Maintains $1.8 Million Net Income, Reaffirms 2008 Guidance
MANKATO, Minn.--April 30, 2008--HickoryTech Corp. (Nasdaq: HTCO) today reported financial results for the first fiscal quarter ended March 31, 2008. The Company reported first quarter revenue of $35.9 million, a modest decline from the $36.9 million revenue of the first quarter 2007. Net Income remained steady at $1.8 million and produced earnings of 13 cents per share for the first quarter 2008. Enventis Sector revenue was relatively flat at $17.6 million.
"Our first quarter results were solid, while we continued to invest in the future of our Company," said John Finke, HickoryTech's president and chief executive officer. "We've added resources to expand our managed, professional and support services. This along with our investment to expand our business network and Digital TV service area should lead to excellent operating growth in the future."
Consolidated Results for the first quarter 2008
HickoryTech's consolidated operating revenue for the first quarter totaled $35.9 million, a modest decline from a year ago, due primarily to decreases in Telecom revenue and Enventis equipment sales revenue; however, offset by an increase in Enventis Sector service revenue. "We continue to be very pleased with the progress in growing our professional services business within the Enventis Sector, with its recurring revenue and higher margin characteristics," said Finke.
Consolidated operating income for the quarter totaled $4.9 million, a 3.9 percent decrease compared to the first quarter of 2007, primarily related to a decrease in Telecom operating income; however, partly offset by improvements in corporate costs and increased profitability within Enventis.
Improvements in interest expense helped offset the decline in operating income in the first quarter of 2008. HickoryTech reported net income of $1.8 million, or $0.13 per diluted share, for the first quarter of 2008, flat with first quarter of 2007.
Telecom Sector (before inter-segment eliminations)
In the first quarter of 2008, the Telecom Sector experienced a mixture of trends including: increased consumer competition, local service declines, broadband growth and network access declines.
Key Telecom Sector metrics for the first quarter 2008, as compared to same period 2007
- Pre-elimination Telecom Sector Revenue decreased to $18.4 million versus $19.1 million
- Broadband revenues grew 20 percent to $2.6 million versus $2.2 million. This revenue, which includes DSL, Data and Digital TV services, again outpaced the decline in local service revenue. The upward growth trend in DSL lines continued, totaling 18,003, an increase of 10 percent. Total Digital TV services grew to 7,107, up 46 percent.
- Network access revenue was $6.8 million, a decrease of $534,000 or 7.3 percent.
- Local service revenue declined 7.1 percent primarily due to competition. Local lines declined 5.2 percent.
Enventis Sector (before inter-segment eliminations), as compared to same period 2007
Enventis Sector revenue before eliminations totaled $17.7 million, a 1 percent decline of $208,000. Enventis operating income for the first quarter was $1.4 million, an increase of 3 percent compared with the same quarter in 2007.
- Equipment sales within Enterprise Network Services (ENS) for the first quarter 2008 totaled $10.2 million, a decrease of $1.3 million or 11 percent.
- Service revenue within ENS, which includes managed services, increased $322,000 or 18 percent.
- Enterprise Transport Services (ETS), network based services, first quarter 2008 revenue increased 15 percent to $5.5 million, from $4.8 million a year ago, attributed to strong wholesale transport growth and increased demand for our hosted unified communication solutions. Operating income was $1.1 million or 20 percent of revenue, compared to $633,000, or 13 percent of revenue.
Capital Expenditures and Debt
HickoryTech reported capital expenditures of $3.4 million for the first quarter of 2008. Investments supported fiber and IP network upgrades, Digital TV expansion and success-based network sales. The investment was $0.7 million more than the same period one year ago. The debt balance (long-term and current portion) totaled $131.2 million as of March 31, 2008, a $2 million increase from the beginning of the year.
Future Outlook
HickoryTech reaffirmed its previously stated 2008 full-year outlook:
- Revenue is expected to range from $158 million to $164 million
- Net Income is expected to range from $7.6 million to $8.4 million
- CAPEX is expected to range from $18 million to $20 million for the year
- Year-end debt balance is expected to range from $126 million to $129 million
"We are focused on our business plan and delivering strong results for the full year 2008," said Finke. "We are well positioned to fully utilize our extended network to grow our business services and cross-sell additional services along our fiber footprint. We look forward to expanding our Digital TV services and increasing penetration of broadband services in existing markets."
Webcast Details
Further information on the first quarter 2008 results will be discussed during the Company's quarterly conference call and webcast with investors on Thursday, May 1, 2008 at 9:00 a.m. CT. The dial-in number for the call is 866.314.9013 (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 410 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 thousands) Three Months Ended March 31
---------------------------
2008 2007
------------- -------------
Revenues:
Telecom Sector $ 18,294 $ 19,037
Enventis Sector
Equipment revenue 10,168 11,434
Services revenue 7,438 6,456
------------- -------------
Total Enventis Sector 17,606 17,890
------------- -------------
Total revenues 35,900 36,927
Costs and Expenses:
Cost of sales, equipment, excluding
depreciation and amortization 8,697 10,314
Cost of services, excluding depreciation
and amortization 11,690 10,917
Selling, general and administrative
expenses 5,686 5,836
Depreciation 4,669 4,504
Amortization of intangibles 289 289
------------- -------------
Total costs and expenses 31,031 31,860
------------- -------------
Operating income 4,869 5,067
Interest and other income 27 84
Interest expense (1,697) (2,182)
------------- -------------
Income before income taxes 3,199 2,969
Income taxes 1,418 1,201
------------- -------------
Income from continuing operations 1,781 1,768
Discontinued operations
Loss from operations of discontinued
component - (2)
Income tax benefit - (1)
------------- -------------
Loss from discontinued operations - (1)
------------- -------------
Net income $ 1,781 $ 1,767
============= =============
Reconciliation of operating income to
EBITDA:
Operating income $ 4,869 $ 5,067
Add:
Depreciation 4,669 4,504
Amortization of intangibles 289 289
------------- -------------
EBITDA $ 9,827 $ 9,860
============= =============
(Not in thousands)
Basic earnings per share - continuing
operations: $ 0.13 $ 0.13
Basic loss per share - discontinued
operations: - -
------------- -------------
$ 0.13 $ 0.13
============= =============
Basic weighted average common shares
outstanding 13,301,409 13,240,434
============= =============
Diluted earnings per share - continuing
operations: $ 0.13 $ 0.13
Diluted loss per share - discontinued
operations: - -
------------- -------------
$ 0.13 $ 0.13
============= =============
Diluted weighted average common and
equivalent shares outstanding 13,306,910 13,241,010
============= =============
Dividends per share $ 0.12 $ 0.12
============= =============
Consolidated Balance Sheet
(unaudited)
(In thousands) March 31, 2008 December 31, 2007
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,492 $ 171
Receivables, net of allowance
for doubtful accounts of
$987 and $1,184 21,384 28,357
Inventories 7,749 7,054
Income tax receivable - 1,013
Deferred income taxes 1,334 1,334
Prepaid expenses 1,989 1,713
Other 740 1,196
----------------- -----------------
Total current assets 34,688 40,838
Investments 4,066 3,830
Property, plant and equipment 325,359 322,249
Less accumulated depreciation 173,497 169,318
----------------- -----------------
Property, plant and
equipment, net 151,862 152,931
Other assets:
Goodwill 25,239 25,239
Intangible assets, net 1,694 1,983
Deferred costs and other 2,573 2,674
----------------- -----------------
Total other assets 29,506 29,896
----------------- -----------------
Total assets $ 220,122 $ 227,495
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Extended term payable $ 7,505 $ 14,443
Accounts payable 2,779 4,538
Accrued expenses 6,717 7,740
Accrued income taxes 275 -
Advanced billings and deposits 5,075 5,158
Current maturities of long-
term obligations 1,035 731
----------------- -----------------
Total current liabilities 23,386 32,610
Long-term liabilities:
Debt obligations, net of
current maturities 130,214 128,475
Financial derivative
instruments 3,099 1,451
Accrued income taxes 7,837 7,747
Deferred income taxes 14,250 14,901
Deferred revenue 1,499 1,527
Accrued employee benefits and
deferred compensation 8,769 8,852
----------------- -----------------
Total long-term
liabilities 165,668 162,953
Total liabilities 189,054 195,563
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par value,
$.10 stated value
shares authorized: 100,000
Shares issued and outstanding:
13,319 in 2008 and 13,285 in
2007 1,332 1,329
Additional paid-in capital 11,289 11,031
Retained earnings 20,825 20,639
Accumulated other
comprehensive income/(loss) (2,378) (1,067)
----------------- -----------------
Total shareholders'
equity 31,068 31,932
----------------- -----------------
Total liabilities and
shareholders' equity $ 220,122 $ 227,495
================= =================
The accompanying notes are an integral part of the consolidated
financial statements.
Telecom Sector Recap
(unaudited)
Three Months Ended March 31
----------------------------
2008 2007
------------- -------------
(Dollars in thousands)
Revenues:
Local Service $ 4,131 $ 4,448
Network Access 6,825 7,359
Long Distance 1,190 1,332
Data 1,848 1,676
Internet 1,078 1,126
Digital TV 744 489
Directory 1,000 885
Message Processing & Billing 594 689
Intersegment 130 107
Other 884 1,033
------------- -------------
Total Telecom Revenues $ 18,424 $ 19,144
Costs and expenses:
Cost of services, excluding
depreciation and amortization 7,647 7,855
Selling, general and administrative
expenses 3,304 3,273
Depreciation and amortization 3,926 3,913
------------- -------------
Operating income $ 3,547 $ 4,103
============= =============
Net income $ 2,068 $ 2,439
============= =============
Capital expenditures $ 2,420 $ 1,646
============= =============
Key Metrics
----------------------------------------
Business access lines 27,318 27,254
Residential access lines 36,713 40,324
------------- -------------
Total access lines 64,031 67,578
Long distance customers 40,837 41,237
DSL customers 18,003 16,313
Digital TV customers 7,107 4,865
Enventis Sector Recap
(unaudited)
Three Months Ended March 31
----------------------------
(Dollars In thousands) 2008 2007
------------- -------------
Revenues before eliminations:
ENS equipment revenue $ 10,168 $ 11,434
ENS services revenue 2,065 1,743
ETS services revenue 5,373 4,713
Intersegment 138 62
------------- -------------
$ 17,744 $ 17,952
Cost of sales, equipment
(excluding depreciation and
amortization) 8,697 10,314
Cost of services
(excluding depreciation and
amortization) 4,279 3,198
Selling, general and administrative
expenses 2,327 2,185
Depreciation and amortization 1,020 875
------------- -------------
Operating income $ 1,421 $ 1,380
============= =============
Net income $ 834 $ 822
============= =============
Capital expenditures $ 993 $ 1,084
============= =============
Enventis Product Line
Three Months Ended March 31
---------------------------------------
Network Services Transport Services
(Dollars in thousands) 2008 2007 2008 2007
---------------------------------------
Revenues before intersegment
eliminations:
Equipment revenue $10,168 $11,434 $ - $ -
Services revenue 2,065 1,743 5,373 4,713
Intersegment - - 138 62
--------- --------- ---------- --------
$12,233 $13,177 $ 5,511 $4,775
Cost of sales, equipment
(excluding depreciation and
amortization) 8,692 10,310 5 4
Cost of services
(excluding depreciation and
amortization) 1,832 927 2,447 2,271
Selling, general and
administrative expenses 1,259 1,098 1,068 1,087
Depreciation and amortization 121 95 899 780
--------- --------- ---------- --------
Operating income $ 329 $ 747 $ 1,092 $ 633
========= ========= ========== ========
Net income $ 193 $ 445 $ 641 $ 377
========= ========= ========== ========
Capital expenditures $ 133 $ (32) $ 860 $1,116
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