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, 1999
Commission File Number 0-9881
SHENANDOAH TELECOMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1162806
-------- ----------
(State or other jurisdiction (IRS 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 10, 1999
----- ------------------------------
Common Stock, No Par Value 3,755,760 Shares
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998 1 - 2
Consolidated Statements of Income
Three Months and Six Months Ended
June 30, 1999 and 1998 3 - 4
Consolidated Statements of Cash Flow
Six Months Ended
June 30, 1999 and 1998 5
Condensed Consolidated Statement
of Stockholders' Equity 6
Notes To Consolidated Financial
Statements 7
Item II. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 13
PART II. OTHER INFORMATION
Item 4. Submission of Matters To a Vote
1of Security Holders 16
Item 6. Exhibits and Reports On Form 8-K 16
Signatures 17
<PAGE>
SHENANDOAH TELECOMMUNICAITONS COMPANY
AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1999 December 31, 1998
------------- -----------------
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents $ 6,655,892 $ 4,891,109
Held to maturity securities 499,581
Accounts receivable, including interest 4,448,030 4,272,016
Materials and supplies 3,337,876 3,488,137
Prepaid expenses and other current assets 494,704 777,853
------- -------
Total current assets 14,936,502 13,928,696
Securities and Investments
Available-for-sale securities 2,705,703 2,677,789
Other Investments 5,904,324 5,921,206
--------- ---------
8,610,027 8,598,995
Property, Plant and Equipment
Plant in service 91,759,329 88,427,844
Plant under construction 6,829,844 5,670,371
--------- ---------
98,589,173 94,098,215
Less accumulated depreciation 31,840,343 29,063,738
---------- ----------
$66,748,830 $65,034,477
Other assets
Cost in excess of net assets of
Business acquired, less accumulated
Amortization 4,593,792 4,876,215
Deferred charges and other assets 503,459 354,216
Radio spectrum license net of
Accumulated amortization 1,114,914 653,145
--------- -------
6,212,165 5,883,576
--------- ---------
$96,507,524 $93,445,744
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1999 December 31, 1998
------------- -----------------
LIABILITIES & STOCKHOLDERS EQUITY (Unaudited)
Current Liabilities
Current maturities of long-term debt $ 1,055,645 $ 863,972
Accounts payable 1,505,233 1,149,286
Advance billings & payments 494,212 712,581
Customers' deposits 123,574 113,586
Accrued compensation 489,941 890,443
Other current liabilities 1,127,429 1,072,422
Other taxes payable 381,326 214,433
------- -------
Total current liabilities 5,177,360 5,016,723
Long-Term Debt, less current maturities 27,932,765 28,398,374
Other Liabilities and Deferred Credits
Deferred investment tax credit 111,116 145,909
Deferred income taxes 6,750,530 6,741,121
Pension and other 1,556,295 1,331,465
--------- ---------
8,417,941 8,218,495
Minority Interests 2,175,144 2,265,426
Stockholders' Equity
Common stock 4,734,377 4,734,377
Retained earnings 47,428,071 44,173,730
Accumulated other comprehensive income,
Unrealized gain on available-for-sale
Securities, net 641,866 638,619
------- -------
52,804,314 49,546,726
---------- ----------
$96,507,524 $93,445,744
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
SHENANDOAH TELECOMMUNICAITONS COMPANY
AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
Operating Revenues ---- ---- ---- ----
Telephone:
Local service $ 1,008,967 $ 929,325 $ 1,969,071 $ 1,851,355
Access 1,948,981 2,022,831 3,839,932 3,947,151
Toll 6,145 17,708 11,947 30,341
Directory 299,334 307,660 613,480 601,147
Facility leases 621,502 494,319 1,123,884 996,934
Billing and collection 113,515 137,710 237,467 256,134
Miscellaneous 43,975 39,817 81,962 81,224
------ ------ ------ ------
Total telephone revenues 4,042,419 3,949,370 7,877,743 7,764,286
Cable television 876,520 784,233 1,662,261 1,500,901
ShenTel Service 796,859 573,601 1,729,603 1,099,968
Leasing 2,733 4,303 6,028 8,888
Mobile 3,158,602 2,426,328 5,580,036 4,483,371
PCS 937,822 910,948 1,640,300 1,577,684
Long distance 241,523 216,162 521,782 434,995
Network 169,310 153,733 323,043 307,467
------- ------- ------- -------
Total operating revenues 10,225,788 9,018,678 19,340,796 17,177,560
Operating Expense
Cost of products and
services sold 292,469 340,969 754,583 706,227
Line costs 112,224 108,988 219,400 209,367
Plant specific 814,223 609,624 1,570,062 1,309,146
Plant non-specific:
Network and other 1,643,780 1,443,094 3,138,355 2,683,724
Depreciation 1,617,700 1,312,564 3,175,636 2,594,095
Customer operations 1,285,139 1,213,359 2,498,287 2,412,045
Corporate operations 687,227 649,256 1,355,497 1,339,532
Other operating expenses 261,717 210,082 526,234 428,801
Taxes other than income 160,106 134,172 199,474 267,682
Total Operating Expense 6,874,585 6,022,108 13,437,528 11,950,619
--------- --------- ---------- ----------
Operating Income $ 3,351,203 $2,996,570 $ 5,903,268 $ 5,226,941
See notes to condensed consolidated financial statements.
<PAGE>
SHENANDOAH TELECOMMUNICAITONS COMPANY
AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
---- ---- ---- ----
Non-operating income less
expense $ 641,490 $ 413,381 $ 874,020 $ 622,768
Interest expense 441,565 418,422 910,126 731,266
------- ------- ------- -------
Income before income taxes 3,551,128 2,991,529 5,867,162 5,118,443
Provision for income taxes 1,170,464 997,104 1,955,103 1,680,046
--------- ------- --------- ---------
Net income before minority
interest 2,380,664 1,994,425 3,912,059 3,438,397
Minority interest (439,220) (326,397) (657,718) (582,006)
-------- -------- -------- --------
Net income $1,941,444 $1,668,028 $3,254,341 $ 2,856,391
========== ========== ========== ===========
Earnings per share
Net earnings per share,
basic and diluted $0.52 $0.44 $0.87 $0.76
===== ===== ===== =====
Weighted average common shares
outstanding basic and diluted 3,755,760 3,755,760 3,755,760 3,757,031
========= ========= ========= =========
See notes to condensed consolidated financial statements.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL SATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOW
(UAUDITED)
Six Months Ended
June 30, 1999 June 30, 1998
------------- -------------
Cash Flows from Operating Activities
Net income $ 3,254,341 $ 2,856,391
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation & amortization 3,175,636 2,596,329
Deferred taxes (59,460) 270,627
Investment (gains)/losses (742,776) (741,692)
Minority share of income, net
of distributions (90,282) 242,005
Other 66,967 57,809
Decrease/(increase) in
Accounts receivable (176,014) (1,064,505)
Materials 150,261 122,505
Increase/(decrease) in
Accounts payable 355,947 (89,389)
Income taxes payable 401,226 553,866
Deferrals & accruals (404,031) 424,638
-------- -------
Net cash provided by operating
activities 5,931,815 5,228,584
Cash Flows From Investing Activities
Purchase of property and equipment (4,666,121) (6,897,415)
Purchase of intangible assets (486,214) 0
Purchase of investment securities (138,697) (623,457)
Maturities of certificates of deposit 0 104,122
Maturity of investment securities 499,581 1,098,998
Cash flows from securities 898,355 335,231
------- -------
Net cash used in investing activities (3,893,096) (5,982,521)
Cash Flows From Financing Activities
Proceeds from long-term debt 0 2,166,556
Stock redemption 0 (100,000)
Principal payments on long-term debt (273,936) (129,157)
-------- --------
Net cash provided by financing activities (273,936) 1,937,399
-------- ---------
Net increase in cash and cash equivalents 1,764,783 1,183,462
Cash and cash equivalents:
Beginning 4,891,109 5,203,521
--------- ---------
Ending $ 6,655,892 $ 6,386,983
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<CAPTION> CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Accumulated
Other
Common Retained Comprehensive
Shares Stock Earnings Income Total
------ ----- -------- ------ -----
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 3,760,760 $ 4,740,677 $ 40,579,090 $1,190,717 $46,510,484
Comprehensive income: -----------
Net income 5,603,775 -- 5,603,775
Change in unrealized gain on
Securities available-for-sale,
Net of tax ($368,110) (552,098) (552,098)
----------
Total comprehensive income 5,051,677
----------
Dividends declared (1,915,435) (1,915,435)
Redemption of common stock (5,000) (6,300) (93,700) (100,000)
------ ------ ------- -------- --------
Balance, December 31, 1998 3,755,760 4,734,377 44,173,730 638,619 49,546,726
---------
Comprehensive income
Net income 3,254,341 3,254,341
Change in unrealized gain on
Securities available-for-sale,
Net of tax ($2,165) 3,247 3,247
---------
Total comprehensive income 3,257,588
--------- -------- -------- ------- ---------
Balance, June 30, 1999 3,755,760 $ 4,734,377 $47,428,071 $641,866 $52,804,314
=== ==== ========= =========== =========== ======== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying condensed 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, 1999 and
the results of operations and cash flows for the six-month periods ended
June 30, 1999 and 1998.
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 on Form
10-K.
2. The results of operations for the six-month period ended June 30, 1999
and 1998 are not necessarily indicative of the results to be expected
for the full year.
3. The earnings per common share were computed on the weighted average
number of shares outstanding. The Company has stock options outstanding,
which are not dilutive; therefore basic and diluted earnings per share
are the same.
4. The Company has identified nine reporting segments based on the
products and services each provide. Each segment is managed and
evaluated separately because of differing technologies and marketing
strategies. A summary of external revenues and net income for each
segment is as follows:
Six Months Six Months
June 30, 1999 June 30, 1998
External External
Subsidiary Revenues Net Income Revenues Net Income
---------- -------- ---------- -------- ----------
Holding $ - $ 252,759 $ - $ 189,554
Telephone 7,877,743 2,903,950 7,764,286 2,850,982
Cable TV 1,662,261 (134,971) 1,500,901 (82,505)
ShenTel 1,729,603 (37,562) 1,099,968 (220,853)
Leasing 6,028 10,725 8,888 12,891
Mobile 5,580,036 842,762 4,483,371 739,437
Long Distance 521,782 102,386 1,577,684 52,828
Network 323,043 148,406 434,995 151,090
PCS 1,640,300 (834,114) 307,467 (837,033)
--------- -------- ------- --------
Total $19,340,796 $ 3,254,341 $17,177,560 $ 2,856,391
=========== =========== =========== ===========
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements. These statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those anticipated in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to changes in
the interest rate environment; management's business strategy; national,
regional, and local market conditions; and legislative and regulatory
conditions. Readers should not place undue reliance on forward-looking
statements, which reflect management's view only as of the date hereof. The
Company undertakes no obligation to publicly revise these forward-looking
statements to reflect subsequent events or circumstances
Shenandoah Telecommunications Company is a diversified telecommunications
holding company providing both regulated and unregulated telecommunications
services through its eight wholly-owned subsidiaries.
This industry has, for some time, been in a period of transition from a
protected monopoly to a competitive environment. A milestone in this transition
was the passage of the Telecommunications Act of 1996. As a result of this
ongoing change, Shenandoah Telecommunications has made and plans to continue to
make significant investments in the new and emerging technologies.
The most significant revenues are from the telephone local exchange company
accounting for 39.5% of revenue and the cellular dominated operations of the
Mobile subsidiary, accounting for 30.9% 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 and also
participates in emerging technologies by direct investment in non-affiliated
companies.
RESULTS OF OPERATIONS
Access revenues are fees for connection to the local exchange network charged to
interexchange carriers. The volume for approximately two-thirds of these access
revenues typically correlates with changes in minutes of use. This has not held
true in 1999 due to rate reductions effective January 1, 1999. The minutes of
use during the second quarter and the first six months of 1999 increased .2% and
2.9% respectively from the total minutes of use in comparative periods in 1998.
The revenue decreased 2.7% in the second quarter and 3.7% year-to-date for the
associated revenues.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Second quarter cable television revenues increased 11.8% over the second quarter
of 1998, due principally to a rate increase effective April 1, 1999. The
year-to-date increase is 10.8%.
The increase in the ShenTel Service revenues category for the second quarter of
1999 compared to 1998 was 38.9%. The year-to-date increase is 57.2%. This was
due to increases in Internet Service revenues. The second quarter Internet
revenues increased $206,509 or 57.0%. Second quarter 1998 revenues from our
Internet Service operations increased $95,859 or 69.1% compared to the second
quarter of 1997. Equipment sales revenue for the second quarter of 1999
increased $29,212 over second quarter 1998.
The Mobile revenues are mainly comprised of revenues from cellular services.
Total cellular revenues represented 24.6% of the Company's revenues during the
second quarter. Second quarter 1999 local cellular revenues increased $124,609
or 11.4% compared to the same period in 1998. The year-to-date increase is
$233,017 or 11.1%. Price reductions in our service plans were more than offset
by customer growth. The year-to-date increase in outcollect roamer revenues is
$708,384 or 33.8%. This change is attributed to additional network facilities
our Company placed in service in late 1998, complemented growth in usage. Total
revenues from the Cellular operation accounted for 27.0% of total Company
revenues year-to-date, compared to 24.6% for the first six months of 1998.
Long Distance revenues are principally for toll calls placed to locations
outside the regulated telephone service area. These revenues increased by 11.7%
for the second quarter and 20.0% for the first six months as compared to the
corresponding periods in 1998. New discount calling plans have increased market
share, and in combination with reduced line costs from a new contract, resulted
in improved profitability for the Long Distance subsidiary.
Network revenues are derived from fiber facility leases in Maryland and West
Virginia. These revenues increased 10.1% in the second quarter and 5.1% in the
first six months as compared to the corresponding periods in 1998. Additional
leases have been offset in part by rate reductions in this increasingly
competitive business.
Cost of Goods Sold decreased 14.2% in the second quarter compared to the same
period in 1998. The year-to-date increase is 6.9%. This is due primarily to the
decrease in ShenTel equipment sales.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Plant Specific expenses consist mainly of maintenance to the Company's plant in
service. This expense category increased 33.6% in the second quarter compared to
the second quarter of 1998. The year-to-date increase is 19.9% over the same
period of 1998, principally in the Telephone, Cable Television, and PCS
companies due to network expansions.
The expense category Network and Other consists primarily of network support,
engineering, and leased facilities costs. This was our largest expense category
in the second quarter. These costs increased 13.9% in the second quarter
compared to the second quarter of 1998. The year-to-date increase is 16.9%.
These increases are primarily due to increased incollect roaming costs in the
cellular operation, and increased leased facilities costs in the PCS and
Internet operations due to network expansion.
Depreciation and Amortization, historically our largest expense category, was
23.3% higher in the second quarter of 1999 compared to the same period in 1998.
This is principally due to the pace of plant additions due mainly to the
expansion of our fiber network and Cable TV upgrade. Plant in Service increased
$3,331,485 or 3.8% at the end of second quarter 1999 compared to year-end 1998.
Depreciation expense has also been increased as a result of decreasing the
useful life estimates on a portion of the wireless equipment. The year-to-date
increase is 22.4%.
Customer operations increased 5.9% for the quarter and 3.6% year-to-date
compared to the same periods in 1998. These costs are for the marketing and
sales, billing, and customer service functions. Customer growth in the Internet
and cellular businesses is primarily responsible for the increase.
The Other Operating Expense category consists of royalty expense paid to
programming providers for the Cable Television subsidiary.
Interest expense has increased 5.5% in the second quarter compared to the second
quarter of 1998, and increased 24.5% year-to-date.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company has 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 has
borrowed $18,280,000 at July 31 against this note, with the last draw made in
the first quarter of 1998. The Company is currently in discussions with CoBank
about extending and enlarging this facility, particularly with regard to
potential capital requirements for our PCS operation. A loan agreement with the
RTB allows for additional borrowings of approximately $2,800,000. Expenditures
of these loan funds are limited to capital projects for the regulated local
exchange carrier.
The Company has a $2 million line of credit with First Union Bank and a $5
million line of credit with CoBank. No draws are outstanding on these lines of
credit as of July 31, 1999.
The Company budgeted potential capital expenditures of approximately
$17,800,000 for our subsidiaries in 1999. These capital needs will be met
through internally generated cash flows and the existing CoBank facility and
Rural Telephone Bank note.
PCS TRANSITION
Our PCS subsidiary has operated a GSM network since January 1996 under an
agreement with American Personal Communications (APC), in which switching,
billing, and other services are provided by APC. Sprint Spectrum, the current
controlling interest of APC, recently announced the APC customer base will be
transitioned to CDMA as Sprint PCS customers. We are currently in the process of
building a CDMA network for use by Sprint PCS. We have executed purchase orders
totaling $5 million for CDMA equipment to be installed by the end of this year.
The Company's GSM equipment has a book value of approximately $6.5 million.
Management is exploring various options for disposing of the equipment
profitably or at a minimal amount of loss.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 (Y2K) issue is the result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. Some computer systems
may be unable to interpret dates beyond the year 1999, which could cause a
system failure or other computer errors, leading to disruptions in operations.
Year 2000 readiness means the ability to (a) continue to operate without
substantial interruption attributable to the inability of systems to correctly
process, provide, store and receive date data in and around the Year 2000 and
(b) to mitigate the risks associated with such system limitations to an
acceptable level. The Company has developed a four-phase program for Y2K
readiness.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IMPACT OF THE YEAR 2000 ISSUE (Continued)
Phase I (Inventory and Assessment): In this Phase, an inventory was conducted of
all hardware and software that might be at risk, including third-party
businesses whose Y2K failures might significantly impact the Company, and an
assessment was made on corrective direction. A Y2K Task Force, reporting to
senior management, started work on this Phase in 1997. The Company determined
that software provided by third parties was its most vulnerable link to the Y2K
event.
The at-risk software included switching, end user billing, carrier access
billing, and financial accounting systems. The Company further identified that
it had one mainframe and a local area network consisting of a server and
approximately 75 individual microcomputers that may be vulnerable.
Phase II (Strategy): In this Phase, the Company determined whether each at-risk
system should be classified as "routine upgrade", "obsolete", or "non-critical."
A "routine upgrade" involves the upgrade of hardware or software as part of the
normal course of doing business. An "obsolete" designation involves total
replacement in that the application no longer meets our business needs. A
"non-critical" designation is for those applications that can be addressed
through simple work-around solutions, manual updates, or other inexpensive
measures. The majority of this classification work was completed mid-1998.
Phase III (Installation and Testing): In this Phase, the selected approach to
Y2K remediation is executed. The information that follows reflects the Company's
current plans and estimates as of August 1999 and is subject to change. Routine
upgrade classification: A performance enhancing upgrade of the mainframe
computer, which also made the hardware and operating system Y2K compliant, was
performed in the first quarter of 1998. The main telephone switches received new
feature upgrades, incorporating Y2K compliance, in the fourth quarter of 1998.
The latest releases of end user billing software, placed in service in the
second quarter of 1999, have been represented by the vendors to be Y2K
compliant. The local area network, comprised of the hardware and software on the
server and the microcomputers, was approximately 95% Y2K compliant at the end of
the second quarter of 1999. Obsolete classification: The new financial software
and new carrier access billing software were placed in service in the second
quarter of 1999. Non-critical classification: The measures identified to deal
with these low priority systems are expected to be tested by the end of the
third quarter of 1999, and implemented as necessary.
<PAGE>
SHENANDOAH TELECOMMUNICATIONS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IMPACT OF THE YEAR 2000 ISSUE (Continued)
Phase IV (Monitoring and Contingency planning): In this Phase, the implemented
changes are monitored and backup plans designed where necessary. With the
majority of the required hardware and software changes completed by mid-1999,
the Company is utilizing the changes in a production setting. This approach
minimized disruption to current operations and had provided a basis for ongoing
testing and monitoring. Contingency plans have not been deemed necessary as of
mid-1999. With this four-phase program, where the normal business practice of
weighing replacement against adopting routine upgrades was followed, the
Company's non-routine expense in making its core operations Y2K compliant has
thus far been minimal. The Company has also reviewed other third party
relationships that could affect its operation. Most relationships are with large
interexchange carriers and suppliers who state that they are or will be Y2K
compliant.
.
<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
20, 1999, 2,616,619 of the Company's 3,755,760 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:
CLASS I DIRECTORS - To serve until the 2002 Annual Meeting
Douglas C. Arthur
Harold Morrison, Jr.
Zane Neff
(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 2,542,826 73,793
Harold Morrison, Jr. 2,562,054 54,565
Zane Neff 2,576,772 39,847
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibit No. 27 - Financial Data Schedule
B. No reports on Form 8-K were file 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 11, 1999 /s/ CHRISTOPHER E FRENCH
--------------------------------
Christopher E. French
President
August 11, 1999 /s/ LAURENCE F PAXTON
------------------------------
Laurence F. Paxton
Vice President - Finance
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0
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