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Shentel reports 30% net income hike in 4Q

Posted 27 February 2015 12:00 AM by julia

Shenandoah Telecommunications Company (“Shentel”) (NASDAQ: SHEN) announces financial and operating results for the three months and year ended December 31, 2014.

Consolidated Fourth Quarter Results

For the quarter ended December 31, 2014, net income was $8.6 million compared to $6.7 million in the fourth quarter of 2013, due to continued growth primarily in the Wireless segment. Operating income was $16.3 million, up 31.3% from the same quarter last year.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 17.8% to $34.2 million in the fourth quarter of 2014 from $29.0 million in the fourth quarter of 2013. Total revenues were $82.8 million, an increase of 6.2% compared to $78.0 million for the 2013 fourth quarter. Revenues increased as a result of wireless subscriber growth and improved prepaid product mix. Additionally, cable segment revenues increased related to an increase in RGU (revenue generating unit) counts and customers selecting higher-priced digital TV and higher-speed data packages. Total operating expenses were $66.5 million in the fourth quarter of 2014 compared to $65.5 million in the prior year period.

President and CEO Christopher E. French commented, “This was a strong quarter for the Company, culminating a year of solid organic revenue growth with enhanced profitability and cash flow. After a period of increased capital expenditures to upgrade our cable network and our wireless network to state-of-the-art 4G capabilities, existing and new customers embraced the higher quality service we offered in 2014. The enhanced profitability enabled us to further improve our strong balance sheet, providing a solid foundation for long-term growth.”

Consolidated Full Year Results

For the year ended December 31, 2014, net income was $33.9 million or $1.39 per diluted share, compared to $29.6 million or $1.23 per diluted share in 2013, due primarily to continued growth in the Wireless segment. Operating income was $61.9 million, up 11.8% from last year’s $55.4 million. Adjusted OIBDA increased 11.4% to $132.1 million in 2014 from $118.6 million in 2013.

Total revenues were $326.9 million, an increase of 5.8% compared to $308.9 million for 2013. Revenue increases resulted from subscriber growth, increased fees and prices and improved product mix in both the Wireless and Cable segments. Total operating expenses were $265.0 million in 2014 compared to $253.5 million in the prior year.

Wireless Segment

Service revenues in the wireless segment increased 3.1% to $48.0 million as compared to the fourth quarter of 2013. Postpaid service revenues increased $1.4 million or 2.6% due to 5.4% growth in average customers partially offset by lower service revenues on shared plan accounts and customers selecting leasing and installment billing programs for handsets. Postpaid costs, discounts and write-offs increased $0.6 million. Overall, net postpaid revenues increased $0.8 million. During the fourth quarter, net prepaid service revenues grew $0.6 million, or 6.0%, due to improved product mix and a 7.6% growth in average pre-paid customers as compared to the same period of 2013.

During the fourth quarter of 2014, net additions to postpaid subscribers were 4,891, a decrease compared to the fourth quarter of 2013’s record high of 6,054 postpaid subscriber additions. Net additions to prepaid subscribers were 5,036 during fourth quarter 2014, compared to 4,378 in the fourth quarter of 2013, an increase of 15.0%.

Fourth quarter operating expenses in the Wireless segment increased $1.5 million overall.

Fourth quarter adjusted OIBDA in the wireless segment was $26.4 million, an increase of $3.3 million or 14.4% from the fourth quarter of 2013.

“We experienced solid growth in our wireless segment with increased customers for our post and pre-paid offering as a result of our upgraded network, leveraging Sprint’s national marketing and providing high quality local customer service. As we announced previously, discounting is currently prevalent in the industry, resulting in declining monthly service fees per customer. These reduced fees, to date, have been offset by reduced handset subsidies as a result of customers choosing to finance handsets under equipment installment billing plans. Under our agreement with Sprint, both the revenue and cost of goods sold related to equipment installment sales and leases are recorded on the books of Sprint. Further pricing reductions, as well as changes in the ratio of new customers without handset subsidies relative to existing customers at lower monthly billing rates, could result in a modest reduction in our wireless net operating margin.”

Cable Segment

Service revenue in the cable segment increased $1.8 million due to 6.9% growth in average RGUs (the sum of voice, data, and video users), video price increases driven by rising programming costs, and customers selecting higher speed data access packages and higher priced digital TV services. Operating expenses increased by $2.9 million in fourth quarter 2014 over fourth quarter 2013.

Revenue generating units totaled 121,716 at the end of the fourth quarter of 2014, an increase of 6.9%.

Adjusted OIBDA in the cable segment for fourth quarter 2014 was $4.3 million, up 21.8% from $3.5 million in the fourth quarter of 2013.

Mr. French stated, “Performance in our cable segment continued to improve as demand for our high speed internet and voice services outpaced the anticipated decrease in video subscribers. Our updated cable network delivers a level of high speed and reliability typically only seen in larger metropolitan markets. Our Field Operations and our Call Centers are staffed by trained experts from the community, and our quality service has become a cornerstone to this segment’s improved performance.”

Wireline Segment

Operating income for the wireline segment was $3.2 million as compared to $2.9 million in fourth quarter 2013. Access lines at December 31, 2014, were 21,612, compared to 22,106 at December 31, 2013. Fiber revenue for the quarter was $8.4 million, an increase from $7.1 million for the same quarter last year, due to additional leasing of fiber backhaul facilities to new and existing customers. Adjusted OIBDA for the wireline segment for fourth quarter 2014

increased 7.5% to $6.3 million, as compared to $5.9 million in fourth quarter 2013, primarily as a result of the higher fiber revenue.

Other Information

Capital expenditures were $17.0 million in the fourth quarter of 2014, compared to $36.2 million in the comparable 2013 period.

Cash and cash equivalents as of December 31, 2014 were $68.9 million, compared to $38.3 million at December 31, 2013. Total outstanding debt at December 31, 2014 totaled $224.3 million compared to $230.0 million last year. The Company began making quarterly principal payments of $5.75 million on its debt in December 2014. At December 31, 2014, debt as a percent of total assets was 36.2%. The amount available to the Company through its revolver facility was $50 million as of December 31, 2014.

“Our already strong balance sheet improved further over the course of the year, providing enhanced liquidity and a solid foundation upon whic