HickoryTech Reports Second Quarter 2009 Results > HickoryTech

HickoryTech Reports Second Quarter 2009 Results

Net Income increases 30 percent sequentially;
cash position is strengthened

MANKATO, Minn., July 29, 2009—HickoryTech Corp. (Nasdaq: HTCO) today reported second quarter revenue of $32.4 million, down 18 percent from the $39.7 million reported one year ago. Net income totaled $2.1 million, or 16 cents per diluted share, up 30 percent sequentially from the $1.6 million reported in the first quarter of fiscal 2009. Net income was down 15 percent from second quarter 2008.

Operating income for the second quarter totaled $5.3 million, up 16 percent sequentially from the $4.6 million reported in the first quarter of 2009. Operating income was down 10 percent compared to the second quarter of 2008.

"We are pleased with the results we have achieved in 2009 with solid financial performance on a sequential basis and the continued strengthening of our balance sheet, including a substantial increase in our cash position,” said John Finke, HickoryTech’s president and chief executive officer. “Contributing to the quarter’s success is our strong growth in Enventis transport services, solid results from the Telecom Sector and overall cost controls. However, our top line continues to be affected by lower business equipment sales in our Enventis Sector due to the economy.”

The Company’s cash position, as of June 30, 2009, was $11.3 million versus $6.6 million on March 31, 2009, a sequential increase of 72 percent, and compares with $1.6 million on Dec. 31, 2008.

Telecom Sector (before inter-segment eliminations), as compared to same period 2008

Telecom Sector net income was $2.2 million for the second quarter 2009, a 26 percent increase from the comparable quarter in 2008. Pre-elimination Telecom Sector revenue was $18 million, a decline of 1 percent. Telecom Sector results continue to be affected by heightened competition within local service offset by broadband revenue growth. Costs and Expenses in the Telecom Sector were $14.3 million, a reduction of 6 percent relative to the second quarter last year.

Network access revenue of $6 million remained flat year-over-year.
Local service revenue declined 5 percent and local lines declined 9 percent, both the result of increased competition in telecom markets.
Broadband revenue, which includes DSL, Data and Digital TV services, grew 8 percent to $3 million versus $2.8 million. This revenue growth again outpaced the decline in local service revenue. DSL subscribers increased 5 percent, totaling 19,065, while Digital TV subscribers grew 21 percent totaling 8,895 subscribers.

Enventis Sector (before inter-segment eliminations), as compared to same period 2008

Enventis Sector net income totaled $1 million for the second quarter 2009, a 39 percent decrease from the comparable quarter in 2008. Enventis Sector revenue before eliminations totaled $14.8 million, a decline of 33 percent to the second quarter in 2008, which included large equipment orders. Costs and expenses in the Enventis Sector were $13.1 million, a reduction of 31 percent from the same quarter in 2008.

Equipment sales within Enterprise Network Services (ENS) totaled $5.4 million, a decrease of $7.3 million from a year ago, which included significant equipment orders.

Service revenue within ENS, which includes professional services, decreased $300,000 or 10 percent.
Enterprise Transport Services (ETS), network based services, revenue increased 8 percent to $6.6 million, attributed to strong sales of transport services.
Both product lines of Enventis, ENS and ETS, continued to operate at net operating profit levels for the second quarter and for the six months ended June 30, despite the economic slowdown.

Capital Expenditures, Debt and Cash Position

HickoryTech reported capital expenditures of $4.7 million for the second quarter of 2009 and $7.3 million year-to-date in fiscal 2009. Capital investments increased $110,000 as compared to the second quarter 2008 and decreased $660,000 for the first six months of fiscal 2009, compared to the same period in fiscal 2008. Long-term and current portion debt balance totaled $125.2 million as of June 30, 2009, a $1.8 million decrease from the beginning of the year, and $8.4 million lower than one year ago. The Company’s cash position, as of June 30, 2009, totaled $11.3 million, compared with $1.6 million at the beginning of fiscal 2009.

CP Telecom Acquisition

The previously announced agreement to acquire CP Telecom is scheduled to close on Aug. 1, 2009. All regulatory approvals have been received. The Company expects to use existing cash on hand to fund the acquisition, and not to incur additional debt. Additional information will be released after the Aug. 1, 2009 closing.

Conference call

HickoryTech will host a conference call and webcast on Thursday, July 30 at 9 a.m. CT. The dial-in number for the call is 877-774-2369 (U.S. and Canada) and the participant pass code is 17422851. A simultaneous Webcast of the call and downloadable presentation will be available through a link on the Investor Relations page at investor.hickorytech.com.

Quarterly Financials Tables

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, founded in 1898, has approximately 430 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. Enventis 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. HickoryTech undertakes no obligation to update any of its forward-looking statements, except as required by federal securities laws.

Consolidated Statement of Operations (unaudited)

(Dollars in thousands,	Three Months Ended								Six Months Ended
except share data)	June 30						%		June 30						%
	2009			2008			Change		2009			2008			Change
Revenues:
Telecom Sector	$	17,781		$	17,999		-1	%	$	35,453		$	36,293		-2	%
Enventis Sector
Equipment		5,393			12,709		-58	%		12,184			22,877		-47	%
Services		9,229			9,037		2	%		18,227			16,475		11	%
Total Enventis Sector		14,622			21,746		-33	%		30,411			39,352		-23	%
Total revenues		32,403			39,745		-18	%		65,864			75,645		-13	%

Costs and Expenses:
Cost of sales, equipment, excluding depreciation and amortization		4,717			10,718		-56	%		10,716			19,415		-45	%
Cost of services, excluding depreciation and amortization		11,948			12,627		-5	%		24,413			24,319		0	%
Selling, general and administrative expenses		5,406			5,463		-1	%		10,562			11,147		-5	%
Depreciation		4,830			4,757		2	%		9,899			9,426		5	%
Amortization of intangibles		213			289		-26	%		427			578		-26	%
Total costs and expenses		27,114			33,854		-20	%		56,017			64,885		-14	%

Operating income		5,289			5,891		-10	%		9,847			10,760		-8	%

Interest and other income		32			15		113	%		41			42		-2	%
Interest expense		(1,719	)		(1,478	)	16	%		(3,427	)		(3,175	)	8	%

Income before income taxes		3,602			4,428		-19	%		6,461			7,627		-15	%
Income taxes		1,485			1,931		-23	%		2,718			3,349		-19	%

Net income	$	2,117		$	2,497		-15	%	$	3,743		$	4,278		-13	%

Reconciliation of operating income to EBITDA:
Operating income	$	5,289		$	5,891		-10	%	$	9,847		$	10,760		-8	%
Add:
Depreciation		4,830			4,757		2	%		9,899			9,426		5	%
Amortization of intangibles		213			289		-26	%		427			578		-26	%
EBITDA	$	10,332		$	10,937		-6	%	$	20,173		$	20,764		-3	%



Basic earnings per share	$	0.16		$	0.19		-16	%	$	0.29		$	0.32		-9	%

Basic weighted average common shares outstanding		13,049,238			13,324,200					13,034,005			13,312,804

Diluted earnings per share	$	0.16		$	0.19		-16	%	$	0.29		$	0.32		-9	%

Diluted weighted average common and equivalent shares outstanding		13,049,677			13,326,719					13,034,005			13,317,145

Dividends per share	$	0.13		$	0.12		8	%	$	0.26		$	0.24		8	%


Consolidated Balance Sheet (unaudited)

Dollars and Share Data in Thousands	June 30, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	11,308		$	1,626
Receivables, net of allowance for doubtful accounts of $760 and $905		20,701			26,292
Inventories		5,899			8,674
Income tax receivable		-			566
Deferred income taxes		2,064			2,064
Prepaid expenses		1,999			1,409
Other		816			1,114
Total current assets		42,787			41,745

Investments		4,306			4,066

Property, plant and equipment		343,698			338,510
Accumulated depreciation		(194,619	)		(187,157	)
Property, plant and equipment, net		149,079			151,353

Other assets:
Goodwill		25,239			25,239
Intangible assets, net		429			856
Deferred costs and other		1,992			2,249
Total other assets		27,660			28,344

Total assets	$	223,832		$	225,508

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Extended term payable	$	12,438		$	10,474
Accounts payable		1,509			3,133
Accrued expenses and other		5,858			8,001
Accrued income taxes		1,563			-
Deferred revenue		5,234			6,205
Current maturities of long-term obligations		1,693			1,621
Total current liabilities		28,295			29,434

Long-term liabilities:
Debt obligations, net of current maturities		123,553			125,384
Financial derivative instruments		2,497			3,286
Accrued income taxes		7,590			7,517
Deferred income taxes		18,623			18,282
Deferred revenue		1,523			1,646
Accrued employee benefits and deferred compensation		10,456			10,210
Total long-term liabilities		164,242			166,325

Total liabilities		192,537			195,759

Commitments and contingencies		-			-

Shareholders' equity:
Common stock, no par value, $.10 stated value
shares authorized: 100,000
Shares issued and outstanding: 13,056 in 2009 and 12,992 in 2008		1,306			1,299
Additional paid-in capital		12,169			11,504
Retained earnings		20,556			20,199
Accumulated other comprehensive (loss)		(2,736	)		(3,253	)
Total shareholders' equity		31,295			29,749

Total liabilities and shareholders' equity	$	223,832		$	225,508


Telecom Sector Recap (unaudited)

	Three Months Ended						Six Months Ended
	June 30				%		June 30				%
	2009		2008		Change		2009		2008		Change
(Dollars in thousands)
Revenues:
Local Service	$	3,880	$	4,086	-5	%	$	7,757	$	8,217	-6	%
Network Access		5,955		5,952	0	%		12,165		12,777	-5	%
Long Distance		1,027		1,197	-14	%		2,058		2,387	-14	%
Data		1,899		1,903	0	%		3,775		3,751	1	%
Internet		1,252		1,189	5	%		2,506		2,267	11	%
Digital TV		1,080		858	26	%		2,088		1,602	30	%
Directory		1,023		1,004	2	%		2,100		2,004	5	%
Bill Processing		961		905	6	%		1,630		1,499	9	%
Intersegment		234		161	45	%		477		291	64	%
Other		704		905	-22	%		1,374		1,789	-23	%
Total Telecom Revenues	$	18,015	$	18,160	-1	%	$	35,930	$	36,584	-2	%

Total Telecom revenue before intersegment eliminations
Unaffiliated Customers	$	17,781	$	17,999			$	35,453	$	36,293
Intersegment		234		161				477		291
		18,015		18,160				35,930		36,584
Costs and expenses:
Cost of services, excluding depreciation and amortization		7,440		7,845	-5	%		15,016		15,492	-3	%
Selling, general and administrative expenses		3,040		3,301	-8	%		5,874		6,605	-11	%
Depreciation and amortization		3,827		4,008	-5	%		7,947		7,934	0	%
Total costs and expenses		14,307		15,154	-6	%		28,837		30,031	-4	%

Operating income	$	3,708	$	3,006	23	%	$	7,093	$	6,553	8	%

Net income	$	2,205	$	1,747	26	%	$	4,183	$	3,815	10	%

Capital expenditures	$	2,351	$	2,545	-8	%	$	3,786	$	4,965	-24	%

Key Metrics
Business access lines		25,034		27,023	-7	%
Residential access lines		32,334		35,872	-10	%
Total access lines		57,368		62,895	-9	%
Long distance customers		37,557		40,565	-7	%
DSL customers		19,065		18,126	5	%
Digital TV customers		8,895		7,353	21	%


Enventis Sector Recap (unaudited)

	Three Months Ended						Six Months Ended
	June 30				%		June 30				%
(Dollars In thousands)	2009		2008		Change		2009		2008		Change
Revenue before eliminations:
ENS equipment	$	5,393	$	12,709	-58	%	$	12,184	$	22,877	-47	%
ENS services		2,749		3,056	-10	%		5,090		5,121	-1	%
ETS services		6,480		5,981	8	%		13,137		11,354	16	%
Intersegment		142		128	11	%		283		266	6	%
	$	14,764	$	21,874	-33	%	$	30,694	$	39,618	-23	%

Total Enventis revenue before intersegment eliminations
Unaffiliated customers	$	14,622	$	21,746			$	30,411	$	39,352
Intersegment		142		128				283		266
	$	14,764	$	21,874			$	30,694	$	39,618
Cost of sales, equipment
(excluding depreciation and amortization)		4,717		10,718	-56	%		10,716		19,415	-45	%
Cost of services
(excluding depreciation and amortization)		4,849		4,880	-1	%		10,087		9,159	10	%
Selling, general and administrative expenses		2,294		2,413	-5	%		4,683		4,740	-1	%
Depreciation and amortization		1,201		1,025	17	%		2,350		2,045	15	%
Total costs and expenses		13,061		19,036	-31	%		27,836		35,359	-21	%

Operating income	$	1,703	$	2,838	-40	%	$	2,858	$	4,259	-33	%
Net income	$	1,018	$	1,660	-39	%	$	1,699	$	2,494	-32	%

Capital expenditures	$	2,262	$	1,984	14	%	$	3,453	$	2,977	16	%


ENVENTIS PRODUCT LINE

	Three Months Ended June 30
	Enterprise Network						Enventis Transport
	Services (ENS)				%		Services (ETS)				%
(Dollars in thousands)	2009		2008		Change		2009		2008		Change

Revenue before intersegment eliminations:
Equipment	$	5,393	$	12,709	-58	%	$	-	$	-	-
Services		2,749		3,056	-10	%		6,480		5,981	8	%
Intersegment		-		-	-			142		128	11	%
	$	8,142	$	15,765	-48	%	$	6,622	$	6,109	8.4	%

Cost of sales, equipment
(excluding depreciation and amortization)		4,701		10,714	-56	%		16		4	300	%
Cost of services
(excluding depreciation and amortization)		1,649		2,143	-23	%		3,200		2,737	17	%
Selling, general and administrative expenses		1,211		1,273	-5	%		1,083		1,140	-5	%
Depreciation and amortization		104		123	-15	%		1,097		902	22	%
Total costs and expenses		7,665		14,253	-46	%		5,396		4,783	13	%

Operating income	$	477	$	1,512	-68	%	$	1,226	$	1,326	-8	%
Net income	$	284	$	885	-68	%	$	734	$	775	-5	%

Capital expenditures	$	119	$	156	-24	%	$	2,143	$	1,828	17	%


	Six Months Ended June 30
	Enterprise Network						Enventis Transport
	Services (ENS)				%		Services (ETS)				%
(Dollars in thousands)	2009		2008		Change		2009		2008		Change

Revenue before intersegment eliminations:
Equipment	$	12,184	$	22,877	-47	%	$	-	$	-	-
Services		5,090		5,121	-1	%		13,137		11,354	16	%
Intersegment		-		-	-			283		266	6	%
	$	17,274	$	27,998	-38	%	$	13,420	$	11,620	15	%

Cost of sales, equipment
(excluding depreciation and amortization)		10,699		19,406	-45	%		17		9	89	%
Cost of services
(excluding depreciation and amortization)		3,601		3,975	-9	%		6,486		5,184	25	%
Selling, general and administrative expenses		2,499		2,532	-1	%		2,184		2,208	-1	%
Depreciation and amortization		186		244	-24	%		2,164		1,801	20	%
Total costs and expenses		16,985		26,157	-35	%		10,851		9,202	18	%

Operating income	$	289	$	1,841	-84	%	$	2,569	$	2,418	6	%
Net income	$	173	$	1,078	-84	%	$	1,526	$	1,416	8	%

Capital expenditures	$	262	$	289	-9	%	$	3,191	$	2,688	19	%

Posted in: 2009

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