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/
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