
September 30, 1994 are not necessarily indicative of the
results to be expected for the full year.
PAGE
<PAGE>
</TABLE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
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:
<CAPTION> RELATIONSHIP TO PERIOD TO PERIOD
TOTAL OPERATING REVENUES INCREASE OR DECREASE
---------------------------- ----------------------------------
Three months Nine months Three months Nine months
ended Sept 30 ended Sept 30 ended Sept 30 ended Sept 30
<S> 1994 1993 1994 1993 1994-93 1993-92 1994-93 1993-92
OPERATING REVENUES
Telephone Revenues <C> <C> <C> <C> <C> <C> <C> <C>
Local Service 14.1% 14.2% 14.1% 14.7% 8.9% 6.3% 8.0% 5.2%
Access 31.1% 35.4% 32.4% 34.7% -5.0% 11.3% 3.1% 13.9%
Toll -0.3% 0.1% -0.2% 0.0% -687.3% -89.3% -839.3% -91.3%
Miscellaneous:
Directory 4.9% 5.1% 5.1% 5.4% 3.4% 12.1% 3.5% 10.9%
Facility Leases 6.1% 4.8% 6.1% 5.6% 36.1% -29.1% 20.4% -21.6%
Billing & Collection 2.3% 2.4% 2.3% 2.4% 5.7% 20.7% 3.8% -30.0%
Other Miscellaneous 0.3% 0.6% 0.8% 0.6% -46.0% -36.4% 39.2% -31.2%
Total Telephone Revenues 58.5% 62.6% 60.6% 63.4% 1.4% 4.4% 5.8% 3.7%
Cable Television Revenues 3.7% 3.5% 3.6% 3.8% 13.5% -2.1% 2.5% 6.7%
ShenTel Service Revenues 8.4% 5.1% 7.9% 5.6% 79.0% 7.9% 55.4% 13.9%
Leasing Revenues 0.1% 0.8% 0.1% 0.9% -87.3% -18.6% -88.4% -26.4%
Mobile Revenues 21.9% 19.0% 20.5% 16.9% 25.1% 42.1% 33.9% 29.1%
Long Distance Revenues 5.8% 7.0% 5.7% 7.2% -10.6% 4.8% -11.5% 4.8%
Network Revenues 1.6% 2.0% 1.6% 2.2% -14.7% 7.3% -18.4% 21.8%
------ ------- ------ ------ -------- -------- -------- -------
Total Revenues and Sales 100.0% 100.0% 100.0% 100.0% 8.4% 9.7% 10.6% 8.0%
PAGE
<PAGE>
</TABLE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<CAPTION> RELATIONSHIP TO PERIOD TO PERIOD
TOTAL OPERATING REVENUES INCREASE OR DECREASE
---------------------------- ----------------------------------
Three months Nine months Three months Nine months
ended Sept 30 ended Sept 30 ended Sept 30 ended Sept 30
<S> 1994 1993 1994 1993 1994-93 1993-92 1994-93 1993-92
OPERATING EXPENSES <C> <C> <C> <C> <C> <C> <C> <C>
Cost of Products and Services Sold 3.9% 2.4% 3.6% 3.1% 79.0% -20.0% 25.2% 1.9%
Line Costs 2.7% 2.7% 2.6% 2.9% 6.0% -7.5% 1.4% -12.0%
Plant Specific 8.4% 10.2% 8.1% 9.7% -11.1% 24.7% -7.8% 7.6%
Plant Non-Specific:
Network & Other 7.9% 9.3% 8.2% 8.9% -7.1% 28.3% 2.8% 26.8%
Depreciation and Amortization 13.8% 13.5% 13.6% 13.8% 11.2% 17.9% 8.3% 12.0%
Customer Operations 11.9% 11.6% 11.6% 11.8% 11.0% 0.0% 8.3% 1.9%
Corporate Operations 10.2% 9.9% 9.5% 10.1% 12.3% 15.9% 4.2% 14.2%
Other Operating Income & Expense 0.8% 0.7% 0.8% 0.7% 16.9% 11.2% 11.1% 11.2%
Taxes other than income 1.6% 1.2% 1.6% 1.3% 42.2% -9.3% 36.4% 0.1%
------ ------- ------ ------ -------- -------- -------- -------
Total Operating Expenses 61.2% 61.5% 59.6% 62.3% 7.9% 12.0% 5.5% 9.2%
<S>
Operating income 38.7% 38.5% 40.4% 37.6% 9.1% 6.1% 18.9% 6.1%
<S>
Non-operating income less expenses 1.4% 0.8% 0.8% -0.5% 103.1% 29.7% -277.2% 156.0%
Interest expense 3.3% 3.2% 3.3% 3.3% 12.9% -12.2% 8.8% -8.6%
<S> ------ ------- ------ ------ -------- -------- -------- -------
Income before taxes 36.8% 36.0% 37.9% 33.7% 10.8% 6.9% 24.3% 3.3%
PAGE
<PAGE>
</TABLE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<CAPTION> RELATIONSHIP TO PERIOD TO PERIOD
TOTAL OPERATING REVENUES INCREASE OR DECREASE
---------------------------- ----------------------------------
Three months Nine months Three months Nine months
ended Sept 30 ended Sept 30 ended Sept 30 ended Sept 30
<S> 1994 1993 1994 1993 1994-93 1993-92 1994-93 1993-92
OPERATING EXPENSES <C> <C> <C> <C> <C> <C> <C> <C>
Provision for income taxes 10.9% 12.4% 12.4% 11.7% 4.3% 4.0% 17.2% 1.0%
------ ------- ------ ------ -------- -------- -------- -------
Net income before minority interest 25.9% 23.7% 25.5% 22.0% 18.7% 8.6% 28.1% 4.6%
Minority interest -2.2% -1.1% -1.8% -0.4% 108.0% 765.4% 378.5% -381.6%
Net Income 23.8% 22.5% 23.7% 21.6% 14.2% 4.0% 21.3% 1.9%
====== ======= ====== ====== ======== ======== ======== =======
PAGE
<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 telephone local exchange company is by far the largest
subsidiary, accounting for over 61% of revenue and 83% of net income.
This industry is in a period of transition from a protected monopoly
to a competitive environment with changing technology. As a result,
Shenandoah Telecommunications has made and plans to continue to make
significant investments in the new and emerging technologies.
Other significant services provided are cellular phone, 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 are measured in minutes of use. The
minutes of use during the first nine months of 1994 increased 6.79%
compared to the same period in 1993. Minutes of use for the third
quarter of 1994 increased 5.18% compared to third quarter 1993.
Changes in NECA settlement procedures, effective July 1, 1994,
accounted for the balance of the revenue decrease from third quarter
1993 to third quarter 1994.
The increase in the ShenTel Service revenues category for the third
quarter and the first nine months compared to 1993, is due to an
increase in retail equipment sales. The increase equaled $219,988
year-to-date, and $93,521 for the quarter.
The increase in revenues reported on the Mobile revenues line of the
financial statement was due to growth in our cellular operation. Our
cellular service revenues have increased $773,288 year-to-date over
1993, and $220,254 over the third quarter of 1994. Airtime minutes
of use increased 37.30% in the first nine months from the same period
in 1993. Airtime minutes of use in the third quarter of 1994
increased 27.80% from the third quarter of 1993. In 1994, customers
are being added at a rate below that of last year. During the first
nine months of 1994, net additions of customers were 42.06% less than
the additions for the same period in 1993. Net additions for the
third quarter of 1994 were 40.72% below those in the third quarter of
1993.PAGE
<PAGE>
SHENANDOAH TELECOMMUNICATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
The decrease in Leasing revenues is the result of the expiration of
major leases discussed in previous reports.
In late 1992, the United States Congress passed legislation for the
re-regulation of cable television systems. As a result of this
legislation, the FCC froze the rates cable systems can charge their
subscribers. This rate freeze expired May 15, 1994. The regulation
may be administered by local authorities for basic services and
equipment. None of the local governments within the Company's cable
television serving area have indicated that they will exercise their
authority to regulate rates. On September 1 the Company increased
its rates for basic and premium service and decreased or eliminated
its charges for other services such as rental of converters.
September's total revenue for cable television services increased
16.74% over the previous month's total. The Company estimated that
our cable rates are within the limits prescribed by the FCC for cable
systems of our size.
For the calendar year 1993, the Company's expenses increased at a
greater percentage than its revenues. For 1993, expenses increased
9.57% and revenues increased 5.59%. During the first nine months of
1994 this trend was reversed.
One of the factors in this reversal is payroll costs. The total
payroll costs decreased 2.96% in the first nine months of 1994
compared with the same period in 1993. Total payroll costs in 1993
increased 7.11% from the previous year.
Another factor was that Depreciation, still our largest expense
category, increased at a slower rate than the previous year. Our
additions to Property, Plant, and Equipment during the first nine
months of 1994 were lower than in the first nine months of 1993, and
the assets being placed in service recently have been longer life
assets than those placed in service in 1992 and 1993. Computer
software placed in service in the second quarter of 1994 has
increased this category's rate of change.
The increase in Cellular revenues, discussed above, compared with the
increase in the Cellular network costs is another factor. The
expenses were 35.42% of service revenues during the first nine months
of 1994 compared with 40.31% of revenues during the same period in
1993. These expenses account for the increases in the category
Network and Other.
PAGE
<PAGE>
SHENANDOAH TELECOMMUNICATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
The increase in Taxes Other Than Income is due to a rate increase in
the real estate tax for the local jurisdiction in which a majority of
our regulated Telephone plant is located.
The Non-operating Income Less Expenses category consists mainly of
the income or loss from investments made by the Company. The
increase reflected on the income statement is the result of a 11.98%
increase in the amount of short-term investments compared to a year
earlier and an increase in the rates of returns from those
investments. The losses recorded on investments accounted for by the
equity method that are also included in this category, decreased
45.25%.
The Company, along with other telecommunications providers, founded
an organization that was building a fiber optic network in the
Richmond, Virginia metropolitan area. The fiber network would
provide competitive access to businesses in the area. Management
decided that our potential in the Richmond market would be greater as
part of a company already successfully providing competitive access
services. As a result, it has been agreed that this business be
acquired by Metropolitan Fiber Systems. The agreement is contingent
upon MFS securing the appropriate regulatory approvals. Management
expects to recognize a gain on the sale in the first quarter of 1995
if the sale is closed. The amount of the gain cannot be determined
currently. The Company has recognized losses of $156,308 year-to-
date as our portion of the operations of this organization.
PAGE
<PAGE>
SHENANDOAH TELECOMMUNICATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to generate a strong cash flow from operations
that adequately meets the Company's need for cash. As the FCC
licenses new Personal Communication Services, the Company expects
increasing competitive pressures on its cellular operations, which
may impact cash flow. Due to the competition coming from new
sources, management is unable to predict the potential impact on the
Company's cash flow.
Other available sources of liquidity are two $2,000,000 unsecured
lines of credit with local banks. No advances have been made from
these lines of credit in 1994. The Company has a loan agreement with
the Rural Telephone Bank in the amount of $9,240,000. As of December
31, 1993, the Company had received advances in the amount of
$2,448,350. No new advances have been received during 1994, however,
the Company requested an additional draw of $909,300 (including the
required purchase of Rural Telephone Bank stock) at the end of July,
and management expects to receive the advance in the fourth quarter.
The Company has until February 1, 1996 to complete drawing down these
funds. Expenditure of these loan funds is limited to capital
projects for the regulated local exchange carrier that are approved
by the REA.
The Company has no material commitments for capital expenditures.
The Company's Board of Directors has approved a construction budget
of $6,538,683 for 1994. The largest portions of the budget are
scheduled for telephone central office equipment and fiber optic
cable facilities.
PAGE
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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
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the nine
months ended September 30, 1994.
PAGE
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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)
November 14, 1994 CHRISTOPHER E. FRENCH
Christopher E. French
President
November 14, 1994 LAURENCE F. PAXTON
Laurence F. Paxton
Vice President - Finance
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