SHEN
$38.90
Shenandoah Telecom
($.15)
(.38%)
Earnings Details
4th Quarter December 2017
Thursday, March 15, 2018 7:00:00 AM
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Summary

Shenandoah Telecom (SHEN) Recent Earnings

Shenandoah Telecom (SHEN) reported 4th Quarter December 2017 earnings of $0.14 per share on revenue of $151.6 million. The consensus earnings estimate was $0.05 per share on revenue of $154.2 million. Revenue fell 2.5% compared to the same quarter a year ago.

Shenandoah Telecommunications Co and its subsidiaries provides both regulated and unregulated telecommunications services to end-user customers and other telecommunications providers in Virginia, West Virginia, central Pennsylvania and western Maryland.

Results
Reported Earnings
$0.14
Earnings Whisper
-
Consensus Estimate
$0.05
Reported Revenue
$151.6 Mil
Revenue Estimate
$154.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Shenandoah Telecommunications Company Reports Fourth Quarter and Full Year 2017 Results

EDINBURG, Va., March 15, 2018 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (NASDAQ:SHEN) announces financial and operating results for the three months and for the year ended December 31, 2017.

Consolidated Fourth Quarter 2017 Results

For the quarter ended December 31, 2017, the Company reported net income of $60.6 million, compared to a net loss of $0.2 million in the fourth quarter of 2016, representing an improvement of $60.8 million. This includes a one-time non-cash tax benefit of approximately $53.4 million in our net deferred tax liabilities as a result of the remeasurement of our deferred tax assets and liabilities to reflect the reduction in the U.S. corporate income tax rate from 35 percent to 21 percent.  The integration of nTelos' operations, the transition of its customers, and the upgrade of the network were completed ahead of schedule.

Total revenues were $151.6 million, compared with $155.6 million for the 2016 fourth quarter. Wireless service revenues decreased 3.0% as a result of lower average revenue per subscriber, partially offset by an increase in the number of subscribers. Cable revenues increased 7.7% due primarily to an increase in High Speed Data and voice Revenue Generating Units (RGUs), and new and existing customers selecting higher-speed data packages.  Wireline revenues increased 7.3% due to increases in fiber revenue.

Total operating expenses were $133.5 million in the fourth quarter of 2017 compared to $143.4 million in the prior year period, a decrease of $9.9 million or 6.9%.  Operating expenses in the fourth quarter of 2017 included $1.2 million of integration and acquisition costs associated with the nTelos acquisition and the exchange transaction with Sprint, compared to $6.4 million in the same quarter last year.

Operating income was $18.1 million representing an increase of $5.9 million compared with the fourth quarter of 2016.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) decreased 6.5% to $71.0 million in the fourth quarter of 2017 from $76.0 million in the fourth quarter of 2016 primarily due to a decline in Wireless revenues. Continuing OIBDA (Adjusted OIBDA less the benefit received from the waived Sprint management fee) decreased 7.4% to $62.0 million from $67.0 million.

Consolidated Full Year Results

For the year ended December 31, 2017, operating revenues were $612.0 million, an increase of $76.7 million or 14.3%, primarily due to the expansion of our wireless network and coverage area through our acquisition of nTelos and exchange transaction with Sprint that occurred during May 2016.  Operating income was $46.5 million, representing an increase of $24.0 million compared with 2016.

Adjusted OIBDA increased 14.1% to $280.9 million in 2017 from $246.1 million in 2016, primarily due to the expansion of our wireless network coverage area through our acquisition of nTelos and exchange transaction with Sprint that occurred during May 2016.  Continuing OIBDA increased 10.5% to $244.8 million from 2016.

Net cash provided by operating activities increased 38.0% to $222.9 million.

President and CEO Christopher E. French commented, “Our Company delivered profitable growth in 2017, highlighted by our completed transition of nTelos to the Sprint affiliate model and making great progress in many areas.  We accomplished the transition a full quarter ahead of schedule and below our cost expectations. The fourth quarter was our first full quarter of sales after completing the upgrade to 4G LTE in the former nTelos area.   At year end 2017 we have completed more than 60% of the planned expansion sites and believe we’re well positioned to continue marketing our enhanced network to drive new customer growth."

Wireless

Fourth quarter wireless revenue decreased $6.3 million or 5.3%, primarily related to a reduction in average revenue per customer as our postpaid subscriber base continued the shift from higher revenue subsidized phone price plans to lower revenue price plans associated with leased and installment sale phones.

Shentel served 736,597 postpaid wireless subscribers at December 31, 2017, up 1.9% over December 31, 2016.  Fourth quarter postpaid churn was 2.0% for the total Company and 1.8% in the Legacy area (service area excluding the acquired nTelos area). The Company had net adds of 8,643 postpaid subscribers in the quarter, of which 2,895 were tablets and devices, with the Legacy area adding 3,838 net adds.  As of December 31, 2017, tablets and data devices were 7.9% of the postpaid base.

Shentel served 225,822 prepaid wireless subscribers at December 31, 2017, representing an increase of 9.3% compared with 2016. Total fourth quarter prepaid churn was 5.1% with 4.8% in the Legacy area.  The Company had net additions of 1,213 prepaid subscribers in the fourth quarter of 2017, with the Legacy area net additions of 1,191.

As previously reported, the prepaid subscriber migration was completed in late December 2016, and the outsourced prepaid billing arrangement was terminated. Shentel completed the migration of the postpaid subscribers in the nTelos service area and the upgrade of the network September 30, 2017.

Fourth quarter 2017 Adjusted OIBDA in Wireless was $56.6 million, a decrease of 11.0% from the fourth quarter of 2016.  Continuing OIBDA in Wireless was $47.6 million, down 12.9% from the fourth quarter of 2016.

Mr. French continued, “With the nTelos transition completed, we are focused on attracting new subscribers by effectively marketing the benefits of our improved network, extended coverage area and enhanced service offerings.  A few weeks ago, we announced that effective February 1, 2018 we have further expanded our Sprint relationship to add 1.1 million POPs in Lancaster County, Pennsylvania, central Virginia, southwest Virginia, southern West Virginia and eastern Kentucky, with the opportunity to add an additional 200,000 POPs in eastern Kentucky.  The expansion allows us to build networks that will improve coverage between our existing service areas and Sprint’s metro networks, provide better and more reliable service for our customers and introduce significant opportunities for our continued growth.”

Cable

Fourth quarter Cable revenue increased $2.2 million or 7.7% to $30.5 million, primarily due to growth in High Speed Data and Voice RGUs.  Operating expenses decreased 1.0% or $0.3 million in the fourth quarter of 2017. Operating income was $5.4 million compared with $3.0 million in the prior year, primarily due to the continued transformation of Cable from a video focus to broadband.  In the fourth quarter of 2017, the Company added 476 High Speed Data users and 136 voice users, and lost 766 video users.

Adjusted OIBDA in Cable for fourth quarter 2017 was $11.3 million, up 21.3% from $9.3 million in the fourth quarter of 2016.

“Our proven network delivers the high bandwidth and availability that enables us to meet and exceed consumer expectations for high speed service and dependably accessing voice, video or data applications.  The reliability of our state-of-the-art network is a competitive advantage as customers choose a new provider or evaluate upgrading their existing service,” Mr. French stated.

Wireline

Revenue in Wireline increased 7.3% to $20.7 million in the fourth quarter of 2017, as compared to $19.3 million in the fourth quarter of 2016.  Fiber revenue for the fourth quarter of 2017 was $14.2 million, an increase of 9.7% from the same quarter last year, primarily as a result of new fiber contracts. Increases in broadband service revenue offset the loss of regulated voice service revenue.  Operating expenses increased 10.6% or $1.5 million to $15.3 million for fourth quarter 2017, primarily due to costs to support new fiber contracts.

Adjusted OIBDA in Wireline for fourth quarter 2017 was $8.8 million, as compared to $8.4 million in fourth quarter 2016.

Other Information

The Company declared and paid a cash dividend of $0.26 per share during the fourth quarter of 2017.  This was the 58th consecutive year of paying a dividend.

Capital expenditures were $37.1 million in the fourth quarter of 2017 compared to $70.4 million in the comparable 2016 period.

Capital Expenditures were $146.5 for the full year 2017, compared with $173.2 for 2016. Capital expenditures in 2017 primarily supported the expansion of our wireless network. Capital expenditures in 2016 primarily supported wireless network upgrades and capacity and coverage enhancements as a result of the nTelos acquisition, as well as retail store remodeling, cable segment extensions and investment in customer premises equipment, and expansion and upgrade of our fiber networks.

Cash and cash equivalents as of December 31, 2017 were $78.6 million, compared to $36.2 million at December 31, 2016. Total outstanding debt at December 31, 2017 totaled $822.0 million, net of unamortized loan costs, compared to $829.3 million as of December 31, 2016.  At December 31, 2017, debt as a percent of total assets was 58%. The amount available to the Company through its revolver facility was $75.0 million.  The Company expects to utilize $15 million of the revolver facility capacity during the first quarter of 2018.

Effective February 1, 2018, we signed the Expansion Agreement with Sprint to expand our wireless service area to include certain areas in Kentucky, Pennsylvania, Tennessee, Virginia and West Virginia, (the “Expansion Area”), effectively  adding a population (POPs) of approximately 1.1 million in Lancaster County, PA, central Virginia, southwest Virginia, southern West Virginia, and eastern Kentucky. The agreement includes certain network build out requirements in the Expansion Area, and the ability to utilize Sprint’s spectrum in the Expansion Area along with certain other amendments to the Affiliate Agreements. Pursuant to the Expansion Agreement, Sprint agreed to, among other things, transition the provision of network coverage in the Expansion Area from Sprint to us. The Expansion Agreement required us to make a one-time payment of $60.0 million to Sprint for the right to service the Expansion Area pursuant to the Affiliate Agreements plus an additional payment of up to $5.0 million for certain equipment at the Sprint cell sites in the Expansion Area for maximum potential consideration of $65.0 million. We also amended our affiliate agreements with Sprint to reflect the provisions of the Expansion Agreement. A post-closing reconciliation to validate Sprint subscribers in the Expansion Area identified 59,097 Sprint subscribers in the Expansion Area instead of the 66,822 originally identified, which resulted in an $8 million reduction in purchase price.

On February 16, 2018, the Company, entered into a Second Amendment to Credit Agreement (the “Second Amendment”) with CoBank, ACB, as administrative agent of its Credit Agreement, described more fully in Note 13, Long-Term Debt, and the various financial institutions party thereto (the “Lenders”), which modifies the Credit Agreement by (i) reducing the interest rate paid by the Company by approximately 50 basis points with respect to certain loans made by the Lenders to the Company under the Credit Agreement, and (ii) allowing the Company to make charitable contributions to Shentel Foundation, a Virginia nonstock corporation, of up to $1.5 million in any fiscal year.

Conference Call and Webcast

The Company will host a conference call and simultaneous webcast Thursday, March 15, 2018, at 9:00 A.M. Eastern Time.

Teleconference Information:

March 15, 2018 9:00 A.M. (ET) 
Dial in number: (888) 695-7639

Password:7073389
Audio webcast: http://investor.shentel.com/ 

An audio replay of the call will be available approximately two hours after the call is complete, until March 29, 2018 by calling (855) 859-2056.

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States.  The Company’s services include: wireless voice and data; cable video, internet and digital voice; fiber network and services; and regulated local and long distance telephone. Shentel is the exclusive personal communications service (“PCS”) Affiliate of Sprint in portions of Pennsylvania, Maryland, Virginia, West Virginia, and portions of Kentucky and Ohio.  For more information, please visit www.shentel.com.

This release contains forward-looking statements that are subject to various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen factors. A discussion of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations is available in the Company’s filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.

CONTACTS:
Shenandoah Telecommunications, Inc.
James F. Woodward
Senior Vice President, Finance and Chief Financial Officer
540-984-5990
James.Woodward@emp.shentel.com 

Or
John Nesbett/Jennifer Belodeau
Institutional Marketing Services (IMS)
203-972-9200
jnesbett@institutionalms.com

 
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 
 Three Months Ended
December 31,
 Year Ended
December 31,
 2017 2016 2017 2016
        
Operating revenues$151,617  $155,572  $611,991  $535,288 
        
Operating expenses:       
Cost of goods and services48,531  53,166  211,507  193,520 
Selling, general and administrative40,564  37,062  165,937  133,325 
Acquisition, integration and migration expenses1,157  6,432  11,030  42,232 
Depreciation and amortization43,255  46,723  177,007  143,685 
Total operating expenses133,507  143,383  565,481  512,762 
Operating income (loss)18,110  12,189  46,510  22,526 
        
Other income (expense):       
Interest expense(9,925) (8,733) (38,237) (25,102)
Gain (loss) on investments, net168  35  564  271 
Non-operating income (loss), net939  1,339  4,420  4,250 
Income (loss) before income taxes9,292  4,830  13,257  1,945 
        
Income tax expense (benefit)(51,303) 5,014  (53,133) 2,840 
Net income (loss)$60,595  $(184) $66,390  $(895)
        
Earnings (loss) per share:       
Basic$1.23  $  $1.35  $(0.02)
Diluted$1.21  $  $1.33  $(0.02)
Weighted average shares outstanding, basic49,298  48,922  49,150  48,807 
Weighted average shares outstanding, diluted50,043  48,922  50,026  48,807 


 
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2017 and 2016
(in thousands)
 
  2017 2016
     
Cash and cash equivalents $78,585  $36,193 
Other current assets 94,310  125,272 
Total current assets 172,895  161,465 
     
Investments 11,472  10,276 
Property, plant and equipment, net 686,327  698,122 
Intangible assets, net 380,979  454,532 
Goodwill 146,497  145,256 
Deferred charges and other assets, net 13,690  14,756 
Total assets $1,411,860  $1,484,407 
     
Total current liabilities 137,584  164,263 
Long-term debt, less current maturities 757,561  797,224 
Other liabilities 166,493  227,026 
Total shareholders' equity 350,222  295,894 
Total liabilities and shareholders' equity $1,411,860  $1,484,407 
 

Non-GAAP Financial Measures

In managing our business and assessing our financial performance, management supplements the information provided by financial statement measures prepared in accordance with GAAP with Adjusted OIBDA and Continuing OIBDA, which are considered “non-GAAP financial measures” under SEC rules.

Adjusted OIBDA is defined as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of:  certain non-recurring transactions; impairment of assets; gains and losses on asset sales; actuarial gains and losses on pension and other post-retirement benefit plans; and share-based compensation expense, and adjusted to include the benefit received from the waived management fee by Sprint over the next approximately five-year period. Continuing OIBDA is defined as Adjusted OIBDA, less the benefit received from the waived management fee by Sprint. Adjusted OIBDA and Continuing OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.

In a capital-intensive industry such as telecommunications, management believes that Adjusted OIBDA and Continuing OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance.  We use Adjusted OIBDA and Continuing OIBDA as supplemental performance measures because management believes these measures facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of our peers and other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made.  In the future, management expects that the Company may again report Adjusted OIBDA and Continuing OIBDA excluding these items and may incur expenses similar to these excluded items.  Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes.  By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes Adjusted OIBDA and Continuing OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors.  In addition, we believe that Adjusted OIBDA and Continuing OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA and Continuing OIBDA have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.  These limitations include the following:

  • they do not reflect capital expenditures;
  • many of the assets being depreciated and amortized will have to be replaced in the future and Adjusted OIBDA and Continuing OIBDA do not reflect cash requirements for such replacements;
  • they do not reflect costs associated with share-based awards exchanged for employee services;
  • they do not reflect interest expense necessary to service interest or principal payments on indebtedness;
  • they do not reflect gains, losses or dividends on investments;
  • they do not reflect expenses incurred for the payment of income taxes; and
  • other companies, including companies in our industry, may calculate Adjusted OIBDA and Continuing OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers Adjusted OIBDA and Continuing OIBDA as financial performance measures that supplement but do not replace the information reflected in our GAAP results.

The following table reconciles Adjusted OIBDA and Continuing OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure, for the three and twelve months ended December 31, 2017 and 2016:

 
Three Months Ended
December 31, 2017
(in thousands)
 Wireless Cable Wireline Other Consolidated
Operating income $11,907  $5,386  $5,393  $(4,576) $18,110 
Plus depreciation and amortization 33,922  5,898  3,293  $142  43,255 
Plus (gain) loss on asset sales 6  (128) 53  90  21 
Plus share based compensation expense 233  146  63  88  530 
Plus the benefit received from the waived management fee (1) 8,988        8,988 
Plus amortization of intangibles netted in rent expense (645)       (645)
Plus temporary back office costs to support the billing operations through migration (2) 964        964 
Less actuarial gains on pension plans       (1,391) (1,391)
Plus integration and acquisition related expenses 1,187      (30) 1,157 
Adjusted OIBDA $56,562  11,302  8,802  (5,677) $70,989 
Less waived management fee (8,988)       (8,988)
Continuing OIBDA $47,574  $11,302  $8,802  $(5,677) $62,001 


 
Three Months Ended
December 31, 2016
(in thousands)
 Wireless Cable Wireline Other Consolidated
Operating income $5,337  $2,954  $5,454  $(1,556) $12,189 
Plus depreciation and amortization 37,594  6,074  2,928  $127  46,723 
Plus (gain) loss on asset sales (47) 209  (67)   95 
Plus share based compensation expense 251  83  63  54  451 
Plus the benefit received from the waived management fee (1) 8,983        8,983 
Plus amortization of intangibles netted in rent expense 728        728 
Plus temporary back office costs to support the billing operations through migration (2) 4,700      115  4,815 
Less actuarial gains on pension plans       (4,460) (4,460)
Plus integration and acquisition related expenses 6,038      394  6,432 
Adjusted OIBDA $63,584  9,320  8,378  (5,326) $75,956 
Less waived management fee (8,983)       (8,983)
Continuing OIBDA $54,601  $9,320  $8,378  $(5,326) $66,973 


           
Year Ended December 31, 2017
(in thousands)
 Wireless Cable Wireline Other Consolidated
Operating income $34,139  $15,846  $20,965  $(24,440) $46,510 
Plus depreciation and amortization 139,610  23,968  12,829  600  177,007 
Plus (gain) loss on asset sales 214  (243) 79  68  118 
Plus share based compensation expense 1,579  916  384  701  3,580 
Plus the benefit received from the waived management fee (1) 36,056        36,056 
Plus amortization of intangibles netted in rent expense 1,528        1,528 
Plus temporary back office costs to support the billing operations through migration (2) 6,459      1  6,460 
Less actuarial gains on pension plans       (1,387) (1,387)
Plus integration and acquisition related expenses 10,793      237  11,030 
Adjusted OIBDA 230,378  40,487  34,257  (24,220) 280,902 
Less waived management fee (36,056)       (36,056)
Continuing OIBDA $194,322  $40,487  $34,257  $(24,220) $244,846 


           
Year Ended December 31, 2016
(in thousands)
 Wireless Cable Wireline Other Consolidated
Operating income $26,241  $6,997  $20,524  $(31,236) $22,526 
Plus depreciation and amortization 107,621  23,908  11,717  439  143,685 
Plus (gain) loss on asset sales (131) 156  (27) (47) (49)
Plus share based compensation expense 1,309  756  347  609  3,021 
Plus the benefit received from the waived management fee (1) 24,596        24,596 
Plus amortization of intangibles netted in rent expense 728        728 
Plus temporary back office costs to support the billing operations through migration (2) 13,843        13,843 
Less actuarial gains on pension plans       (4,460) (4,460)
Plus integration and acquisition related expenses 25,927      16,305  42,232 
Adjusted OIBDA 200,134  31,817  32,561  (18,390) 246,122 
Less waived management fee (24,596)       (24,596)
Continuing OIBDA $175,538  $31,817  $32,561  $(18,390) $221,526 

_______________________________________________________

1)   Under our amended affiliate agreement, Sprint agreed to waive the Management Fees charged on both postpaid and prepaid revenues, up to $4.2 million per month, until the total amount waived reaches approximately $255.6 million, which is expected to occur in 2022.
2)   Once former nTelos customers migrate to the Sprint back office, the Company incurs certain postpaid fees retained by Sprint and prepaid costs passed to us by Sprint that would offset a portion of these savings.

Operating Results

           
Three Months Ended December 31, 2017          
(in thousands)Wireless Cable Wireline Other Eliminations Consolidated Totals
External revenues           
Service revenues$106,468  $27,109  $5,087  $  $  $138,664 
Other3,813  2,295  6,845      12,953 
Total external revenues110,281  29,404  11,932      151,617 
Internal revenues1,241  1,093  8,740    (11,074)  
Total operating revenues111,522  30,497  20,672    (11,074) 151,617 
            
Operating expenses           
Costs of goods and services34,450  14,297  10,127  39  (10,382) 48,531 
Selling, general and administrative30,056  4,916  1,859  4,425  (692) 40,564 
Acquisition, integration and migration expenses1,187      (30)   1,157 
Depreciation and amortization33,922  5,898  3,293  142    43,255 
Total operating expenses99,615  25,111  15,279  4,576  (11,074) 133,507 
Operating income (loss)$11,907  $5,386  $5,393  $(4,576) $  $18,110 


           
Three Months Ended December 31, 2016          
(in thousands)Wireless Cable Wireline Other Eliminations Consolidated Totals
External revenues           
Service revenues$109,716  $25,615  $4,919  $  $  $140,250 
Other6,903  2,128  6,291      15,322 
Total external revenues116,619  27,743  11,210      155,572 
Internal revenues1,203  578  8,062    (9,843)  
Total operating revenues117,822  28,321  19,272    (9,843) 155,572 
            
Operating expenses           
Costs of goods and services38,221  14,717  9,367    (9,139) 53,166 
Selling, general and administrative30,632  4,576  1,523  1,035  704  37,062 
Acquisition, integration and migration expenses6,038      394    6,432 
Depreciation and amortization37,594  6,074  2,928  127    46,723 
Total operating expenses112,485  25,367  13,818  1,556  (9,843) 143,383 
Operating income (loss)$5,337  $2,954  $5,454  $(1,556) $  $12,189 


           
Year Ended December 31, 2017          
(in thousands)Wireless Cable Wireline Other Eliminations Consolidated Totals
External revenues           
Service revenues$431,184  $107,338  $20,388  $  $  $558,910 
Other18,945  8,579  25,557      53,081 
Total external revenues450,129  115,917  45,945      611,991 
Internal revenues4,949  3,245  33,308    (41,502)  
Total operating revenues455,078  119,162  79,253    (41,502) 611,991 
            
Operating expenses           
Costs of goods and services152,279  59,349  38,536  39  (38,696) 211,507 
Selling, general and administrative118,257  19,999  6,923  23,564  (2,806) 165,937 
Acquisition, integration and migration expenses10,793      237    11,030 
Depreciation and amortization139,610  23,968  12,829  600    177,007 
Total operating expenses420,939  103,316  58,288  24,440  (41,502) 565,481 
Operating income (loss)$34,139  $15,846  $20,965  $(24,440) $  $46,510 


           
Year Ended December 31, 2016          
(in thousands)Wireless Cable Wireline Other Eliminations Consolidated Totals
External revenues           
Service revenues$359,769  $99,070  $19,646  $  $  $478,485 
Other24,364  7,927  24,512      56,803 
Total external revenues384,133  106,997  44,158      535,288 
Internal revenues4,620  1,737  30,816    (37,173)  
Total operating revenues388,753  108,734  74,974    (37,173) 535,288 
            
Operating expenses           
Costs of goods and services133,113  58,581  36,259    (34,433) 193,520 
Selling, general and administrative95,851  19,248  6,474  14,492  (2,740) 133,325 
Acquisition, integration and migration expenses25,927      16,305    42,232 
Depreciation and amortization107,621  23,908  11,717  439    143,685 
Total operating expenses362,512  101,737  54,450  31,236  (37,173) 512,762 
Operating income (loss)$26,241  $6,997  $20,524  $(31,236) $  $22,526 
                        


Wireless Service Revenues

     
  Three Months Ended
December 31,
 Change
(in thousands) 2017 2016 $ %
Wireless Service Revenues        
Postpaid net billings (1) $91,513  $96,252  $(4,739) (4.9)
Management fee (7,392) (7,629) 237  (3.1)
Net service fee (7,899) (6,967) (932) 13.4 
  76,222  81,656  (5,434) (6.7)
         
Prepaid net billings (2) 26,128  23,928  2,200  9.2 
Sprint management fee (1,568) (1,436) (132) 9.2 
  24,560  22,492  2,068  9.2 
         
Travel and other revenues (2) 5,686  5,568  118  2.1 
Total Service Revenues $106,468  $109,716  $(3,248) (3.0)


     
  Twelve Months Ended
December 31,
 Change
(in thousands) 2017 2016 $ %
Wireless Service Revenues        
Postpaid net billings (1) $372,237  $314,579  $57,658  18.3 
Management fee (29,857) (25,543) (4,314) 16.9 
Net service fee (30,751) (22,953) (7,798) 34.0 
  311,629  266,083  45,546  17.1 
         
Prepaid net billings (2) 103,161  80,056  23,105  28.9 
Sprint management fee (6,189) (4,960) (1,229) 24.8 
  96,972  75,096  21,876  29.1 
         
Travel and other revenues (2) 22,583  18,590  3,993  21.5 
Total Service Revenues $431,184  $359,769  $71,415  19.9 

_______________________________________________________

1)     Postpaid net billings are defined under the terms of the affiliate contract with Sprint to be the gross billings to customers within our wireless network coverage area less billing credits and adjustments and allocated write-offs of uncollectible accounts.
2)     The Company is no longer including Lifeline subscribers to be consistent with Sprint. The above table reflects the reclassification of the related Assurance Wireless prepaid revenue from Prepaid gross billings to travel and other revenues for both years shown.

Supplemental Information

Subscriber Statistics

The following tables indicate selected operating statistics of the Wireless, including Sprint subscribers as of the dates shown:

 December 31, 2017 (4) December 31, 2016 (3) December 31, 2015
Retail PCS Subscribers – Postpaid736,597  722,562  312,512 
Retail PCS Subscribers – Prepaid (1)225,822  206,672  129,855 
PCS Market POPS (000) (2)5,942  5,536  2,433 
PCS Covered POPS (000) (2)5,272  4,807  2,224 
CDMA Base Stations (sites)1,623  1,467  552 
Towers Owned192  196  158 
Non-affiliate Cell Site Leases192  202  202 

_______________________________________________________

  1. Prepaid subscribers reported in the December 2016 and subsequent periods include the impact of a change how long an inactive customer is included in the customer counts. This policy change effectively reduced prepaid customers by approximately 24 thousand. As of September 2017, the Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts have been adjusted accordingly.
  2. "POPS" refers to the estimated population of a given geographic area.  Market POPS are those within a market area which we are authorized to serve under our Sprint PCS affiliate agreements, and Covered POPS are those covered by our network. As of December 31, 2017, the data source for POPS is U.S. census data. Historical periods previously referred to other third party population data and have been recast to refer to U.S. census data.
  3. December 31, 2016 includes nTelos.
  4. December 31, 2017 includes Parkersburg.
     
  Three Months Ended
December 31,
 Year Ended
December 31,
  2017 (4) 2016 (3) 2017 (4) 2016 (3) (5)
Gross PCS Subscriber Additions – Postpaid 51,442  47,988  173,871  132,593 
Net PCS Subscriber Additions – Postpaid 8,643  3,777  14,035  5,085 
PCS Average Monthly Retail Churn % - Postpaid (1) 1.95% 2.10% 2.04% 1.84%
Gross PCS Subscriber Additions – Prepaid (2) 35,208  36,651  151,926  102,352 
Net PCS Subscriber Additions (Losses) – Prepaid (2) 1,213  (39,652) 19,150  (58,643)
PCS Average Monthly Retail Churn % - Prepaid (2) 5.05% 6.27% 5.07% 6.72%

_______________________________________________________

  1. PCS Average Monthly Retail Churn - Postpaid is the average of the monthly subscriber turnover, calculated for the period.
  2. Prepaid subscribers reported in the December 2016 and subsequent periods include the impact of a change in policy as to how long an inactive customer is included in the customer counts. This policy change, implemented in December 2016, effectively reduced prepaid customers by approximately 24 thousand. As of September 2017, the Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts have been adjusted accordingly.
  3. December 31, 2016 includes nTelos.
  4. December 31, 2017 includes Parkersburg.
  5. 2016 Net addition figures exclude the impact of the nTelos acquisition.

The operating statistics shown above include the following:

 April 6, 2017 May 6, 2016
 Parkersburg Expansion Area (3) nTelos Area (4)
PCS Subscribers - Postpaid (1)19,067  404,965 
PCS Subscribers - Prepaid (1)5,962  154,944 
Acquired PCS Market POPS (000)511  3,099 
Acquired PCS Covered POPS (000)244  2,298 
Acquired CDMA Base Stations (sites) (2)  868 
Towers  20 
Non-affiliate Cell Site Leases  10 

_______________________________________________________

  1. Represents Sprint's subscribers, including prepaid Lifeline, as of the acquisition date in the acquired territory.
  2. As of December 31, 2017 we have shut down 107 overlap sites associated with the nTelos area.
  3. Acquired on April 6, 2017
  4. Acquired on May 6, 2016

The following table indicates selected operating statistics for Cable as of the dates shown:

  December 31, 2017 December 31, 2016 December 31, 2015
Homes Passed (1) 184,910  184,710  172,538 
Customer Relationships (2)      
Video users 44,269  48,512  48,184 
Non-video customers 33,559  28,854  24,550 
Total customer relationships 77,828  77,366  72,734 
Video      
Users (3) 46,613  50,618  50,215 
Penetration (4) 25.2% 27.4% 29.1%
Digital video penetration (5) 76.2% 77.4% 77.9%
High-speed Internet         
Available Homes (6) 184,910  183,826  172,538 
Users (3) 63,918  60,495  55,131 
Penetration (4) 34.6% 32.9% 32.0%
Voice         
Available Homes (6) 182,379  181,089  169,801 
Users (3) 22,555  21,352  20,166 
Penetration (4) 12.4% 11.8% 11.9%
Total Revenue Generating Units (7) 133,086  132,465  125,512 
Fiber Route Miles 3,356  3,137  2,844 
Total Fiber Miles (8) 122,011  92,615  76,949 
Average Revenue Generating Units 132,759  131,218  124,054 

_______________________________________________________

1)     Homes and businesses are considered passed (“homes passed”) if we can connect them to our distribution system without further extending the transmission lines.  Homes passed is an estimate based upon the best available information.

 2)    Customer relationships represent the number of billed customers who receive at least one of our services.

 3)    Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer.  Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.  During the first quarter of 2016, we modified the way we count subscribers when a commercial customer upgrades its internet service via a fiber contract. We retroactively applied the new count methodology to prior periods, and applied similar logic to certain bulk customers; the net result was a reduction in internet subscriber counts of 559 subscribers at December 31, 2015.

 4)    Penetration is calculated by dividing the number of users by the number of homes passed or available homes, as appropriate.

 5)    Digital video penetration is calculated by dividing the number of digital video users by total video users.  Digital video users are video customers who receive any level of video service via digital transmission.  A dwelling with one or more digital set-top boxes or digital adapters counts as one digital video user.

 6)    Homes and businesses are considered available (“available homes”) if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area.

 7)    Revenue generating units are the sum of video, voice and high-speed internet users.

 8)    Total Fiber Miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

The following table shows selected operating statistics for Wireline as of the dates shown:

  December 31, 2017 December 31, 2016 December 31, 2015
Telephone Access Lines (1) 17,933  18,443  20,252 
Long Distance Subscribers 9,078  9,149  9,476 
Video Customers (2) 5,019  5,264  5,356 
DSL and Cable Modem Subscribers (3) 14,665  14,314  13,890 
Fiber Route Miles 2,073  1,971  1,736 
Total Fiber Miles (4) 154,165  142,230  123,891 

_______________________________________________________

 1)    Effective October 1, 2015, we launched cable modem services on our cable plant, and ceased the requirement that a customer have a telephone access line to purchase internet service.

 2)    Wireline's video service passes approximately 16,500 homes.

 3)    December 2017, 2016 and December 2015 totals include 2,105, 1,072 and 420 customers, respectively, served via the coaxial cable network.  During 2016, we modified the way we count subscribers when a commercial customer upgrades its internet service via a fiber contract. We retroactively applied the new count methodology to prior periods and the net result was an increase in internet subscriber counts of 804 subscribers to December 31, 2015.

 4)    Total Fiber Miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

 

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Source: Shenandoah Telecommunications Co