HickoryTech Reports First Quarter 2009 Results > HickoryTech

HickoryTech Reports First Quarter 2009 Results

Positioned for Growth: Lower Debt, Higher Cash Position

MANKATO, Minn.--May. 4, 2009-- HickoryTech Corp. (Nasdaq: HTCO) today reported financial results for the first fiscal quarter ended March 31, 2009. The Company reported first quarter revenue of $33.5 million, a 7 percent decline from the $35.9 million reported for the first quarter 2008. Net Income of $1.6 million, or 12 cents per diluted share, experienced a modest decline in the 2009 first quarter compared with the same period one year ago, primarily due to declines in Telecom revenue and Enventis equipment sales revenue, which were partially offset by Enventis services revenue.

Operating income for the first quarter totaled $4.6 million, down 6 percent compared to the first quarter of 2008, primarily related to a decrease in Telecom and Enventis operating income; however, partly offset by improvements in corporate costs.

Debt balance, including long term and current positions, was reduced an additional $1.4 million to $125.6 million in the first quarter of 2009 and the Company’s total cash position increased $4.9 million in the first three months of fiscal 2009.

“HickoryTech has continued to experience challenges due to the macroeconomic environment; however, our business remains strong as demonstrated by our further reduction of debt and increased cash position,” said John Finke, HickoryTech’s president and chief executive officer. “Overall, we are pleased with our first quarter performance. As our customers look for ways to maximize their communications spending, HickoryTech continues to demonstrate the strong value through our products and services.”

Sector Highlights

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

First quarter 2009 Telecom Sector revenue totaled $17.9 million versus $18.4 million one year ago. Growth in broadband revenues partially offset the continued declines in local service and network access revenue.

Broadband revenue, including DSL, data and digital TV services, continued to outpace the decline in local service revenue, reporting $2.9 million, an increase of 11 percent compared to $2.6 million one year ago. The growth trend in DSL subscribers continued with a 5 percent increase, totaling 18,924 subscribers. Digital TV subscribers increased 19 percent to 8,464.
Network access revenue totaled $6.2 million, a decline of $615,000. The minute-of-use and number-of-lines-served have been on a steady decline for several quarters, an industry-wide trend.
Local service revenue declined 6 percent, primarily due to competition and economic impacts. Local voice lines declined 9 percent from one year ago.

Enventis Sector (before intersegment eliminations), as compared to same period 2008

First quarter 2009 Enventis Sector revenue of $15.9 million declined 10 percent from the $17.7 million reported for the same period one year ago. Enventis operating income for the first quarter totaled $1.2 million, a 19 percent decrease from the first quarter in 2008. Enventis net income declined 18 percent as a result of a decline in revenue and a planned increase in operating expenses to grow the sector’s services revenue.

Enventis Transport Services (ETS) revenue increased 24 percent to $6.7 million, attributed to strong wholesale and retail transport growth including national MPLS services and an increased demand for Enventis’ SingleLink™ Unified Communications solution.
Enterprise Network Services (ENS) services revenue, which includes monitoring and support services, increased 13 percent to $2.3 million.
ENS equipment sales in the first quarter 2009 totaled $6.8 million, a decrease of $3.4 million or 33 percent. The decline is a result of a slowdown in equipment sales driven by the economy.
Enventis cost-of-services expense increased in the first quarter 2009 by $1 million, or 22 percent, as compared to the same quarter last year. This cost increase was planned and supports the growth in Enventis services. First quarter 2009 cost-of-services level reported a decrease of $1.6 million, or 24 percent, from the previous quarter.

Capital expenditures, debt and cash

HickoryTech reported capital expenditures of $2.6 million for the first quarter of 2009, down from the $3.4 million reported in the same quarter in 2008, and down from the $5.3 million reported in the previous quarter. The debt balance (long-term and current portion) totaled $125.6 million as of March 31, 2009, a $1.4 million decrease from the previous quarter. Additionally, the Company had $6.6 million of cash on hand as of March 31, 2009, an increase of $4.9 million.

In an announcement earlier today, HickoryTech reported it has reached an agreement to acquire CP Telecom, a facilities-based telecommunications provider serving Minneapolis and Duluth, Minn. The closing of the transaction is pending approval of regulatory agencies and is expected in the third quarter 2009.

“Looking forward, we expect to see continued scrutiny around business and consumer spending for the remainder of the year, which will adversely impact several of our lines of business,” continued Finke. “We will continue to execute prudent cost controls while at the same time aligning our company to take advantage of opportunities when the economic climate changes.”

Due to the pending acquisition, the Company will not update its future outlook at this time.

Conference call

HickoryTech will host a conference call and webcast on Tuesday, May 5 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 95430548. A simultaneous Webcast of the call and downloadable presentation will be available through a link on the Investor Relations page at www.hickorytech.com.

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)

		Three Months Ended March 31
								%
(Dollars in thousands)		2009			2008			Change
Revenues:
	Telecom Sector	$	17,672		$	18,294		-3	%
	Enventis Sector
	Equipment		6,791			10,168		-33	%
	Services		8,998			7,438		21	%
	Total Enventis Sector		15,789			17,606		-10	%
	Total revenues		33,461			35,900		-7	%

Costs and Expenses:
	Cost of sales, equipment, excluding depreciation and amortization		5,999			8,697		-31	%
	Cost of services, excluding depreciation and amortization		12,465			11,690		7	%
	Selling, general and administrative expenses		5,156			5,686		-9	%
	Depreciation		5,069			4,669		9	%
	Amortization of intangibles		214			289		-26	%
	Total costs and expenses		28,903			31,031		-7	%

Operating income			4,558			4,869		-6	%

Interest and other income			9			27		-67	%
Interest expense			(1,708	)		(1,697	)	1	%

Income before income taxes			2,859			3,199		-11	%
Income taxes			1,233			1,418		-13	%

Net income		$	1,626		$	1,781		-9	%

Reconciliation of operating income to EBITDA:
	Operating income	$	4,558		$	4,869		-6	%
	Add:
	Depreciation		5,069			4,669		9	%
	Amortization of intangibles		214			289		-26	%
	EBITDA	$	9,841		$	9,827		0	%

(Not in thousands)

Basic earnings per share		$	0.12		$	0.13		-8	%

Basic weighted average common shares outstanding			13,018,602			13,301,409

Diluted earnings per share		$	0.12		$	0.13		-8	%

Diluted weighted average common and equivalent shares outstanding			13,019,248			13,306,910

Dividends per share		$	0.13		$	0.12		8	%


Consolidated Balance Sheet
(Unaudited)
(Dollars in Thousands)


	March 31, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	6,565		$	1,626
Receivables, net of allowance for doubtful accounts of $813 and $905		16,375			26,292
Inventories		5,786			8,674
Income tax receivable		-			566
Deferred income taxes		2,064			2,064
Prepaid expenses		2,230			1,409
Other		669			1,114
Total current assets		33,689			41,745

Investments		4,306			4,066

Property, plant and equipment		340,187			338,510
Accumulated depreciation		(191,001	)		(187,157	)
Property, plant and equipment, net		149,186			151,353

Other assets:
Goodwill		25,239			25,239
Intangible assets, net		642			856
Deferred costs and other		2,128			2,249
Total other assets		28,009			28,344

Total assets	$	215,190		$	225,508

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Extended term payable	$	4,768		$	10,474
Accounts payable		2,307			3,133
Accrued expenses and other		6,004			8,001
Accrued income taxes		309			-
Deferred revenue		5,368			6,205
Current maturities of long-term obligations		1,671			1,621
Total current liabilities		20,427			29,434

Long-term liabilities:
Debt obligations, net of current maturities		123,918			125,384
Financial derivative instruments		2,801			3,286
Accrued income taxes		7,578			7,517
Deferred income taxes		18,489			18,282
Deferred revenue		1,500			1,646
Accrued employee benefits and deferred compensation		10,286			10,210
Total long-term liabilities		164,572			166,325

Total liabilities		184,999			195,759

Commitments and contingencies		-			-

Shareholders' equity:
Common stock, no par value, $.10 stated value
shares authorized: 100,000
Shares issued and outstanding: 13,041 in 2009 and 12,992 in 2008		1,304			1,299
Additional paid-in capital		11,692			11,504
Retained earnings		20,135			20,199
Accumulated other comprehensive (loss)		(2,940	)		(3,253	)
Total shareholders' equity		30,191			29,749

Total liabilities and shareholders' equity	$	215,190		$	225,508


Telecom Sector Recap
(Unaudited)

	Three Months Ended March 31
					%
(Dollars in thousands)	2009		2008		Change

Revenues:
Local Service	$	3,877	$	4,131	-6	%
Network Access		6,210		6,825	-9	%
Long Distance		1,031		1,190	-13	%
Data		1,876		1,848	2	%
Internet		1,254		1,078	16	%
Digital TV		1,008		744	35	%
Directory		1,077		1,000	8	%
Bill Processing		669		594	13	%
Intersegment		243		130	87	%
Other		670		884	-24	%
Total Telecom Revenues	$	17,915	$	18,424	-3	%

Total Telecom revenue before intersegment eliminations
Unaffiliated Customers	$	17,672	$	18,294
Intersegment		243		130
		17,915		18,424
Costs and expenses:
Cost of services, excluding depreciation and amortization		7,576		7,647	-1	%
Selling, general and administrative expenses		2,834		3,304	-14	%
Depreciation and amortization		4,120		3,926	5	%
Operating income	$	3,385	$	3,547	-5	%

Net income	$	1,978	$	2,068	-4	%


Capital expenditures	$	1,435	$	2,420	-41	%

Key Metrics
Business access lines		25,189		27,318	-8	%
Residential access lines		32,966		36,713	-10	%
Total access lines		58,155		64,031	-9	%
Long distance customers		37,990		40,837	-7	%
DSL customers		18,924		18,003	5	%
Digital TV customers		8,464		7,107	19	%


Enventis Sector Recap
(Unaudited)

	Three Months Ended March 31
					%
(Dollars In thousands)	2009		2008		Change
Revenue before eliminations:
ENS equipment	$	6,791	$	10,168	-33	%
ENS services		2,341		2,065	13	%
ETS services		6,657		5,373	24	%
Intersegment		141		138	2	%
	$	15,930	$	17,744	-10	%

Total Enventis revenue before intersegment eliminations
Unaffiliated customers	$	15,789	$	17,606
Intersegment		141		138
	$	15,930	$	17,744
Cost of sales, equipment
(excluding depreciation and amortization)		5,999		8,697	-31	%
Cost of services
(excluding depreciation and amortization)		5,238		4,279	22	%
Selling, general and administrative expenses		2,389		2,327	3	%
Depreciation and amortization		1,149		1,020	13	%

Operating income	$	1,155	$	1,421	-19	%
Net income	$	681	$	834	-18	%

Capital expenditures	$	1,191	$	993	20	%


ENVENTIS PRODUCT LINE

	Three Months Ended March 31
	Enterprise Network Services (ENS)					%		Enventis Transport Services (ETS)				%
(Dollars in thousands)	2009			2008		Change		2009		2008		Change

Revenue before intersegment eliminations:
Equipment	$	6,791		$	10,168	-33	%	$	-	$	-	-
Services		2,341			2,065	13	%		6,657		5,373	24	%
Intersegment		-			-	-			141		138	2	%
	$	9,132		$	12,233	-25	%	$	6,798	$	5,511	23	%

Cost of sales, equipment
(excluding depreciation and amortization)		5,998			8,692	-31	%		1		5	-80	%
Cost of services
(excluding depreciation and amortization)		1,952			1,832	7	%		3,286		2,447	34	%
Selling, general and administrative expenses		1,288			1,259	2	%		1,101		1,068	3	%
Depreciation and amortization		82			121	-32	%		1,067		899	19	%

Operating income	$	(188	)	$	329	-157	%	$	1,343	$	1,092	23	%
Net income	$	(111	)	$	193	-158	%	$	792	$	641	24	%

Capital expenditures	$	143		$	133	8	%	$	1,048	$	860	22	%

Source: HickoryTech Corp.

HickoryTech Corp.
David Christensen, 507-387-3355
CFO
or
Jennifer Spaude, 507-386-3765
Investor Relations

Posted in: 2009

Actions: E-mail | Permalink

News Room

HickoryTech Reports First Quarter 2009 Results

News Archives