Attached files
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
On July 30, 2010, Shenandoah Telecommunications Company (“Shentel” or the “Company”), through its wholly-owned subsidiary Shentel Cable Company, completed the acquisition of the cable system assets and operations of Helicon Cable Holdings, LLC (“Helicon”), which owned cable systems in southern Virginia and West Virginia and operated under the JetBroadBand brand name. The purchase price for the acquisition was $148 million, adjusted for working capital balances as defined.
The Company has accounted for the acquisition under the purchase method of accounting. Under the purchase method of accounting, the total purchase price is allocated to the net tangible and intangible assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values. The preliminary allocation of the purchase price was based upon management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, and such estimates and assumptions are subject to change.
The following unaudited pro forma combined consolidated financial information has been prepared to give effect to the completed acquisition and to the assumptions and adjustments in the accompanying notes. The unaudited pro forma combined consolidated balance sheet as of March 31, 2010 gives effect to the acquisition as if it had occurred on March 31, 2010 and is derived from the unaudited financial statements of the Company and Helicon as of March 31, 2010. The unaudited pro forma combined consolidated statements of income for the year ended December 31, 2009 and the three months ended March 31, 2010 give effect to the acquisition as if it had occurred on January 1, 209 and are derived from the audited financial statements of the Company and Helicon for the year ended December 31, 2009 and the unaudited financial statements of the Company and Helicon for the three months ended March 31, 2010.
The unaudited pro forma combined consolidated financial information has been prepared for illustrative purposes only and is not necessarily indicative of the combined consolidated financial position or results of operations in future periods or the results that actually would have been realized had the acquisition actually occurred on the dates indicated above. The adjustments necessary to present fairly the unaudited pro forma combined consolidated financial information have been made based on available information and, in the opinion of management, are reasonable. This unaudited pro forma combined consolidated financial information should be read in conjunction with the accompanying notes, the financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year end December 31, 2009 and the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2010, and Helicon’s audited financial statements and related notes for the year ended December 31, 2009 and unaudited financial statements for the three months ended March 31, 2010, which are attached as Exhibit 99.1 to this Form 8-K.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
As of March 31, 2010
(in thousands)
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Historical
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ASSETS
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Shenandoah Telecommun-
ications Company
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Helicon Cable Holdings, LLC
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Pro Forma Adjustments
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Pro Forma Combined
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Current Assets
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|||||||||||||||||
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Cash and cash equivalents
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$ | 18,198 | $ | 1,589 | $ | 11,567 | (a) | $ | 31,354 | ||||||||
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Accounts receivable, net
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16,734 | 3,259 | - | 19,993 | |||||||||||||
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Income taxes receivable
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734 | - | 1,410 | (c) | 2,144 | ||||||||||||
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Materials and supplies
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4,895 | - | - | 4,895 | |||||||||||||
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Prepaid expenses and other
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3,209 | 391 | - | 3,600 | |||||||||||||
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Assets held for sale
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10,676 | - | - | 10,676 | |||||||||||||
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Deferred income taxes
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616 | - | - | 616 | |||||||||||||
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Total current assets
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55,062 | 5,238 | 12,977 | 73,278 | |||||||||||||
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Investments
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8,683 | - | - | 8,683 | |||||||||||||
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Net property, plant and equipment
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203,448 | 67,713 | (12,563 | ) | (a) | 258,598 | |||||||||||
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Other Assets
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Intangible assets, net
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2,310 | 59,083 | 26,381 | (a) | 87,774 | ||||||||||||
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Cost in excess of net assets of businesses acquired
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4,418 | - | 7,386 | (b) | 11,804 | ||||||||||||
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Deferred charges and other assets, net
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1,216 | 748 | (604 | ) | (a) | 1,360 | |||||||||||
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Net other assets
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7,944 | 59,831 | 33,163 | 100,938 | |||||||||||||
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Total assets
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$ | 275,137 | $ | 132,783 | $ | 33,577 | $ | 441,497 | |||||||||
(Continued)
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
As of March 31, 2010
(in thousands)
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Historical
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Shenandoah Telecommun-ications Company
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Helicon Cable Holdings, LLC
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Pro Forma Adjustments
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Pro Forma Combined
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Current Liabilities
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Current maturities of long-term debt
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$ | 5,588 | $ | 2,682 | $ | (7,750 | ) |
(c)
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$ | 520 | |||||||
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Accounts payable
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5,213 | 5,439 | - | 10,652 | |||||||||||||
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Advanced billings and customer deposits
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6,542 | 2,636 | - | 9,178 | |||||||||||||
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Accrued compensation
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1,181 | - | - | 1,181 | |||||||||||||
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Liabilities held for sale
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890 | - | - | 890 | |||||||||||||
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Accrued liabilities and other
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3,573 | - | - | 3,573 | |||||||||||||
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Total current liabilities
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22,987 | 10,757 | (7,750 | ) | 25,994 | ||||||||||||
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Long-term debt, less current maturities
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26,248 | 85,267 | 80,116 |
(c)
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191,631 | ||||||||||||
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Other Long-Term Liabilities
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Deferred income taxes
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29,095 | - | - | 29,095 | |||||||||||||
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Deferred lease payable
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3,430 | - | - | 3,430 | |||||||||||||
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Asset retirement obligations
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6,033 | - | - | 6,033 | |||||||||||||
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Other liabilities
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4,133 | 1,962 | (1,962 | ) |
(c)
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4,133 | |||||||||||
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Total other liabilities
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42,691 | 1,962 | (1,962 | ) | 42,691 | ||||||||||||
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Commitments and Contingencies
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Shareholders’ Equity
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Common stock
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18,651 | 34,797 | (34,797 | ) |
(a)
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18,651 | |||||||||||
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Retained earnings
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166,984 | - | (2,030 | ) |
(c)
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164,954 | |||||||||||
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Accumulated other comprehensive loss, net of tax
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(2,424 | ) | - | - | (2,424 | ) | |||||||||||
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Total shareholders’ equity
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183,211 | 34,797 | (36,827 | ) | 181,181 | ||||||||||||
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Total liabilities and shareholders’ equity
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$ | 275,137 | $ | 132,783 | $ | 33,577 | $ | 441,497 | |||||||||
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended March 31, 2010
(in thousands)
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Historical
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Shenandoah Telecomm-unications Company
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Helicon Cable Holdings, LLC
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Pro Forma Adjustments
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Pro Forma Combined
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Operating revenues
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$ | 41,518 | $ | 11,509 | $ | - | $ | 53,027 | |||||||||
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Operating expenses:
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Cost of goods and services, exclusive of depreciation and amortization shown separately below
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13,918 | 5,128 | - | 19,046 | |||||||||||||
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Selling, general and administrative, exclusive of depreciation and amortization shown separately below
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7,773 | 2,385 | - | 10,158 | |||||||||||||
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Depreciation and amortization
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8,327 | 3,013 | (1,267 | ) |
(a)
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10,073 | |||||||||||
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Total operating expenses
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30,018 | 10,526 | (1,267 | ) | 39,277 | ||||||||||||
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Operating income
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11,500 | 983 | 1,267 | 13,750 | |||||||||||||
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Other income (expense):
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Interest expense
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(310 | ) | (1,646 | ) | 100 |
(c)
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(1,856 | ) | |||||||||
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Gain (loss) on investments, net
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(67 | ) | - | - | (67 | ) | |||||||||||
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Non-operating income, net
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87 | - | - | 87 | |||||||||||||
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Income (loss) from continuing operations before income taxes
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11,210 | (663 | ) | 1,367 | 11,914 | ||||||||||||
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Income tax expense (benefit)
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4,641 | (275 | ) | 566 |
(c)
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4,932 | |||||||||||
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Net income (loss) from continuing operations
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6,569 | (388 | ) | 801 | 6,982 | ||||||||||||
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Earnings from discontinued operations, net of taxes
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185 | - | - | 185 | |||||||||||||
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Net income (loss)
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$ | 6,754 | $ | (388 | ) | $ | 801 | $ | 7,167 | ||||||||
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Basic and diluted income (loss) per share:
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Net income (loss) from continuing operations
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$ | 0.28 | $ | - | $ | - | $ | 0.29 | |||||||||
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Net earnings from discontinued operations
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0.01 | - | - | 0.01 | |||||||||||||
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Net income (loss)
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$ | 0.29 | $ | - | $ | - | $ | 0.30 | |||||||||
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Weighted average shares outstanding:
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Basic
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23,698 | - | 23,698 | ||||||||||||||
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Diluted
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23,733 | - | 23,733 | ||||||||||||||
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 2009
(in thousands)
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Historical
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Shenandoah Telecomm-unications Company
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Helicon Cable Holdings, LLC
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Pro Forma Adjustments
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Pro Forma Combined
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Operating revenues
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$ | 160,616 | $ | 44,620 | $ | - | $ | 205,236 | |||||||||
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Operating expenses:
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Cost of goods and services, exclusive of depreciation and amortization shown separately below
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54,032 | 20,234 | - | 74,266 | |||||||||||||
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Selling, general and administrative, exclusive of depreciation and amortization shown separately below
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31,127 | 10,482 | - | 41,609 | |||||||||||||
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Depreciation and amortization
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32,630 | 11,666 | (4,681 | ) |
(a)
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39,615 | |||||||||||
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Total operating expenses
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117,789 | 42,382 | (4,681 | ) | 155,490 | ||||||||||||
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Operating income
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42,827 | 2,238 | 4,681 | 49,746 | |||||||||||||
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Other income (expense):
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Interest expense
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(1,361 | ) | (7,469 | ) | 1,405 |
(c)
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(7,425 | ) | |||||||||
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Gain (loss) on investments, net
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124 | 4,159 | (4,159 | ) |
(c)
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124 | |||||||||||
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Non-operating income, net
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959 | (123 | ) | - | 836 | ||||||||||||
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Income (loss) from continuing operations before income taxes
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42,549 | (1,195 | ) | 1,927 | 43,281 | ||||||||||||
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Income tax expense (benefit)
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17,465 | (490 | ) | 790 |
(c)
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17,765 | |||||||||||
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Net income (loss) from continuing operations
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25,084 | (705 | ) | 1,137 | 25,516 | ||||||||||||
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Loss from discontinued operations, net of taxes
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(9,992 | ) | - | - | (9,992 | ) | |||||||||||
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Net income (loss)
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$ | 15,092 | $ | (705 | ) | $ | 1,137 | $ | 15,524 | ||||||||
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Basic and diluted income (loss) per share:
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Net income (loss) from continuing operations
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$ | 1.06 | $ | - | $ | - | $ | 1.08 | |||||||||
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Net loss from discontinued operations
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(0.42 | ) | - | - | (0.42 | ) | |||||||||||
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Net income (loss)
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$ | 0.64 | $ | - | $ | - | $ | 0.66 | |||||||||
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Weighted average shares outstanding:
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Basic
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23,639 | - | - | 23,639 | |||||||||||||
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Diluted
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23,701 | - | - | 23,701 | |||||||||||||
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
Certain reclassifications have been made to conform Helicon’s historical amounts to the Company’s presentation. The pro forma adjustments included in the unaudited pro forma combined consolidated financial information are as follows:
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a)
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Adjustments to reflect the difference between the historical cost and the preliminary estimate of the fair value of Helicon’s identifiable tangible and intangible net assets, based upon an independent third-party preliminary valuation, and the resulting adjustment to depreciation and amortization expense.
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b)
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Represents the adjustment to goodwill for the amount of consideration for the acquisition in excess of the identifiable net assets acquired, determined as follows (in thousands):
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Initial purchase price
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$ | 148,000 | ||
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Cash withheld for working capital
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(5,407 | ) | ||
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Cash paid
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142,593 | |||
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Fair value of identifiable net assets
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135,207 | |||
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Consideration in excess of net assets acquired
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$ | 7,386 |
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c)
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Represents the debt incurred to finance the transaction, repay existing debt of the Company, pay transaction costs, and related interest expense. The acquisition was financed with debt of $198 million utilizing a new fixed term credit facility; the Company also entered into a $50 million revolving credit facility to fund planned capital expenditures and other corporate needs. Excess cash from the transaction will be used for working capital needs and capital expenditures.
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