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HickoryTech Reports Third Quarter 2003 Results
Posts 31.5 Percent Increase in Income from Continuing Operations
MANKATO, Minn., Oct. 27 /PRNewswire-FirstCall/ -- HickoryTech Corporation
today reported income from continuing operations for the third quarter ended
Sept. 30, 2003, of $2.0 million, or 14 cents per diluted share, an increase of
31.5 percent from $1.5 million, or 11 cents per diluted share, for the same
period in 2002. Revenues from continuing operations were $23.1 million in the
third quarter of 2003, a decrease of 5.2 percent from $24.3 million in the same
period of 2002. Operating income from continuing operations was $5.0 million in
the third quarter of 2003, an increase of 15.6 percent over the same period of
2002.
On Sept. 18, 2003, HickoryTech announced its agreement to sell all of its
wireless operations to Western Wireless Corporation, a transaction expected to
close in the fourth quarter of 2003, subject to the approval of the Federal
Communications Commission. As a result of the agreement to sell, the company
classified its wireless operations as discontinued operations. This includes the
quarter and nine months ended Sept. 30, 2003, as well as for the comparable
periods of 2002. During the third quarter of 2003, the Company recorded a $14.7
million loss from discontinued operations, net of an income tax benefit of $10.2
million. The loss includes a writedown and expenses associated with the pending
sale of the company's wireless operations in the amount of $25.9 million before
tax, $15.3 million after tax. The wireless writedown, which had been estimated
at $21 million, or $1.50 per share after tax in the Company's September
announcement, has been reduced to $15.3 million, or $1.09 per share.
"The underlying strength of our continuing operations is largely obscured by the
impact of the wireless valuation writedown," said John Duffy, president and
chief executive officer. "The 91 cent per share loss that is reflected in our
third quarter financials includes this $1.09 per share wireless valuation item.
Excluding the $1.09 per share wireless valuation item would result in earnings
per share for our third quarter 2003 of 18 cents. This is an improvement of 3
cents per share, or 20 percent, over earnings of 15 cents per share in the third
quarter 2002 -- improvement that is both encouraging and consistent with our
first two quarters in 2003.
"The sale of our wireless business will enable us to tighten the focus on our
core wireline and broadband business, strengthen our balance sheet by allowing
us to reduce debt, and improve our position to take advantage of potential
future opportunities."
For the third quarter and nine months ended Sept. 30, 2003, the total net loss
per share from combined continued and discontinued operations was $0.91 and
$0.56 respectively, compared with earnings per share from combined continued
operations and discontinued operations for the comparative periods of 2002 of
$0.15 and $0.43 respectively.
The Telecom business sector, which represents over 80 percent of HickoryTech's
consolidated revenues, expanded its revenues by $0.7 million in the third
quarter, up 3.9 percent from the same quarter of 2002. ILEC network access
revenues contributed $274,000 or 3.4 percent more revenue in the third quarter
of 2003 than in the same period of 2002. CLEC local service contributed
$106,000 or 12.9 percent more revenue in the third quarter of 2003 than the
third quarter of 2002. Data networking for schools and libraries (known as
project Socrates) and other data services provided a combined $193,000, or 15.5
percent increase in revenues for the Communications Services line of business in
the third quarter of 2003 over the same quarter last year.
HickoryTech's broadband penetration continues a positive trend. Reported ILEC
Digital Subscriber Line (DSL) growth of 2,361 lines, provided a 121.8 percent
increase in this service. In addition, CLEC DSL lines increased by 1,171, or
95.7 percent. Total DSL lines increased by 3,532 or 111.7 percent to 6,694 from
a year ago. "Broadband deployment is part of our core strategic focus," Duffy
noted. "We have more than doubled our DSL lines in service from one year ago
and we still have opportunities for further growth."
Overall operating expenses from continuing operations, excluding depreciation
and amortization, declined 8.6 percent to $11.5 million for the third quarter of
2003, based on service improvement in the CLEC line of business, general
operating improvement actions, and improvement in the high level of bad debt
expense from other telecom carriers in 2002. Interest expense declined 9.9
percent to $1,579,000 for the third quarter. The company reduced debt by
another $4.5 million during the quarter, to $141.6 million at the end of
September. Company debt levels have been reduced by $17.5 million since the
beginning of the year.
The third-quarter revenue contribution of the Enterprise Solutions Sector was
overshadowed by the sector's revenue performance in last year's third quarter,
which included the initial installation at the Best Buy Corporate Headquarters.
The decline in Enterprise Solutions revenues offset an increase in Telecom
revenues, resulting in a third-quarter decrease in overall company revenues.
For the nine months ended Sept. 30, 2003, revenues increased to $69.5 million
from $67.6 million in the comparable period of 2002. Income from continuing
operations was $6.1 million, or 43 cents per diluted share, vs. $4.4 million, or
32 cents per share, in the first nine months of 2002.
Further discussion of the third quarter results, as well as additional guidance
regarding management's outlook, will be given during the company's quarterly
conference call and Webcast with investors at 8:00 a.m. Central Standard Time on
Tuesday, Oct. 28, 2003. Investors can access the Webcast through a link on
HickoryTech's homepage at http://www.hickorytech.com/ or through
http://www.ccbn.com/ .
About HickoryTech
HickoryTech Corporation is a diversified communications company headquartered in
Mankato, Minn., with nearly 500 employees and operations in Minnesota and Iowa.
HickoryTech is in its 106th year of operation with its roots in the local
telephone exchange business. From this base, it has expanded into competitive
local service, long distance, Internet, information solutions and enterprise
solutions. To learn more about HickoryTech Corporation, visit the company's Web
page at http://www.hickorytech.com/ .
Certain statements included in this press release that are not historical facts
are "forward-looking statements." Such forward-looking statements are based on
current expectations, estimates and projections about the industry in which
HickoryTech operates and management's beliefs and assumptions. The
forward-looking statements are subject to uncertainties. These statements are
not guarantees of future performance and involve certain risks, uncertainties
and probabilities. Therefore, actual outcomes and results may differ materially
from what is expressed or forecasted in such forward-looking statements. You are
cautioned not to place undue reliance on these forward- looking statements,
which speak only as of the date on which they were made. Except as required by
federal securities laws, HickoryTech undertakes no obligation to update any of
its forward-looking statements for any reason.
Statement of Operations
For Three Months Ended For Nine Months Ended
(Dollars in Thousands) September 30 September 30
2003 2002 2003 2002
Revenues from Continuing
Operations:
Telecom Sector $18,810 $18,100 $56,058 $52,857
Information Solutions
Sector 702 981 2,609 3,064
Enterprise Solutions
Sector 3,565 5,257 10,859 11,655
Total Revenues 23,077 24,338 69,526 67,576
Costs and Expenses from
Continuing Operations:
Cost of Goods Sold,
Enterprise Solutions 2,606 3,688 7,675 7,905
Operating Expenses,
excluding Depreciation
and Amortization 11,475 12,557 35,242 35,651
Depreciation 3,780 3,448 11,013 10,085
Amortization of
Intangibles 236 336 761 989
Total Costs and
Expenses 18,097 20,029 54,691 54,630
Operating Income from
Continuing Operations 4,980 4,309 14,835 12,946
Equity in Net Income
(Loss) of Investees 1 (29) (4) (27)
Gain on Sale of Assets - - 2 -
Interest and Other Income 10 66 33 138
Interest Expense (1,579) (1,752) (4,624) (5,566)
Income from Continuing
Operations Before Income
Taxes 3,412 2,594 10,242 7,491
Income Taxes 1,395 1,060 4,186 3,061
Income from Continuing
Operations 2,017 1,534 6,056 4,430
Discontinued Operations
Income (Loss) from
Discontinued
Operations (24,873) 949 (23,487) 2,637
Income Tax (Benefit) (10,198) 389 (9,630) 1,081
Income (Loss) from
Discontinued Operations (14,675) 560 (13,857) 1,556
Net Income (Loss) $(12,658) $2,094 $(7,801) $5,986
(Not in thousands)
WEIGHTED AVERAGE # OF
SHARES (BASIC) 13,973,920 14,058,750 13,972,741 14,008,985
EARNINGS PER SHARE FOR
CONTINUING OPERATIONS $0.14 $0.11 $0.43 $0.32
EARNINGS PER SHARE FOR
DISCONTINUED OPERATIONS (1.05) 0.04 (0.99) 0.11
$(0.91) $0.15 $(0.56) $0.43
DIVIDENDS PER SHARE $0.11 $0.11 $0.33 $0.33
WEIGHTED AVERAGE # OF
SHARES (DILUTIVE) 14,024,219 14,117,327 14,030,862 14,092,932
EARNINGS PER SHARE
(DILUTIVE) FOR
CONTINUING OPERATIONS $0.14 $0.11 $0.43 $0.32
EARNINGS PER SHARE
(DILUTIVE) FOR
DISCONTINUED OPERATIONS (1.05) 0.04 (0.99) 0.11
$(0.91) $0.15 $(0.56) $0.43
HICKORY TECH CORPORATION
September 30, 2003
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In Thousands Except Share and Per
Share Amounts) 9/30/2003 12/31/2002
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $880 $1,874
Receivables, Net of Allowance for
Doubtful Accounts of $1,201 and
$1,358 10,343 11,056
Income Taxes Receivable - 3,222
Costs in Excess of Billings on
Contracts 839 2,107
Inventories 4,825 5,059
Deferred Income Taxes 951 951
Other 2,534 2,840
Assets Held for Sale 2,181 -
TOTAL CURRENT ASSETS 22,553 27,109
INVESTMENTS 6,741 10,517
PROPERTY, PLANT AND EQUIPMENT 224,482 247,375
Less ACCUMULATED DEPRECIATION 112,807 111,101
PROPERTY, PLANT AND EQUIPMENT, NET 111,675 136,274
OTHER ASSETS:
Goodwill 25,086 25,086
Intangible Assets, Net 507 34,669
Financial Derivative Instrument 1,961 -
Deferred Income Taxes 5,211 -
Deferred Costs and Other 4,945 6,556
Assets Held for Sale 27,481 -
TOTAL OTHER ASSETS 65,191 66,311
TOTAL ASSETS $206,160 $240,211
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $2,608 $4,543
Accrued Expenses 2,495 3,719
Accrued Interest 60 512
Accrued Income Taxes 1,576 -
Billings in Excess of Costs on
Contracts 275 80
Advanced Billings and Deposits 2,846 3,741
Liabilities Held for Sale 1,568 -
Current Maturities of Long-Term
Obligations 1,482 1,441
TOTAL CURRENT LIABILITIES 12,910 14,036
LONG-TERM OBLIGATIONS, Net of Current
Maturities 140,096 157,599
LONG-TERM LIABILITIES HELD FOR SALE 31 -
DEFERRED INCOME TAXES - 4,377
DEFERRED REVENUE AND BENEFITS 5,766 5,604
TOTAL LIABILITIES 158,803 181,616
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Common Stock, no par value, $.10
stated value
Shares authorized: 100,000,000
Shares outstanding: 13,997,543
in 2003 and 13,983,929 in 2002 1,400 1,398
Additional Paid-In Capital 8,519 7,885
Retained Earnings 36,281 49,312
Accumulated Other Comprehensive
Income 1,157 -
TOTAL SHAREHOLDERS' EQUITY 47,357 58,595
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $206,160 $240,211
Telecom Sector Recap of Continuing Operations
For Three Months For Nine Months
(Dollars in Thousands) Ended September 30 Ended September 30
2003 2002 2003 2002
ILEC
Revenues
Local Access $3,780 $3,760 $11,349 $11,319
Network Access 8,370 8,096 25,101 24,154
Intersegment 69 68 206 205
Other 2,355 2,231 6,745 6,889
Total Revenues 14,574 14,155 43,401 42,567
Key Metrics
Access Lines 63,421 65,360
DSL Customers 4,299 1,938
Communications Services
Revenues
Long Distance $995 $1,028 $3,024 $2,928
Local Service 926 820 2,762 2,216
Internet 944 918 2,835 2,648
Other 1,440 1,247 4,242 2,703
Total Revenues 4,305 4,013 12,863 10,495
Key Metrics
Access Lines
Overbuild 9,607 7,385
Unbundled Network Element (UNE) 1,492 1,311
Total Service Resale (TSR) 2,938 4,736
Total 14,037 13,432
Long Distance Customers 39,663 33,746
Internet Customers 15,901 13,936
DSL Customers 2,395 1,224
Total Continuing Telecom Sector
Revenues $18,879 $18,168 $56,264 $53,062
Operating Expenses, excluding
Depr. and Amort. 9,757 9,267 27,831 26,879
Depreciation and Amortization 3,319 3,144 9,779 9,156
Operating Income $5,803 $5,757 $18,654 $17,027
Net Income $3,475 $3,446 $11,076 $10,111
Other - Continuing Operations
Capital Expenditures $1,935 $1,110 $5,091 $6,462
Customers 133,022 126,474
DSL Customers 6,694 3,162
Contact: Thomas Langenfeld
BlueFire Partners, Inc.
612-344-1038
David Christensen
Chief Financial Officer
507-387-1713
DATASOURCE: HickoryTech Corporation
CONTACT: Thomas Langenfeld of BlueFire Partners, Inc., +1-612-344-1038,
or David Christensen, Chief Financial Officer of HickoryTech Corporation,
+1-507-387-1713
Web site: http://www.hickorytech.com/