Hector Communic (AMEX:HCT)
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Hector Communications Corporation Reports Revenues and Earnings for the Fourth
Quarter of 2003
HECTOR, Minn., March 10 /PRNewswire-FirstCall/ -- Hector Communications
Corporation today reported operating results for its fourth quarter and
twelve-month periods ended December 31, 2003. The Company's operating results
for the current and prior periods have been restated pursuant to SFAS 144 to
reflect the effects of the split-up of Alliance Telecommunications Corporation.
Revenues from continuing operations were $8,128,000 for the three months ended
December 31, 2003, an increase of 9% from $7,451,000 in 2002. The revenue
increase was due to increased universal service fund support generated by
Company investments in new equipment delivering advanced telecommunications
services to customers. Operating income from continuing operations increased
108% to $2,184,000 in 2003 from $1,047,000 in 2002. Income from the Company's
investment in Midwest Wireless Holdings LLC was $245,000 in the 2003 period
compared to $427,000 in 2002. Net income was $1,267,000 or $.33 per diluted
share in 2003 compared to $504,000 or $.14 per diluted share in 2002. Net income
in 2002 included income from discontinued operations of $386,000 or $.11 per
diluted share.
Revenues from continuing operations for 2003 were $32,322,000, an increase of 6%
from $30,517,000 in 2002. Operating income from continuing operations increased
20% to $7,957,000 in 2003 from $6,641,000 in 2002. Income from the Company's
investment in Midwest Wireless Holdings LLC was $2,148,000 in 2003 compared to
$2,261,000 in 2002. The Company recorded gains on sales of cable television
systems totaling $1,081,000 ($.12 per diluted share net of income taxes and
minority interest) in 2003. Incomefrom continuing operations was $4,297,000 or
$1.14 per diluted share in 2003 compared to $2,324,000 or $.62 per diluted share
in 2002. Income from discontinued operations, including the $210,000 gain on
the split-up of Alliance, was $882,000 or $.23 per diluted share in 2003.
Income from discontinued operations in 2002 was $1,331,000 or $.35 per diluted
share. Income before the cumulative effect of a change in accounting principle
for 2003 was $5,179,000 or $1.37 per diluted share, compared to $3,655,000 or
$.97 per diluted share in 2002.
In 2002 the Company tested the value of its goodwill and intangible assets as
required under the provisions of Statement of Financial Accounting Standards No.
142 and concluded that the carrying value of the goodwill and intangible assets
in certain of its operating units exceeded the market value. Accordingly, the
Company recognized an impairment loss, net of income taxes and minority
interest, of $3,147,000 ($.84 per diluted share) and recorded it as a cumulative
effect of change in accounting principle against first quarter 2002 earnings.
Net income for 2002, after the impairment loss, was $508,000 or $.13 per diluted
share.
Curtis A. Sampson, Chairman and Chief Executive Officer, said he was pleased
with the Company's 2003 financial performance. "The Company's growth in revenues
and operating income, despite the challenging economic and regulatory
environment, are reflective of the hard work of our managers and employees to
meet the telecommunications needs of our customers. The broadband initiative now
offered in four of the Company's exchanges has proven very successful. The
Company is aggressively pursuing new revenue sources to offset the decline in
access lines and access revenues the wholeindustry is experiencing."
Hector Communications Corporation is a telecommunications holding company which,
through its wholly-owned and majority-owned subsidiaries, provides local
telephone service, video and high-speed internet service in rural communities in
Minnesota, Wisconsin, South Dakota, North Dakota and Iowa. The Company serves
29,900 telephone access lines, 9,100 cable television subscribers and 10,200
internet customers and has minority ownership interests in many other
telecommunications companies.
From time to time in reports filed with the Securities and Exchange Commission,
in press releases, and in other communications to shareholders and the investing
public, the Company may make statements regarding the Company's future financial
performance. Such forward-looking statements are subject to risks and
uncertainties, including but not limited to, the effects of the
Telecommunications Act, new technological developments which may reduce barriers
for competitors entering the Company's local exchange or cable television
markets, higher than expected expenses and other risks involving the
telecommunications industry generally. All such forward-looking statements
should be considered in light of such risks and uncertainties.
Hector Communications Corporation and Subsidiaries
Earnings Summary
Three Months Ended December 31
2003 2002
Revenues from continuing operations $8,128,433 $7,451,172
Operating income from continuing
operations 2,184,252 1,047,347
Other income (expense):
Income (loss) from investments:
Midwest Wireless Holdings, LLC 245,354 426,907
Other unconsolidated affiliates 172,203 (61,310)
Other income 204,976 30,939
Interest expense (671,053) (833,843)
Net other expense (48,520) (437,307)
Income from continuing operations
before income taxes and minority interest 2,135,732 610,040
Income tax expense (869,000) (481,000)
Minority interest in earnings of
continuing operations of Alliance
Telecommunications Corp. (11,384)
Income from continuing operations 1,266,732 117,656
Income from discontinued operations 386,003
Net Income $1,266,732 $503,659
Basic net income per common share:
Continuing operations $.36 $.03
Discontinued operations .11
$.36 $.14
Diluted net income per share:
Continuing operations $.33 $.03
Discontinued operations .11
$.33 $.14
Hector Communications Corporation and Subsidiaries
Earnings Summary
Twelve Months Ended December 31
2003 2002
Revenues from continuing operations $32,322,428 $30,516,790
Operating income from continuing
operations 7,956,646 6,641,371
Other income (expense):
Income (loss) from investments:
Midwest Wireless Holdings, LLC 2,148,444 2,261,420
Other unconsolidated affiliates 96,299 (56,311)
Gain on sale of cable television
systems 1,080,723
Other income 391,897 199,213
Interest expense (3,401,479) (3,457,093)
Net other income (expense) 315,884 (1,052,771)
Income from continuing operations
before income taxes and minority interest 8,272,530 5,588,600
Income tax expense (3,316,000) (2,483,000)
Minority interest in earnings of
continuing operations of Alliance
Telecommunications Corp. (659,624) (781,403)
Income from continuing operations 4,296,906 2,324,197
Income from discontinued operations 881,854 1,330,692
Income before cumulative effect of
change in accounting principle 5,178,760 3,654,889
Cumulative effect of change in
accounting principle, net of income
taxes and minority interest (3,146,569)
Net income $5,178,760 $508,320
Basic net income (loss) per common
share:
Before cumulative effect of change
in accounting principle
Continuing operations $1.23 $.67
Discontinued operations .25 .38
1.48 1.05
Cumulative effect of accounting change (.90)
$1.48 $.15
Diluted net income (loss) per common
share:
Before cumulative effect of change
in accounting principle
Continuing operations $1.14 $.62
Discontinued operations .23 .35
1.37 .97
Cumulative effect of accounting change (.84)
$1.37 $.13
Hector Communications Corporation and Subsidiaries
Condensed Balance Sheet
December 31 December 31
2003 2002
Cash $16,581,315 $12,020,186
Other current assets 7,852,069 6,888,678
Property, plant and equipment, net 43,088,106 56,665,798
Excess of cost over net assets
acquired, net 31,691,927 49,074,993
Investment in Midwest Wireless
Holdings, LLC 13,349,155 16,232,707
Investments in other unconsolidated
affiliates 2,796,035 4,373,597
Other investments 6,533,858 8,818,502
Other assets 409,664 411,499
Total Assets $122,302,129 $154,485,960
Notes payable and current portion of
long-term debt $6,537,800 $7,364,600
Other current liabilities 4,581,160 5,826,281
Long-term debt, less current portion 57,529,378 75,147,560
Deferred taxes and credits 4,911,869 5,894,308
Deferred compensation 698,254 976,179
Minority Interest 17,027,697
Stockholders' equity 48,043,668 42,249,335
Total Liabilities and Stockholders'
Equity $122,302,129 $154,485,960
DATASOURCE: Hector Communications Corporation
CONTACT: Curtis A. Sampson, Chairman and Chief Executive Officer, Steven
H. Sjogren, President, or Paul N. Hanson, Vice President and Treasurer, all of
Hector Communications Corporation, +1-320-848-6231