News Room

Net Income Increased, Debt Reduced, Shares Repurchased

 MANKATO, Minn., Mar. 3, 2009-- HickoryTech Corp. (Nasdaq: HTCO):

• Enventis services revenue increased - 68 percent for network services; 19 percent for transport services in the fourth quarter
• Telecom sector broadband revenue grew 20 percent in the fourth quarter
• Long-term debt declined $4.4 million from the previous quarter
• Company purchased 393,000 shares of HickoryTech stock for $2.4 million

HickoryTech Corp. (Nasdaq: HTCO) today reported financial results for the fourth quarter ended Dec. 31, 2008. The Company reported fourth quarter-revenue of $37.7 million, a slight decline from the $38.3 million reported in the fourth quarter of fiscal 2007. Net income for the fourth quarter 2008 totaled $1.7 million or $0.13 per diluted share, a 10 percent increase over the $1.5 million or $0.12 per diluted share reported in the fourth quarter 2007.

“Our fourth-quarter results reflect progress on the strategic growth elements of our business plan combined with a challenging economic environment,” said John Finke, HickoryTech’s president and chief executive officer. “Our focus on the customer experience and our extensive business and consumer product portfolio position us well to remain strong and competitive in 2009.”

Consolidated results for the fourth quarter fiscal 2008

The Company’s 2008 fourth-quarter operating revenue totaled $37.7 million, a 2 percent decline over the same quarter one year ago, primarily due to a decline in Enventis Sector equipment revenue.

Consolidated operating income for the fourth quarter totaled $4.1 million, a 16 percent decrease compared to the $4.9 million reported in the fourth quarter of 2007. Costs and expenses including depreciation expense totaled $33.6 million and were relatively flat year over year.

Fourth quarter 2008 net income totaled $1.7 million, or 13 cents per diluted share, compared to $1.5 million, or $0.12 cents per share, in the fourth quarter of 2007. Improvement in income tax expense offset the decline in operating income during the fourth quarter.

Telecom Sector (before inter-segment eliminations), as compared to same period 2007

Fourth quarter 2008 Telecom Sector revenue totaled $18.3 million versus $18.8 million. The Telecom Sector continues to incur increasing competition, which is driving declines in local service and network access, partly offset by growth in broadband services.

• Broadband revenue of $2.9 million increased 20 percent compared to $2.4 million one year ago. This revenue, which includes DSL, data and digital TV services, again outpaced the decline in local service revenue. The upward growth trend in DSL subscribers continued with a 7 percent increase, totaling 18,696 subscribers. Digital TV subscribers increased 29 percent to 8,368.
• Network access revenue was $6.3 million, a decline of $739,000. Fourth quarter 2008 included one-time, negative adjustments of $244,000 associated with distribution of cost-based revenue.
• Local service revenue declined 4 percent, primarily due to competition and the economy. Local voice lines declined 9 percent, inflated by the loss of one Centrex business customer. Excluding this customer, local line loss would have been 6.9 percent.

Enventis Sector (before intersegment eliminations), as compared to same period 2007

Fourth quarter 2008 Enventis Sector revenue of $19.6 million was flat year over year. Enventis operating income for the fourth quarter totaled $1.1 million, a decrease of 48 percent. Enventis net income declined 26 percent. The Company’s plan to invest in Enventis services growth resulted in higher costs and a decline in net income.

• Enterprise Network Services (ENS) equipment sales in the fourth quarter 2008 totaled $8.9 million, a decrease of $2.7 million or 24 percent.
• ENS services revenue, which includes monitoring and support services, increased 68 percent to $4.2 million.
• Enventis Transport Services (ETS) revenue increased 19 percent to $6.5 million, attributed to strong wholesale and retail transport growth including national MPLS services and an increased demand for Enventis’ SingleLink™ Unified Communications solution.
• Enventis’ SingleLink™ Unified Communications solution continues to build momentum offering a cost-effective centrally managed and hosted VoIP-based communications system for users across multiple locations.
• Enventis cost-of-services expense increased in the fourth quarter and fiscal year 2008. This cost increase was planned, and in support of the $7.7 million growth in Enventis services, which are primarily recurring revenues under contract.

Consolidated results for fiscal 2008

• For the fiscal year ending Dec. 31, 2008, HickoryTech reported revenue of $153.2 million, a 2 percent decrease from 2007. Excluding the one-time interexchange carrier settlement recorded in 2007, fiscal 2008 revenue declined 1 percent.
• HickoryTech net income for fiscal 2008 totaled $8 million, or $0.61 per diluted share, a 7 percent decline in net income from 2007. Excluding the one-time settlement in 2007, net income would have increased 7 percent in 2008.
• Operating income for fiscal 2008 totaled $20.2 million, down 13 percent from 2007, or down 5 percent excluding the one-time 2007 settlement.
• Telecom Sector revenue totaled $73.2 million, down 5 percent compared to 2007 revenue, or down 2 percent excluding the one-time 2007 settlement.
• Enventis Sector revenue totaled $80 million, flat with 2007 revenue. Enventis services revenue increased 27 percent in 2008.
• Lower-interest expense and income-tax expense partially offset the lower operating income of 2008.

Capital expenditures, debt and cash

HickoryTech reported capital expenditures of $5.3 million for the fourth quarter of 2008 and $17.7 million for the full year. Investments supported fiber and IP network upgrades, Digital TV expansion, the Mankato data center and the addition of network collocations in Minneapolis. Fiscal 2008 investments were in line with reported 2007 expenditures of $17.5 million. The debt balance (long-term and current portion) totaled $127 million as of Dec. 31, 2008, a $2.2 million decrease from the beginning of the fiscal year and a $4.4 million decrease from the previous quarter. In addition, the Company had $1.6 million of cash on the Dec. 31, 2008 year-end balance sheet.

In the fourth quarter of fiscal 2008, the Company purchased 393,000 shares of HickoryTech common stock for $2.4 million. As of Dec. 31, 2008, HickoryTech has 12,992,000 shares outstanding. Additionally, during the fourth quarter the Company announced an 8 percent increase in its fourth quarter dividend to 13 cents per share.

Future outlook

HickoryTech provided the following information related to its 2009 full-year outlook:

• Revenue is expected to range from $153 million to $159 million
• Net income is expected to range from $7 million to $7.8 million
• CAPEX is expected to range from $17 million to $19 million annual
• Cash flow expected to reduce year-end 2009 debt balance to a range from $124 million to $127 million

“We are cautious as we enter fiscal 2009,” continued Finke. “While there remain many uncertainties regarding relief within the economic environment, we have set a future outlook that we believe is attainable and reflects HickoryTech’s position of strength. That said, should the economy move slowly out of recession, our outlook may change as the year progresses.”

Conference call

HickoryTech will host a conference call and webcast on Wednesday, March 4, 2009 at 9 a.m. CT. The dial-in number for the call is 866-770-7146 (U.S. and Canada) and the participant pass code is “HickoryTech.” 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 in 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											For Year Ended
(Dollars in thousands)				December 31								%			December 31								%
				2008				2007				Change			2008				2007				Change
Revenues:
	Telecom Sector			$	18,148			$	18,715			-3	%		$	73,199			$	76,847			-5	%
	Enventis Sector
		Equipment			8,912				11,651			-24	%			43,514				51,046			-15	%
		Services			10,610				7,895			34	%			36,462				28,756			27	%
		Total Enventis Sector			19,522				19,546			0	%			79,976				79,802			0	%
	Total revenues				37,670				38,261			-2	%			153,175				156,649			-2	%
Costs and Expenses:
	Cost of sales, equipment, excluding depreciation and amortization				7,750				9,762			-21	%			37,355				45,340			-18	%
	Cost of services, excluding depreciation and amortization				14,244				12,049			18	%			52,004				44,881			16	%
	Selling, general and administrative expenses				6,198				6,617			-6	%			22,984				24,244			-5	%
	Depreciation				5,108				4,657			10	%			19,479				17,847			9	%
	Amortization of intangibles				264				290			-9	%			1,127				1,157			-3	%
	Total costs and expenses				33,564				33,375			1	%			132,949				133,469			0	%
Operating income					4,106				4,886			-16	%			20,226				23,180			-13	%
Interest and other income					12				88			-86	%			93				287			-68	%
Interest expense					(1,821	)			(1,880	)		-3	%			(6,870	)			(8,121	)		-15	%
Income before income taxes					2,297				3,094			-26	%			13,449				15,346			-12	%
Income taxes					618				1,563			-60	%			5,420				6,711			-19	%
Income from continuing operations					1,679				1,531			10	%			8,029				8,635			-7	%
Discontinued operations
	Loss from operations of discontinued component				-				(13	)		-100	%			-				(40	)		-100	%
	Income tax benefit				-				(6	)		-100	%			-				(16	)		-100	%
Loss from discontinued operations					-				(7	)		-100	%			-				(24	)		-100	%
Net income				$	1,679			$	1,524			10	%		$	8,029			$	8,611			-7	%
Reconciliation of operating income to EBITDA:
	Operating income			$	4,106			$	4,886			-16	%		$	20,226			$	23,180			-13	%
	Add:
	Depreciation				5,108				4,657			10	%			19,479				17,847			9	%
	Amortization of intangibles				264				290			-9	%			1,127				1,157			-3	%
	EBITDA			$	9,478			$	9,833			-4	%		$	40,832			$	42,184			-3	%
(Not in thousands)
Basic earnings per share - continuing operations:				$	0.13			$	0.12			8	%		$	0.61			$	0.65			-6	%
Basic loss per share - discontinued operations:					-				-			-				-				-
				$	0.13			$	0.12			8	%		$	0.61			$	0.65			-6	%
Basic weighted average common shares outstanding					13,012,619				13,283,103							13,248,731				13,258,369
Diluted earnings per share - continuing operations:				$	0.13			$	0.12			8	%		$	0.61			$	0.65			-6	%
Diluted loss per share - discontinued operations:					-				-			-				-				-
				$	0.13			$	0.12			8	%		$	0.61			$	0.65			-6	%
Diluted weighted average common and equivalent shares outstanding					13,015,211				13,289,587							13,259,933				13,260,087
Dividends per share				$	0.13			$	0.12			8	%		$	0.49			$	0.48			2	%

Consolidated Balance Sheet
(unaudited)
(Dollars and share amounts in thousands)		December 31, 2008				December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents		$	1,626			$	171
Receivables, net of allowance for doubtful accounts of $905 and $1,184			26,292				28,357
Inventories			8,674				7,054
Income tax receivable			566				1,013
Deferred income taxes			2,064				1,334
Prepaid expenses			1,409				1,713
Other			1,114				1,196
Total current assets			41,745				40,838
Investments			4,066				3,830
Property, plant and equipment			338,510				322,249
Accumulated depreciation			(187,157	)			(169,318	)
Property, plant and equipment, net			151,353				152,931
Other assets:
Goodwill			25,239				25,239
Intangible assets, net			856				1,983
Deferred costs and other			2,249				2,674
Total other assets			28,344				29,896
Total assets		$	225,508			$	227,495
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Extended term payable		$	10,474			$	14,443
Accounts payable			3,133				4,538
Accrued expenses and other			8,001				7,740
Deferred revenue			6,205				5,158
Current maturities of long-term obligations			1,621				731
Total current liabilities			29,434				32,610
Long-term liabilities:
Debt obligations, net of current maturities			125,384				128,475
Financial derivative instruments			3,286				1,451
Accrued income taxes			7,517				7,747
Deferred income taxes			18,282				14,901
Deferred revenue			1,646				1,527
Accrued employee benefits and deferred compensation			10,210				8,852
Total long-term liabilities			166,325				162,953
Total liabilities			195,759				195,563
Commitments and contingencies			-				-
Shareholders' equity:
Common stock, no par value, $.10 stated value shares authorized: 100,000
Shares issued and outstanding: 12,992 in 2008 and 13,285 in 2007			1,299				1,329
Additional paid-in capital			11,504				11,031
Retained earnings			20,199				20,639
Accumulated other comprehensive (loss)			(3,253	)			(1,067	)
Total shareholders' equity			29,749				31,932
Total liabilities and shareholders' equity		$	225,508			$	227,495

Telecom Sector Recap
(unaudited before intersegment eliminations)
				Three Months Ended									For Year Ended
				December 31						%			December 31						%
				2008			2007			Change			2008			2007			Change
(Dollars in thousands)
	Revenues:
		Local Service		$	4,000		$	4,167		-4	%		$	16,296		$	17,089		-5	%
		Network Access			6,330			7,069		-10	%			25,859			30,892		-16	%
		Long Distance			1,079			1,191		-9	%			4,563			5,068		-10	%
		Data			1,933			1,728		12	%			7,561			6,900		10	%
		Internet			1,245			1,192		4	%			4,723			4,612		2	%
		Digital TV			949			667		42	%			3,422			2,273		51	%
		Directory			1,034			1,033		0	%			4,119			3,854		7	%
		Bill Processing			768			610		26	%			3,325			2,474		34	%
		Intersegment			179			133		35	%			644			467		38	%
		Other			810			1,058		-23	%			3,331			3,685		-10	%
		Total Telecom Revenues		$	18,327		$	18,848		-3	%		$	73,843		$	77,314		-4	%
	Total Telecom revenue before intersegment eliminations
	Unaffiliated Customers			$	18,148		$	18,715					$	73,199		$	76,847
	Intersegment				179			133						644			467
					18,327			18,848						73,843			77,314
	Costs and expenses:
		Cost of services, excluding depreciation and amortization			7,691			8,086		-5	%			31,141			30,893		1	%
		Selling, general and administrative expenses			3,446			3,380		2	%			13,521			13,407		1	%
		Depreciation and amortization			4,143			3,900		6	%			16,136			15,218		6	%
	Operating income			$	3,047		$	3,482		-12	%		$	13,045		$	17,796		-27	%
	Net income			$	2,256		$	1,909		18	%		$	8,104		$	10,460		-23	%
	Capital expenditures			$	3,020		$	4,210		-28	%		$	11,102		$	11,489		-3	%
	Key Metrics
	Business access lines				25,274			27,403		-8	%
	Residential access lines				33,757			37,428		-10	%
	Total access lines				59,031			64,831		-9	%
	Long distance customers				38,458			40,956		-6	%
	DSL customers				18,696			17,427		7	%
	Digital TV customers				8,368			6,487		29	%

Enventis Sector Recap
(unaudited before intersegment eliminations)
		Three Months Ended									For Year Ended
		December 31						%			December 31						%
(Dollars In thousands)		2008			2007			Change			2008			2007			Change
Revenue before eliminations:
ENS equipment		$	8,912		$	11,651		-24	%		$	43,514		$	51,046		-15	%
ENS services			4,152			2,466		68	%			12,387			8,292		49	%
ETS services			6,458			5,429		19	%			24,075			20,464		18	%
Intersegment			111			141		-21	%			515			440		17	%
		$	19,633		$	19,687		0	%		$	80,491		$	80,242		0	%
Total Enventis revenue before intersegment eliminations
Unaffiliated customers		$	19,522		$	19,546					$	79,976		$	79,802
Intersegment			111			141						515			440
		$	19,633		$	19,687					$	80,491		$	80,242
Cost of sales, equipment
(excluding depreciation and amortization)			7,750			9,762		-21	%			37,355			45,340		-18	%
Cost of services
(excluding depreciation and amortization)			6,877			4,205		64	%			21,894			14,767		48	%
Selling, general and administrative expenses			2,650			2,497		6	%			9,801			9,476		3	%
Depreciation and amortization			1,214			1,037		17	%			4,417			3,755		18	%
Operating income		$	1,142		$	2,186		-48	%		$	7,024		$	6,904		2	%
Net income		$	916		$	1,236		-26	%		$	4,369		$	4,074		7	%
Capital expenditures		$	2,093		$	1,899		10	%		$	6,408		$	5,928		8	%

Enventis Product Line
			Three Months Ended December 31
			Enterprise Network Services (ENS)						%			Enventis Transport Services (ETS)						%
	(Dollars in thousands)		2008			2007			Change			2008			2007			Change
	Revenue before intersegment eliminations:
	Equipment		$	8,912		$	11,651		-24	%		$	-		$	-		-
	Services			4,152			2,466		68	%			6,458			5,429		19	%
	Intersegment			-			-		-				111			141		-21	%
			$	13,064		$	14,117		-7	%		$	6,569		$	5,570		18	%
	Cost of sales, equipment
	(excluding depreciation and amortization)			7,749			9,656		-20	%			1			106		-99	%
	Cost of services
	(excluding depreciation and amortization)			3,429			1,285		167	%			3,448			2,920		18	%
	Selling, general and administrative expenses			1,437			1,472		-2	%			1,213			1,025		18	%
	Depreciation and amortization			149			118		26	%			1,065			919		16	%
	Operating income		$	300		$	1,586		-81	%		$	842		$	600		40	%
	Net income		$	276		$	917		-70	%		$	640		$	319		101	%
	Capital expenditures		$	16		$	69		-77	%		$	2,077		$	1,830		13	%

			For Year Ended December 31
			Enterprise Network Services (ENS)						%			Enventis Transport Services (ETS)						%
	(Dollars in thousands)		2008			2007			Change			2008			2007			Change
	Revenue before intersegment eliminations:
	Equipment		$	43,514		$	51,046		-15	%		$	-		$	-		-
	Services			12,387			8,292		49	%			24,075			20,464		18	%
	Intersegment			-			-		-				515			440		17	%
			$	55,901		$	59,338		-6	%		$	24,590		$	20,904		18	%
	Cost of sales, equipment
	(excluding depreciation and amortization)			37,342			45,001		-17	%			13			339		-96	%
	Cost of services
	(excluding depreciation and amortization)			10,102			4,539		123	%			11,792			10,228		15	%
	Selling, general and administrative expenses			5,264			5,115		3	%			4,537			4,361		4	%
	Depreciation and amortization			515			494		4	%			3,902			3,261		20	%
	Operating income		$	2,678		$	4,189		-36	%		$	4,346		$	2,715		60	%
	Net income		$	1,670		$	2,478		-33	%		$	2,699		$	1,596		69	%
	Capital expenditures		$	468		$	587		-20	%		$	5,940		$	5,341		11	%