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 services | 48,531 | 53,166 | 211,507 | 193,520 | |||||||||||
| Selling, general and administrative | 40,564 | 37,062 | 165,937 | 133,325 | |||||||||||
| Acquisition, integration and migration expenses | 1,157 | 6,432 | 11,030 | 42,232 | |||||||||||
| Depreciation and amortization | 43,255 | 46,723 | 177,007 | 143,685 | |||||||||||
| Total operating expenses | 133,507 | 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, net | 168 | 35 | 564 | 271 | |||||||||||
| Non-operating income (loss), net | 939 | 1,339 | 4,420 | 4,250 | |||||||||||
| Income (loss) before income taxes | 9,292 | 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, basic | 49,298 | 48,922 | 49,150 | 48,807 | |||||||||||
| Weighted average shares outstanding, diluted | 50,043 | 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 | |||||||||||
| Other | 3,813 | 2,295 | 6,845 | — | — | 12,953 | |||||||||||||||||
| Total external revenues | 110,281 | 29,404 | 11,932 | — | — | 151,617 | |||||||||||||||||
| Internal revenues | 1,241 | 1,093 | 8,740 | — | (11,074 | ) | — | ||||||||||||||||
| Total operating revenues | 111,522 | 30,497 | 20,672 | — | (11,074 | ) | 151,617 | ||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Costs of goods and services | 34,450 | 14,297 | 10,127 | 39 | (10,382 | ) | 48,531 | ||||||||||||||||
| Selling, general and administrative | 30,056 | 4,916 | 1,859 | 4,425 | (692 | ) | 40,564 | ||||||||||||||||
| Acquisition, integration and migration expenses | 1,187 | — | — | (30 | ) | — | 1,157 | ||||||||||||||||
| Depreciation and amortization | 33,922 | 5,898 | 3,293 | 142 | — | 43,255 | |||||||||||||||||
| Total operating expenses | 99,615 | 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 | |||||||||||
| Other | 6,903 | 2,128 | 6,291 | — | — | 15,322 | |||||||||||||||||
| Total external revenues | 116,619 | 27,743 | 11,210 | — | — | 155,572 | |||||||||||||||||
| Internal revenues | 1,203 | 578 | 8,062 | — | (9,843 | ) | — | ||||||||||||||||
| Total operating revenues | 117,822 | 28,321 | 19,272 | — | (9,843 | ) | 155,572 | ||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Costs of goods and services | 38,221 | 14,717 | 9,367 | — | (9,139 | ) | 53,166 | ||||||||||||||||
| Selling, general and administrative | 30,632 | 4,576 | 1,523 | 1,035 | 704 | 37,062 | |||||||||||||||||
| Acquisition, integration and migration expenses | 6,038 | — | — | 394 | — | 6,432 | |||||||||||||||||
| Depreciation and amortization | 37,594 | 6,074 | 2,928 | 127 | — | 46,723 | |||||||||||||||||
| Total operating expenses | 112,485 | 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 | |||||||||||
| Other | 18,945 | 8,579 | 25,557 | — | — | 53,081 | |||||||||||||||||
| Total external revenues | 450,129 | 115,917 | 45,945 | — | — | 611,991 | |||||||||||||||||
| Internal revenues | 4,949 | 3,245 | 33,308 | — | (41,502 | ) | — | ||||||||||||||||
| Total operating revenues | 455,078 | 119,162 | 79,253 | — | (41,502 | ) | 611,991 | ||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Costs of goods and services | 152,279 | 59,349 | 38,536 | 39 | (38,696 | ) | 211,507 | ||||||||||||||||
| Selling, general and administrative | 118,257 | 19,999 | 6,923 | 23,564 | (2,806 | ) | 165,937 | ||||||||||||||||
| Acquisition, integration and migration expenses | 10,793 | — | — | 237 | — | 11,030 | |||||||||||||||||
| Depreciation and amortization | 139,610 | 23,968 | 12,829 | 600 | — | 177,007 | |||||||||||||||||
| Total operating expenses | 420,939 | 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 | |||||||||||
| Other | 24,364 | 7,927 | 24,512 | — | — | 56,803 | |||||||||||||||||
| Total external revenues | 384,133 | 106,997 | 44,158 | — | — | 535,288 | |||||||||||||||||
| Internal revenues | 4,620 | 1,737 | 30,816 | — | (37,173 | ) | — | ||||||||||||||||
| Total operating revenues | 388,753 | 108,734 | 74,974 | — | (37,173 | ) | 535,288 | ||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Costs of goods and services | 133,113 | 58,581 | 36,259 | — | (34,433 | ) | 193,520 | ||||||||||||||||
| Selling, general and administrative | 95,851 | 19,248 | 6,474 | 14,492 | (2,740 | ) | 133,325 | ||||||||||||||||
| Acquisition, integration and migration expenses | 25,927 | — | — | 16,305 | — | 42,232 | |||||||||||||||||
| Depreciation and amortization | 107,621 | 23,908 | 11,717 | 439 | — | 143,685 | |||||||||||||||||
| Total operating expenses | 362,512 | 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 – Postpaid | 736,597 | 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 Owned | 192 | 196 | 158 | |||||
| Non-affiliate Cell Site Leases | 192 | 202 | 202 | |||||
_______________________________________________________
- 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.
- "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.
- December 31, 2016 includes nTelos.
- 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 | % | ||||
_______________________________________________________
- PCS Average Monthly Retail Churn - Postpaid is the average of the monthly subscriber turnover, calculated for the period.
- 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.
- December 31, 2016 includes nTelos.
- December 31, 2017 includes Parkersburg.
- 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 | |||
_______________________________________________________
- Represents Sprint's subscribers, including prepaid Lifeline, as of the acquisition date in the acquired territory.
- As of December 31, 2017 we have shut down 107 overlap sites associated with the nTelos area.
- Acquired on April 6, 2017
- 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.