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 June 30, 1997
Commission File Number 0-9881
SHENANDOAH TELECOMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1162806
(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: (540) 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 August 1, 1997
Common Stock, No Par Value 3,760,760 Shares
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 1 - 2
Consolidated Statements of Income
Three and Six Months Ended
June 30, 1997 and 1996 3 - 4
Consolidated Statements of Cash Flow
Six Months Ended
June 30, 1997 and 1996 5 - 6
Notes To Consolidated Financial
Statements 7
Item II. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters To a Vote
of Security Holders 15
Item 6. Exhibits and Reports On Form 8-K 16
Signatures 17
<PAGE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<CAPTION> ASSETS (UNAUDITED)
<S> June 30, 1997 December 31, 1996
CURRENT ASSETS <C> <C>
Cash & Cash Equivalents $4,979,103 $3,763,468
Certificates of Deposit 532,312 1,142,181
Investments Held to Maturity Securities 1,161,574 2,148,945
Accounts Receivable 4,826,579 4,208,742
Materials 3,005,595 2,888,709
Prepaid and Other Current Assets 352,782 399,074
TOTAL CURRENT ASSETS $14,857,945 $14,551,119
NON-CURRENT ASSETS
Investment in available for sale Securities $3,491,631 $2,738,431
Investment in held-to-maturity securities 1,622,433 1,622,433
Other investments 4,289,025 4,112,947
TOTAL NON-CURRENT ASSETS $9,403,089 $8,473,811
PROPERTY, PLANT AND EQUIPMENT
Plant in Service $69,949,016 $65,215,491
Plant Under Construction 5,106,282 5,626,710
Less Accumulated Depreciation 23,544,403 21,648,820
NET PROPERTY, PLANT AND EQUIPMENT $51,510,895 $49,193,381
OTHER ASSETS
Cost in Excess of net assets of Business
less Accumulated Amortization $ 5,344,840 $ 5,532,601
Deferred Charges and Other Assets 466,856 523,185
Radio Spectrum License net of
Accumulated Amortization 726,481 0
Deposit 0 1,100,000
$ 6,538,177 $ 7,155,786
TOTAL ASSETS $82,310,106 $79,374,097
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 BALANCE SHEETS
<CAPTION> LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED)
<S> June 30, 1997 December 31, 1996
CURRENT LIABILITIES <C> <C>
Current Maturities of Long-Term Debt $ 509,407 $ 529,405
Accounts Payable 1,384,655 2,097,115
Advance Billings and Payments 352,859 590,336
Customers' Deposits 98,176 89,591
Other Current Liabilities 1,276,961 1,117,795
Income Taxes Payable 513,522 0
Other Taxes Payable 243,547 128,144
TOTAL CURRENT LIABILITIES $ 4,379,127 $ 4,552,386
LONG TERM DEBT, LESS CURRENT MATURITIES 25,027,560 24,176,834
OTHER LIABILITIES AND DEFERRED CREDITS
Deferred Investment Tax Credits $254,106 $291,957
Deferred Income Taxes 4,751,243 4,908,170
Pension and Other 798,335 573,363
5,803,684 5,773,490
MINORITY INTERESTS $ 1,996,072 $ 1,743,465
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 39,946,602 37,716,654
Unrealized Gain on available-for-sale securities 416,384 670,591
45,103,663 43,127,922
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $82,310,106 $79,374,097
See accompanying notes to consolidated financial statements.
<PAGE>
</TABLE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
<CAPTION> CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended Six months ended
June 30 June 30
------------------------- ---------------------------
<S> 1997 1996 1997 1996
OPERATING REVENUES <C> <C> <C> <C>
Telephone Revenues
Local Service $882,918 $811,613 $1,741,940 $1,602,425
Access 1,748,830 1,696,340 3,488,512 3,470,128
Toll 7,339 4,412 13,474 8,767
Miscellaneous:
Directory 292,143 296,408 565,173 580,076
Facility Leases 509,664 451,974 986,370 885,172
Billing & Collection 108,386 108,967 213,422 223,009
Other Miscellaneous 7,941 23,068 56,327 52,228
Total Telephone Revenues 3,557,221 3,392,782 7,065,218 6,821,805
Cable Television Revenues 626,029 221,843 1,241,150 441,977
ShenTel Service Revenues 526,571 380,664 1,000,521 774,226
Leasing Revenues 3,775 5,163 7,397 9,772
Mobile Revenues 2,163,234 1,650,223 3,953,557 3,005,123
PCS Revenues 452,329 23,284 707,872 36,523
Long Distance Revenues 234,254 249,376 476,232 533,728
Network Revenues 153,733 123,842 307,467 247,685
Total Revenues and Sales 7,717,146 6,047,177 14,759,414 11,870,839
OPERATING EXPENSES
Cost of Products and Services Sold 470,167 249,042 867,375 522,983
Line Costs 97,786 90,860 193,147 225,441
Plant Specific 671,468 502,049 1,293,855 1,026,447
Plant Non-Specific:
Network & Other 1,069,671 801,581 1,999,666 1,463,517
Depreciation and Amortization 1,151,328 815,439 2,261,817 1,617,960
<PAGE>
</TABLE>
<TABLE> SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
<CAPTION> CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended Six months ended
June 30 June 30
------------------------- ---------------------------
<S> 1997 1996 1997 1996
OPERATING EXPENSES (Continued) <C> <C> <C> <C>
Customer Operations $1,035,295 $ 830,548 $2,030,962 $1,594,590
Corporate Operations 619,734 556,244 1,289,355 1,075,888
Other Operating Income & Expense 149,013 47,435 343,927 93,801
Taxes other than income 110,523 101,684 208,700 201,986
Total Operating Expenses 5,374,985 3,994,882 10,488,804 7,822,613
Operating income 2,342,161 2,052,295 4,270,610 4,048,226
Gain on Sale of Investment 0 0 0 228,250
Non-operating income less expenses 255,417 242,528 484,829 436,531
Interest expense 387,719 128,418 744,168 269,678
Income before taxes 2,209,859 2,166,405 4,011,271 4,443,329
Provision for income taxes 697,893 719,871 1,273,714 1,500,806
Net income before minority interest 1,511,966 1,446,534 2,737,557 2,942,523
Minority interest (296,552) (180,421) (507,608) (301,862)
Net Income $1,215,414 $1,266,113 $2,229,949 $2,640,661
EARNINGS PER SHARE
Weighted Average Common
Shares Outstanding 3,760,760 3,760,760 3,760,760 3,760,760
Net Earnings per Share $0.32 $0.34 $0.59 $0.70
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)
SIX MONTHS ENDED JUNE 30
1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income $2,229,948 $2,640,661
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and Amortization $2,261,815 $1,617,960
Deferred taxes 443,799 (53,107)
Gain on Sale of Equity investment 0 (228,250)
Investment (Gains)/Losses (203,582) (140,082)
Minority Share of Income 252,607 46,862
Other 99,990 143,002
Decrease (increase) in
Accounts receivable (617,837) (92,676)
Materials, Prepaid and Other (116,886) (486,680)
Increase (decrease) in
Accounts Payable (712,460) (334,380)
Income taxes payable 54,466 173,199
Deferrals and accruals 316,941 (228,407)
Net cash provided by
operating activities $4,008,801 $3,058,102
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I, FINANCIAL INFORMATION
ITEM I, FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
SIX MONTHS ENDED JUNE 30
1997 1996
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property, Plant
and Equipment ($4,096,812) ($6,941,932)
Purchase of Certificates of Deposit 0 (611,856)
Maturities of Certificates of Deposit 609,869 522,718
Cash flows from Securities (134,202) 1,849,237
Net cash used in
investing activities ($3,621,145) ($5,181,833)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from long term debt $1,100,000 $1,117,000
Principal payments on
long term debt (272,021) (235,844)
Net cash used by
investing activities 827,979 881,156
NET INCREASE/(DECREASE) IN CASH $1,215,635 ($1,242,575)
CASH AND CASH EQUIVALENTS:
Beginning 3,763,468 6,106,447
Ending $ 4,979,103 $ 4,863,872
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 June 30, 1997 and the results of operations and cash
flows for the six month periods ended June 30, 1997 and
1996.
While the Company believes that the disclosures presented
are adequate, to make the information not misleading, it is
suggested that these 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. In April the Board approved a $2 million line of credit with
First Union Bank, and in July the Board approved a $5
million line of credit with CoBank. The First Union line of
credit matures in May 1998, with a variable rate of Libor +
1.25%. Interest due is payable monthly with any unpaid principal
balance due at maturity. The CoBank line of credit matures
in August 1998. There are three interest rate options, a
weekly variable rate quoted by CoBank, a fixed rate quoted
by CoBank for such periods as may be agreeable to CoBank, or
Libor + 1.25%. Interest due is payable monthly with any unpaid
principal balance due at maturity. No draws have been made
on these lines of credit as of July 31, 1997.
<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 Six months Three months Six months
ended June 30 ended June 30 ended June 30 ended June 30
<S> 1997 1996 1997 1996 1997-96 1996-95 1997-96 1996-95
OPERATING REVENUES
Telephone Revenues <C> <C> <C> <C> <C> <C> <C> <C>
Local Service 11.44% 13.42% 11.80% 13.50% 8.79% 6.20% 8.71% 5.69%
Access 22.66% 28.05% 23.64% 29.23% 3.09% 5.53% 0.53% 7.65%
Toll 0.10% 0.07% 0.09% 0.07% 66.34% 33.13% 53.69% 29.15%
Miscellaneous:
Directory 3.79% 4.90% 3.83% 4.89% -1.44% 9.14% -2.57% 2.72%
Facility Leases 6.60% 7.47% 6.68% 7.46% 12.76% 6.28% 11.43% 4.91%
Billing & Collection 1.40% 1.80% 1.45% 1.88% -0.53% 48.71% -4.30% 24.35%
Other Miscellaneous 0.10% 0.38% 0.38% 0.44% -65.58% -26.25% 7.85% -11.16%
Total Telephone Revenues 46.10% 56.11% 47.87% 57.47% 4.85% 6.81% 3.57% 6.71%
Cable Television Revenues 8.11% 3.67% 8.41% 3.72% 182.19% 2.27% 180.82% 2.41%
ShenTel Service Revenues 6.82% 6.29% 6.78% 6.52% 38.33% 42.87% 29.23% 13.21%
Leasing Revenues 0.05% 0.09% 0.05% 0.08% -26.88% -19.80% -24.30% -22.02%
Mobile Revenues 28.03% 27.29% 26.79% 25.32% 31.09% 33.12% 31.56% 31.14%
PCS Revenues 5.86% 0.39% 4.80% 0.31% 1842.66% N/A 1838.15% N/A
Long Distance Revenues 3.04% 4.12% 3.23% 4.50% -6.06% -8.98% -10.77% -5.13%
Network Revenues 1.99% 2.05% 2.08% 2.09% 24.14% 0.00% 24.14% 0.00%
----- ----- ----- ----- ----- ----- ----- -----
Total Revenues and Sales 100.00% 100.00% 100.00% 100.00% 27.62% 14.02% 24.33% 11.75%
<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 Six months Three months Six months
ended June 30 ended June 30 ended June 30 ended June 30
1997 1996 1997 1996 1997-96 1996-95 1997-96 1996-95
<S>
OPERATING EXPENSES
Cost of Products and <C> <C> <C> <C> <C> <C> <C> <C>
Services Sold 6.09% 4.12% 5.88% 4.41% 88.79% 115.97% 65.85% 59.80%
Line Costs 1.27% 1.50% 1.31% 1.90% 7.62% -21.50% -14.32% -8.73%
Plant Specific 8.70% 8.30% 8.77% 8.65% 33.75% 3.53% 26.05% 11.68%
Plant Non-Specific:
Network & Other 13.86% 13.26% 13.55% 12.33% 33.45% 65.41% 36.63% 63.49%
Depreciation and
Amortization 14.92% 13.48% 15.32% 13.63% 41.19% 15.30% 39.79% 16.34%
Customer Operations 13.42% 13.73% 13.76% 13.43% 24.65% 45.27% 27.37% 41.41%
Corporate Operations 8.03% 9.20% 8.74% 9.06% 11.41% 19.24% 19.84% 15.12%
Other Operating Income
& Expenses 1.93% 0.78% 2.33% 0.79% 214.14% 1.87% 266.66% 1.94%
Taxes other than income 1.43% 1.68% 1.41% 1.70% 8.69% 24.25% 3.32% 20.82%
----- ----- ---- ----- ----- ----- ----- -----
Total Operating Expenses 69.65% 66.06% 71.07% 65.90% 34.55% 29.24% 34.08% 28.23%
Operating income 30.35% 33.94% 28.93% 34.10% 14.12% -7.94% 5.49% -10.48%
Gain on Sale of Investment 0.00% 0.00% 0.00% 1.92% 0.00% 0.00% -100.00% -73.83%
Non-operating income
less expenses 3.31% 4.01% 3.28% 3.68% 5.31% -3.70% 11.06% -0.48%
Interest expense 5.02% 2.12% 5.04% 2.27% 201.92% -25.19% 175.95% -23.10%
----- ----- ----- ----- ----- ----- ----- -----
Income before taxes 28.64% 35.83% 27.18% 37.43% 2.01% -6.19% -9.72% -18.95%
<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 Six months Three months Six months
ended June 30 ended June 30 ended June 30 ended June 30
1997 1996 1997 1996 1997-96 1996-95 1997-96 1996-95
<S> <C> <C> <C> <C> <C> <C> <C>
Provision for income taxes 9.04% 11.90% 8.63% 12.64% -3.05% -7.71% -15.13% -21.36%
----- ----- ----- ----- ----- ----- ----- -----
Net income before minority
interest 19.59% 23.92% 18.55% 24.79% 4.52% -5.42% -6.97% -17.66%
Minority interest -3.84% -2.98% -3.44% -2.54% 64.37% 24.30% 68.16% 18.39%
Net Income 15.75% 20.94% 15.11% 22.24% -4.00% -8.54% -15.55% -20.43%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
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 eight wholly-
owned subsidiaries.
This industry is in a period of transition from a protected
monopoly to a competitive environment as evidenced by the recent
passage of the Telecommunications Act of 1996. As a result,
Shenandoah Telecommunications has made and plans to continue to
make significant investments in the new and emerging
technologies.
The most significant revenue contributors are the regulated
telephone local exchange company accounting for 46.1% of revenue
and the cellular dominated operations of the Mobile subsidiary,
accounting for 28.0% of revenue during the most recent quarter.
Other significant services provided are paging, personal
communications services (PCS), cable television, Internet access,
long distance, and fiber facilities and towers leased to other
telecommunications carriers. 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 approximately two-thirds of these
access revenues typically tracks with changes in minutes of use.
The minutes of use during the first six months and the second
quarter of 1997 increased 3.3% and 6.9% respectively from the
total minutes of use in comparative periods in 1996. However, a
change in the mix of minutes of use between the interstate and
intrastate jurisdictions, in combination with regulatory mandates
that reduce tariffed charges, limited the revenue increase to .5%
year-to-date and 3.1% in the second quarter for the associated
revenues.
Second quarter cable television revenues increased 182.2% over
the second quarter of 1996. The year-to-date increase 180.8%.
The increase was due to the acquisition of the CATV assets owned
by FontierVision Operating Partnership located in our service
area on September 30, 1996.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
The increase in the ShenTel Service revenues category for the
second quarter of 1997 compared to 1996 was 38.3%. the year-to-
date increase is 29.2%. This was due to increases in Internet
Service revenues and sales of equipment. Second quarter 1997
revenues from our Internet Service operations were up $109,643 or
107.5% compared to the second quarter of 1996. The year-to-date
increase in Internet revenues is $207,283 or 111.3%. The
increase is due to the increasing customer base. Equipment sales
revenues for the second quarter increased $40,955 or 30.4%
compared to the second quarter of 1996. The year-to-date
increase in equipment sales is $27,211 or 9.1%.
Financing lease revenues are chiefly for leases and rentals of
customer premise equipment such as PBXs sold through Company
subsidiaries.
The Mobile revenues are mainly comprised of revenues from
cellular services. Second quarter 1997 local cellular revenues
increased $158,300 or 21.4% compared to the same period in 1996.
The year-to-date increase is $311,050 or 22.2%. The increase in
local cellular revenues was due to an increase in the customer
base. Second quarter 1997 outcollect roamer revenues increased
$310,413 or 36.5% compared to the same period 1996. The year-to-
date increase in outcollect revenues is $546,600 or 36.6%. Total
revenues from the Cellular operation accounted for 26.7% of total
Company revenues in the second quarter and 25.4% year-to-date,
compared to 25.8% in the second quarter of 1996 and 24.4% for the
first six months of 1996.
PCS revenues increased $429,045 or 1,842.7% in the second quarter
compared to the second quarter of 1996. The year-to-date
increase is $671,349 or 1,838.2%. The PCS network was turned up
in the fourth quarter of 1995. Work continues on the expansion
of this network.
Total payroll costs (including capitalized costs) in the second
quarter of 1997 increased to $189,491 or 17.8% compared to
the same period in 1996. The year-to-date increase is $70,971 or
2.8%. The first quarter of 1997 payroll costs were less than the
first quarter 1996 costs due to high maintenance costs incurred
in January of 1996 to repair blizzard and flood damage not being
repeated in 1997, as well as, reduced sales commissions in the
ShenTel subsidiary. The second quarter increase is primarily due
to additions of personnel in the PCS subsidiary as its sales
force grows with the opening of new retail stores.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Cost of Goods Sold increased 88.8% in the second quarter compared
to the same period in 1996. The year-to-date increase is 65.9%.
This is due primarily to an increase in the volume of PCS phones
sold as network coverage expands.
Plant Specific expenses consist mainly of maintenance to the
Company's plant in service. This expense category increased
33.8% in the second quarter compared to the second quarter of
1996. The year-to-date increase is 26.1%. These increases are
due primarily to increased maintenance to the CATV assets
acquired from FrontierVision, and rents paid for new retail
outlets.
The expense category Network and Other consists primarily of
network support, engineering, and leased facilities costs. These
costs increased 33.5% in the second quarter compared to the
second quarter of 1996. The year-to-date increase is 36.6%.
These increases are primarily due to increased incollect roaming
costs in the cellular operation, and increases in leased
facilities costs in the PCS and Internet operations due to
network expansion.
Depreciation and Amortization, our largest expense category, was
41.2% higher in the second quarter of 1997 compared to the same
period in 1996. The year-to-date increase is 39.8%. Due mainly
to the acquisition of the CATV assets of FrontierVision,
depreciation and amortization expense for the CATV operation has
increased $131,914 or 216.3% in the second quarter and $263,760
or 217.2% for the first six months over the same periods in 1996.
Continuing plant acquisition for the PCS network added $136,203
in the second quarter and $258,784 year-to-date compared to 1996.
The percentage increases are 196.1% and 200.7% respectively.
Customer operations increased 24.7% for the quarter and 27.4%
year-to-date compared to the same periods in 1996. These costs
are for the marketing and sales, billing, and customer service
functions. As with the network and other category, increases for
the Internet access, cellular, and PCS businesses are primarily
responsible for the increase.
Corporate Operations increased 11.4% in the second quarter and
19.8% year-to-date compared to the same periods in 1996. The
Corporate Operations category includes expenses for executive and
general management, accounting, external relations, human
resources, legal, purchasing, insurance, and other general and
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
administrative costs. The PCS subsidiary accounts for 79.2% or
$50,289 of the increase in this category for the second quarter
and 61.3% or $130,807 year-to-date.
The Other Operating Expense category consists of royalty expense
paid to programming providers for the Cable Television
subsidiary. The increase in these expenses compared with 1996 is
due to the acquisition of the Shenandoah County CATV assets of
FrontierVision on September 30, 1996.
Interest expense has increased 201.9% in the second quarter
compared to the second quarter of 1996 and increased 175.9% year-
to-date compared to the first six months of 1996. The Company
began drawing funds on the CoBank note (described below) in the
third quarter of 1996. Draws on this note at June 30, 1997
equaled $14,570,588. On June 13, 1997, the Company made an
additional draw of $573,000 on the existing loan agreement with
RTB (described below).
LIQUIDITY AND CAPITAL RESOURCES
On August 2, 1996, the Company signed a note with CoBank to
borrow up to $25 million. The term of the loan is for up to 15
years, with multiple interest options. The Company began drawing
these funds in the third quarter of 1996. A portion of these
funds were used for the acquisition of the Shenandoah County CATV
assets of FrontierVision in September of 1996. The new debt is
also being used to finance the building of the new network for
the PCS operation. The Company budgeted approximately
$12,000,000 for PCS-related plant in 1997, and anticipates
additional cash flow requirements for inventory and initial
operating losses.
In April the Board approved a $2 million line of credit with
First Union Bank and in July the Board approved a $5 million line
of credit with CoBank. No draws have been made on these lines of
credit as of July 31, 1997.
The Company budgeted capital expenditures of approximately
$11,500,000 for our other subsidiaries for 1997. These capital
needs will be met through internally generated cash flows and the
existing Rural Telephone Bank note. The loan agreement with the
RTB allows for additional borrowings of approximately $2,800,000.
Expenditures of these loan funds is limited to capital projects
for the regulated local exchange carrier. <PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
PART II
OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) At the Annual Meeting of Shareholders of the Company
held on April 22, 1997, 2,708,463 of the Company's 3,760,760
outstanding shares were present in person or by proxy and
entitled to vote, which constituted a quorum.
(b) At the Annual Meeting, the following nominees were
elected to serve until the 1997 Annual Meeting:
Douglas C. Arthur
Noel M. Borden
Dick D. Bowman
Ken L. Burch
Christopher E. French
Grover M. Holler, Jr.
Harold Morrison, Jr.
Zane Neff
James E. Zerkel II
(c) At the Annual Meeting the following matters were voted
upon and received the vote set forth below:
(1) Election of Directors. Provided that a quorum is
present, the nominees receiving the greatest number of votes cast
are elected as directors and, as a result in tabulating the vote,
votes withheld have no effect upon the election of directors.
Each nominee for director was elected, having received the
following vote:
Nominee FOR WITHHELD
Douglas C. Arthur 2,678,420 15,043
Noel M. Borden 2,687,703 5,760
Dick D. Bowman 2,687,295 6,168
Ken L. Burch 2,686,261 7,202
Christopher E. French 2,690,791 2,672
Grover M. Holler, Jr. 2,677,179 16,284
Harold Morrison, Jr. 2,684,144 9,319
Zane Neff 2,677,991 15,472
James E. Zerkel II 2,684,180 9,283
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibit No. 27 - Financial Data Schedule
B. No reports on Form 8-K were filed for the period
covered by this report.
<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)
August 13, 1997
Christopher E. French
President
August 13, 1997
Laurence F. Paxton
Vice President - Finance
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<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
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<CASH> 4,863,872 4,979,103
<SECURITIES> 4,511,314 6,275,638
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<INCOME-PRETAX> 2,209,859 4,011,271
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