HickoryTech (ticker: HTCO, exchange: NASDAQ Global Market (.O))
News Release -
29-Oct-2007
HickoryTech Reports Third Quarter 2007 Results
Net income increases 44 percent to $2.1 million, or $0.16 per share;
Enventis revenues increase 23 percent;
Debt reduced $7.4 million
MANKATO, Minn.--(BUSINESS WIRE)--Oct. 29, 2007--HickoryTech Corp.
(Nasdaq:HTCO) today reported financial results for the third fiscal
quarter ended Sept. 30, 2007. The company reported total third quarter
revenues of $35.9 million, a 10 percent increase over the same period
in fiscal 2006. Net income for the third quarter was $2.1 million, up
44 percent from the comparable period last year. The Enventis Sector
continued its strong growth trend recording a 155 percent increase in
sector net income, following the 143 and 127 percent increases
reported in the first and second quarter of 2007, respectively.
Highlights for the third quarter 2007 as compared to third quarter
2006
- 10 percent increase in revenues
- 32 percent increase in operating income
- 28 percent increase in income from continuing operations
- 44 percent increase in net income, after the loss from
discontinued operations
- 46 percent increase in diluted earnings per share
- $7.4 million reduction in long-term debt in third quarter 2007
Consolidated results for the third quarter 2007
HickoryTech's consolidated operating revenues for the third
quarter were $35.9 million, an increase of 10 percent compared to the
third quarter of 2006 and the Company's seventh consecutive quarter of
positive revenue comparisons. The increase was due to the continued
growth in the company's Enventis Sector, where revenues grew 23
percent over last year.
HickoryTech's consolidated operating income for the third quarter
increased 32 percent to $5.6 million, from $4.2 million in the third
quarter of 2006. The primary drivers for the increase are the Enventis
operating income increase of $1.0 million and a Telecom sector
operating income increase of $0.3 million.
Consolidated income from continuing operations for the third
quarter 2007 totaled $2.1 million, up 28 percent from $1.6 million the
same period of 2006.
"Our third quarter results continue to demonstrate strong growth
in our Enventis Sector and stability within our Telecom Sector," said
John Finke, HickoryTech president and chief executive officer. "The
business market success we have achieved in 2007 is strong evidence of
our favorable market position to offer integrated business solutions
of voice, data and network equipment."
Telecom Sector (before inter-segment eliminations)
In the third quarter of 2007, the Telecom Sector produced many
positive results including increased broadband revenue; stable
operating income, reduced capital expenditures and cost containment.
Revenues in the Telecom Sector before eliminations were $18.8 million
compared to $18.8 million in the third quarter of 2006. Sector
performance was positive in spite of a 6.3 percent decline in Network
Access revenues and a 6.7 percent decrease in local service revenues
for the quarter. Segment operating income was $4.0 million, up 9
percent from $3.6 million a year ago.
Key Telecom Sector metrics for the third quarter 2007 as compared
to same period 2006
- Pre-elimination Telecom Sector revenues remained stable at
$18.8 million.
- Broadband revenues grew 16 percent to $2.4 million, versus
$2.0 million. The increase in these revenues, which include
DSL, data and Digital TV services, outpaced the decline in
local access revenues. DSL lines increased 14.4 percent, with
a total of 17,250 on Sept. 30, 2007. Digital TV lines posted a
34 percent increase totaling 5,706 on Sept. 30, 2007.
- Network access revenues were $7.1 million, a 6.3 percent
decrease. This anticipated decline in the third quarter is due
to interstate rate changes, which went into effect July 1,
2007.
- Local service revenue declined 6.7 percent due to price
compression in rates charged to wireless carriers and
competition. Local lines declined 3.7 percent from the same
period a year ago, a decline that continues to be less than
the 4 to 5 percent average of industry peers.
Enventis Sector (before inter-segment eliminations)
Enventis, an integral element of the HickoryTech growth strategy,
continued to demonstrate solid growth in the third quarter. Enventis
total revenues before eliminations increased $3.4 million, or 24
percent, to $17.4 million compared with $14.0 million in the third
quarter of 2006. Enventis operating income for the third quarter was
$1.0 million, up 148 percent compared with the same quarter of 2006,
which included non-recurring integration expenses. Excluding the
$550,000 of integration expenses incurred in third quarter of 2006,
the normalized operating income increase for Enventis would have been
37 percent.
- Revenues of Enterprise Network Services (ENS), equipment sales
and service, increased 24 percent to $12.1 million from $9.7
million in the prior year, driven by success in large IP
telephony and data sales.
- Revenues of Enterprise Transport Services (ETS), network based
services, increased 25 percent to $5.3 million from $4.2
million a year ago attributed to strong wholesale transport
growth and increased demand for hosted unified communication
solutions.
Capital Expenditures and Debt
HickoryTech capital expenditures were $5.3 million for the third
quarter 2007 and $11.4 million for the first nine months. Investments
supported fiber and IP network upgrades, Digital TV expansion and
success-based network sales. This investment was $5.4 million less
than the first nine months of 2006 and is part of a planned reduction
of capital expenditures from the $21 million level of 2006. The debt
balance (long-term and current portion) was $129.3 million as of Sept.
30, 2007, $7.4 million less than at June 30, 2007, and a $13.8 million
reduction from the beginning of the year.
Future Outlook
Due to increasing business success, the company is updating its
future expectations for 2007 full-year results to the following
ranges:
Total Revenues $153 million to $156 million annual
Net Income $8.2 million to $8.5 million annual
CAPEX $17 million to $19 million annual
Debt Balance end of 2007 $129 million to $131 million
Webcast Details
Further information on the results of the third quarter 2007 will
be discussed during the company's quarterly conference call and
webcast with investors on Oct. 30, 2007 at 9 a.m. CT. Investors may
access the webcast through a link on HickoryTech's investor relations'
page at www.hickorytech.com. A telephone replay of the conference call
will be available from noon Oct. 30 through Nov. 9, 2007. The replay
number is +1 888 286 8010; enter pass code 84746221.
About HickoryTech
HickoryTech Corporation (NASDAQ:HTCO), headquartered in Mankato,
Minn., offers integrated communication products and services to
business and residential customers over a regional fiber network. The
company is in its 110th year of operation and has approximately 400
employees. The Telecom Sector, with facilities-based operations in
Minnesota and Iowa, offers local voice, long distance, high-speed
Internet, Digital TV, and IP networking services to residential and
business customers. In addition, the Telecom Sector develops telecom
and carrier access billing solutions and customer management systems.
The Enventis Sector provides IP-based voice, data and network
solutions to businesses across a five-state region. For more
information, visit www.hickorytech.com.
Forward Looking Statement
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.
Consolidated Statement of Operations
(unaudited)
----------------------------------------------------------------------
(Dollars in Three Months Ended Nine Months Ended
Thousands) September 30 September 30
------------------------- -------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenues:
Telecom Sector $ 18,647 $ 18,698 $ 58,132 $ 56,264
Enventis 17,212 13,972 60,256 43,234
------------ ------------ ------------ ------------
Total Revenues 35,859 32,670 118,388 99,498
Costs and
Expenses:
Cost of sales,
Enventis 8,705 7,183 35,578 23,322
Cost of
services,
excluding
Depreciation
and
Amortization 11,137 11,131 32,832 32,468
Selling, general
and
administrative
expenses,
excluding
depreciation
and
amortization 5,900 5,598 17,627 17,490
Depreciation 4,254 4,235 13,190 12,488
Amortization of
intangibles 289 293 867 879
------------ ------------ ------------ ------------
Total costs and
expenses 30,285 28,440 100,094 86,647
------------ ------------ ------------ ------------
Operating income 5,574 4,230 18,294 12,851
Interest and other
income 68 40 199 109
Interest expense (2,028) (1,913) (6,241) (5,392)
------------ ------------ ------------ ------------
Income before
income taxes 3,614 2,357 12,252 7,568
Income taxes 1,532 728 5,148 2,819
------------ ------------ ------------ ------------
Income from
continuing
operations 2,082 1,629 7,104 4,749
Discontinued
operations
Loss from
operations of
discontinued
component (12) (308) (27) (902)
Income tax
benefit (4) (124) (10) (361)
------------ ------------ ------------ ------------
Loss from
discontinued
operations (8) (184) (17) (541)
------------ ------------ ------------ ------------
Net income $ 2,074 $ 1,445 $ 7,087 $ 4,208
============ ============ ============ ============
Reconciliation of
operating income
to EBITDA:
Operating income $ 5,574 $ 4,230 $ 18,294 $ 12,851
Add:
Depreciation 4,254 4,235 13,190 12,488
Amortization
of
intangibles 289 293 867 879
------------ ------------ ------------ ------------
EBITDA $ 10,117 $ 8,758 $ 32,351 $ 26,218
============ ============ ============ ============
(Not in thousands)
Basic earnings per
share -
continuing
operations: $ 0.16 $ 0.12 $ 0.54 $ 0.36
Basic loss per
share -
discontinued
operations: (0.00) (0.01) (0.00) (0.04)
------------ ------------ ------------ ------------
$ 0.16 $ 0.11 $ 0.53 $ 0.32
============ ============ ============ ============
Basic weighted
average common
shares
outstanding 13,267,649 13,171,658 13,250,033 13,152,435
============ ============ ============ ============
Diluted earnings
per share -
continuing
operations: $ 0.16 $ 0.12 $ 0.54 $ 0.36
Diluted loss per
share -
discontinued
operations: (0.00) (0.01) (0.00) (0.04)
------------ ------------ ------------ ------------
$ 0.16 $ 0.11 $ 0.53 $ 0.32
============ ============ ============ ============
Diluted weighted
average common
and equivalent
shares
outstanding 13,273,304 13,172,085 13,250,745 13,154,788
============ ============ ============ ============
Dividends per
share $ 0.12 $ 0.12 $ 0.36 $ 0.36
============ ============ ============ ============
Consolidated Balance Sheets
(unaudited)
----------------------------------------------------------------------
(In Thousands Except Per Share September 30, 2007 December 31, 2006
Amounts)
------------------ -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,588 $ 84
Receivables, net of allowance
for doubtful accounts of
$1,049 and $851 21,222 20,780
Inventories 7,297 11,294
Deferred income taxes 815 815
Prepaid expenses 1,294 1,903
Other 1,061 1,662
------------------ -----------------
Total current assets 34,277 36,538
Investments 3,830 3,554
Property, plant and equipment 316,083 309,264
Less accumulated depreciation 164,602 156,429
------------------ -----------------
Property, plant and
equipment, net 151,481 152,835
Other assets:
Goodwill 25,239 25,239
Intangible assets, net 2,273 3,140
Financial derivative
instruments - 2,489
Deferred costs and other 2,775 3,105
------------------ -----------------
Total other assets 30,287 33,973
------------------ -----------------
Total assets $219,875 $226,900
================== =================
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Checks written in excess of
available cash balances $ - $ 1,475
Short-term financing 10,141 7,719
Accounts payable 4,065 4,211
Accrued expenses 6,750 5,826
Accrued income taxes 347 4,528
Advanced billings and deposits 4,889 3,488
Current maturities of long-term
obligations 1,587 1,560
------------------ -----------------
Total current liabilities: 27,779 28,807
Long-term liabilities:
Debt obligations, net of
current maturities 127,722 141,529
Financial derivative
instruments 461 -
Accrued income taxes 6,900 -
Deferred income taxes 14,097 15,332
Deferred revenue 1,505 2,596
Accrued employee benefits and
deferred compensation 8,893 8,550
------------------ -----------------
Total long-term
liabilities: 159,578 168,007
Total liabilities 187,357 196,814
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par value,
$.10 stated value shares
authorized: 100,000
Shares issued and
outstanding: 13,254 in 2007
and 13,208 in 2006
1,328 1,321
Additional paid-in capital 10,757 9,992
Retained earnings 20,708 18,323
Accumulated other comprehensive
income/(loss) (275) 450
------------------ -----------------
Total shareholders'
equity 32,518 30,086
------------------ -----------------
Total liabilities and
shareholders' equity $219,875 $226,900
================== =================
Telecom Sector Recap
(unaudited, before inter-segment eliminations)
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------------------
2007 2006 2007 2006
--------- --------- --------- --------
(Dollars in Thousands)
Revenues:
Local Service $ 4,247 $ 4,550 $ 12,922 $13,721
Network Access 7,086 7,562 23,823 22,318
Long Distance 1,248 1,252 3,877 3,654
Data 1,781 1,645 5,172 4,521
Internet 1,164 1,072 3,420 3,355
Digital TV 581 386 1,606 990
Directory 1,037 939 2,821 2,736
Message Processing &
Billing 661 482 1,864 1,705
Intersegment 116 58 334 122
Other 842 810 2,627 3,264
--------- --------- --------- --------
Total Telecom Revenues $18,763 $ 18,756 $ 58,466 $56,386
Costs and Expenses:
Cost of services, excluding
depreciation and
amortization 7,794 7,818 22,807 23,555
Selling, general and
administrative expenses,
excluding depreciation and
amortization 3,381 3,524 10,027 9,866
Depreciation and
amortization 3,616 3,781 11,318 11,070
--------- --------- --------- --------
Operating income $ 3,972 $ 3,633 $ 14,314 $11,895
========= ========= ========= ========
Income from Continuing
Operations, net of tax $ 2,376 $ 2,174 $ 8,551 $ 7,198
========= ========= ========= ========
Capital Expenditures $ 3,345 $ 5,300 $ 7,279 $12,374
========= ========= ========= ========
Key Metrics
-----------------------------
Access Lines 66,290 68,829
Long Distance Customers 41,259 40,959
Internet Customers 20,911 19,678
DSL Customers 17,250 15,076
Digital TV Customers 5,706 4,254
Enventis Sector Recap
(unaudited, before inter-segment eliminations)
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------- --------------------
(Dollars In Thousands) 2007 2006 2007 2006
--------- --------- ---------- ---------
Revenues before eliminations:
Enterprise Network
Services $ 12,076 $ 9,741 $45,221 $30,916
Enterprise Transport
Services 5,136 4,231 15,035 12,318
Intersegment 152 - 299 -
--------- --------- ---------- ---------
$ 17,364 $13,972 $60,555 $43,234
Cost of sales 8,705 7,183 35,578 23,322
Cost of services
(excluding depreciation and
amortization) 3,578 3,320 10,562 8,939
Selling, general and
administrative expenses,
(excluding depreciation and
amortization) 2,476 2,057 6,979 6,758
Depreciation and amortization 916 732 2,718 2,237
--------- --------- ---------- ---------
Operating income $ 1,689 $ 680 $ 4,718 $ 1,978
========= ========= ========== =========
Net income $ 1,026 $ 403 $ 2,838 $ 1,178
========= ========= ========== =========
Capital expenditures $ 1,928 $ 1,240 $ 4,029 $ 4,340
========= ========= ========== =========
Enventis Supplemental Product Line Information
(unaudited, before inter-segment eliminations)
----------------------------------------------------------------------
Three Months Ended September 30
-------------------------------
Transport
Network Services Services
(Dollars in Thousands) 2007 2006 2007 2006
-------------------------------
Revenues before intersegment
eliminations:
Revenues $12,076 $9,741 $5,136 $4,231
Intersegment - - 152 -
-------- ------- ------- ------
$12,076 $9,741 $5,288 $4,231
Cost of sales 8,481 7,183 224 -
Cost of services
(excluding depreciation and
amortization) 1,074 891 2,504 2,429
Selling, general and administrative
expenses,
(excluding depreciation and
amortization) 1,374 1,169 1,102 888
Depreciation and amortization 128 73 788 659
-------- ------- ------- ------
Operating income $ 1,019 $ 425 $ 670 $ 255
======== ======= ======= ======
Net income $ 614 $ 251 $ 412 $ 152
======== ======= ======= ======
Capital expenditures $ 438 $ 60 $1,490 $1,180
======== ======= ======= ======
Nine Months Ended September 30
----------------------------------
Transport
Network Services Services
(Dollars in Thousands) 2007 2006 2007 2006
----------------------------------
Revenues before intersegment
eliminations:
Revenues $45,221 $ 30,916 $15,035 $12,318
Intersegment - - 299 -
-------- -------- ------- --------
$45,221 $ 30,916 $15,334 $12,318
Cost of sales 35,345 23,252 233 70
Cost of services
(excluding depreciation and
amortization) 3,254 2,496 7,308 6,443
Selling, general and administrative
expenses,
(excluding depreciation and
amortization) 3,643 3,646 3,336 3,112
Depreciation and amortization 376 246 2,342 1,991
-------- -------- ------- --------
Operating income $ 2,603 $ 1,276 $ 2,115 $ 702
======== ======== ======= ========
Net income $ 1,561 $ 758 $ 1,277 $ 420
======== ======== ======= ========
Capital expenditures $ 518 $ 210 $ 3,511 $ 4,130
======== ======== ======= ========
CONTACT: HickoryTech Corp.
David Christensen, 507-387-3355
CFO
or
Investor Relations:
Jennifer Spaude, 507-386-3765
SOURCE: HickoryTech Corp.
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HickoryTech
