Fourth quarter and full year revenue increased by 15 and 18 percent, respectively
MANKATO, Minn.--Feb. 27, 2008--HickoryTech Corp. (Nasdaq: HTCO) today reported financial results for the fourth fiscal quarter and full year ended Dec. 31, 2007.
The company reported fourth quarter revenue of $38.3 million, representing a 15 percent increase over the same period in 2006. Net income for the fourth quarter was $1.5 million, or $0.12 per diluted share, compared with a loss of $1.9 million for the comparable period last year. The Enventis Sector, which demonstrated great momentum during the year, continued this trend as it recorded a significant increase in net income, compared to the fourth quarter of 2006.
Highlights for the fourth quarter 2007 as compared to fourth quarter 2006
- 15 percent increase in revenue
- 64 percent increase in operating income
- 215 percent increase in income from continuing operations
- A $3.4 million improvement in net income, after the loss from discontinued operations ($1.5 million net income versus $1.9 million loss in 2006)
Consolidated results for the fourth quarter fiscal 2007
The Company's 2007 fourth quarter results represented the eighth consecutive quarter of positive revenue comparisons. The increase was driven by continued growth in the Company's Enventis Sector, where revenue grew 32 percent over last year, and stable revenues from the Telecom Sector.
HickoryTech's consolidated operating income for the fourth quarter increased 64 percent to $4.9 million, from $3.0 million in the fourth quarter of 2006 primarily due to an increase in Enventis operating income of $1.9 million.
Consolidated income from continuing operations for the fourth quarter 2007 totaled $1.5 million, up 215 percent from $0.5 million the same period of 2006.
"Our results continue to reflect the success in our Enventis Sector and stability in our Telecom Sector, demonstrating the strength of our business plan and our commitment to deliver value to our shareholders," said John Finke, HickoryTech president and chief executive officer. "The business market success achieved in 2007 is strong evidence of our favorable market position, and further reinforces our long-term growth prospects."
Telecom Sector (before inter-segment eliminations)
In the fourth quarter fiscal 2007, the Telecom Sector achieved many positive results, including increases in broadband revenue and operating income, as well as cost containment. Revenue in the Telecom Sector, before eliminations, was $18.8 million, similar to revenue reported in the fourth quarter of 2006. Sector performance was positive during the fourth quarter despite anticipated declines in Network Access and local service revenue. Segment operating income totaled $3.5 million, up nine percent from $3.2 million a year ago.
Key Telecom Sector metrics for the fourth quarter 2007 as compared to same period 2006
- Pre-elimination Telecom Sector revenue remained stable at $18.8 million.
- Broadband revenue grew 20 percent to $2.4 million, versus $2.0 million. The increase in this revenue, which includes DSL, data and Digital TV services, outpaced the decline in local service revenue. DSL customers increased 11 percent, totaling 17,427 on Dec. 31, 2007. Digital TV customers posted a 40 percent increase totaling 6,487 on Dec. 31, 2007.
- Network access revenue was $7.1 million, a 7.2 percent decrease. This anticipated decline in the fourth quarter was due to interstate rate changes, which went into effect July 1, 2007, lower minutes of use and line losses.
Local service revenue declined 7.4 percent due to price compression in rates charged to wireless carriers and line loss due to competition. Local lines declined 4.7 percent from the same period a year ago, a decline that while higher than 2006, continues to be less than the average of industry peers.
Enventis Sector (before inter-segment eliminations)
Enventis continued to demonstrate solid growth in the fourth quarter. Enventis total revenue before eliminations increased $4.9 million, or 33 percent, to $19.7 million compared with $14.8 million in the fourth quarter of 2006. Enventis' operating income for the fourth quarter was $2.2 million, up considerably compared with the same quarter of 2006, which included non-recurring integration expenses. Excluding the 2006 integration expense, the normalized operating income increase for Enventis was 116 percent in the fourth quarter.
- Fourth quarter revenue of Enterprise Network Services (ENS), equipment sales and service, increased 43 percent to $14.1 million from $9.9 million in the prior year, driven by success in large IP telephony and data sales as well as growth in services. Operating income of ENS was $1.6 million, or 11 percent of revenue, compared with a loss of $0.1 million for the same quarter a year ago.
- Fourth quarter revenue of Enterprise Transport Services (ETS), network based services, increased 12 percent to $5.6 million from $4.9 million a year ago attributed to strong wholesale transport growth and increased demand for hosted unified communication solutions. Operating income was $0.6 million, or 11 percent of revenue, compared to $0.4 million last year.
Fiscal 2007 results
For the fiscal year ending Dec. 31, 2007, HickoryTech reported revenue of $156.6 million, an 18 percent increase from the reported $132.9 million in fiscal 2006. Operating income for the year totaled $23.2 million, a 46 percent increase over the $15.8 million reported one year ago. Income from continuing operations for fiscal 2007 totaled $8.6 million, up 65 percent from the $5.2 million in fiscal 2006. Net income, after loss from discontinued operations, for fiscal 2007 was $8.6 million, or $0.65 per diluted share, versus $2.3 million, or $0.17 per diluted share in fiscal 2006, an increase of 280 percent in net income and 282 percent in diluted earnings per share year-over year. Revenue and Operating Income for 2007 were benefited by a $1.9 million non-recurring carrier settlement, resulting in an after tax benefit of $1.1 million to income for continuing operations and net income.
Highlights for the full year 2007 as compared to full year 2006
- 18 percent increase in revenue
- 46 percent increase in operating income
- 65 percent increase in income from continuing operations
- 280 percent increase in net income, after the loss from discontinued operations
- 282 percent increase in diluted earnings per share
- $13.9 million reduction in debt
Capital expenditures and debt
HickoryTech capital expenditures were $6.1 million for the fourth quarter 2007 and $17.5 million for the year. Investments supported fiber and IP network upgrades, Digital TV expansion and success-based network sales. This investment was $3.6 million less than 2006 and was part of a planned reduction of capital expenditures from the $21.1 million level of 2006. The debt balance (long-term and current portion) was $129.2 million as of Dec. 31, 2007, a $13.9 million reduction from the beginning of the year.
Future outlook
HickoryTech provided the following information related to its 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 annual
- The year-end debt balance is expected to range from $125 million to $128 million
"Our growth in 2007 was extraordinary as we benefited from a number of factors, including several large IP telephony sales, a non-recurring access settlement, and the fact that 2006 included Enventis integration costs," added Finke. "The result of having set the bar high in 2007; however, means our comparable growth rates will be tough to match in 2008. Based on this and economic uncertainty, we expect revenue and net income to be in a similar range to last year. We are cautious about the economy and our customers' purchasing decisions in the coming year. We expect to pick up momentum mid-year and anticipate a stronger second half of 2008. We have built a solid business foundation and continue to be very excited about our long-term growth prospects."
Webcast details
As previously announced, HickoryTech will hold a conference call on Thursday, Feb. 28, 2008 beginning at 9 a.m. CST. The dial-in number for the call is (866) 277-1181 (U.S. and Canada). The participant pass code is "HickoryTech." A simultaneous webcast of the call and downloadable presentation will be available at www.hickorytech.com.
For those unable to participate live, a webcast replay will be available at www.hickorytech.com for 30 days or by audio replay until March 8, 2008 by dialing (888) 286-8010 (U.S. and Canada), enter pass code 47525656. The accompanying presentation will be archived and available for download at this website.
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 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 Three Months Ended For Year Ended
thousands) December 31 December 31
------------------------- -------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenues:
Telecom Sector $ 18,715 $ 18,630 $ 76,847 $ 74,896
Enventis Sector
Equipment
revenue 11,651 8,468 51,046 36,191
Services revenue 7,895 6,303 28,756 21,814
------------ ------------ ------------ ------------
Total Enventis
Sector 19,546 14,771 79,802 58,005
------------ ------------ ------------ ------------
Total revenues 38,261 33,401 156,649 132,901
Costs and
Expenses:
Cost of sales,
equipment,
excluding
depreciation and
amortization 9,762 7,830 45,340 31,152
Cost of services,
excluding
depreciation and
amortization 12,049 12,057 44,881 44,506
Selling, general
and
administrative
expenses 6,617 5,782 24,244 23,291
Depreciation 4,657 4,461 17,847 16,949
Amortization of
intangibles 290 293 1,157 1,172
------------ ------------ ------------ ------------
Total costs and
expenses 33,375 30,423 133,469 117,070
------------ ------------ ------------ ------------
Operating income 4,886 2,978 23,180 15,831
Interest and other
income 88 30 287 138
Interest expense (1,880) (1,970) (8,121) (7,362)
------------ ------------ ------------ ------------
Income before
income taxes 3,094 1,038 15,346 8,607
Income taxes 1,563 552 6,711 3,372
------------ ------------ ------------ ------------
Income from
continuing
operations 1,531 486 8,635 5,235
Discontinued
operations
Loss from
operations of
discontinued
component (13) (3,652) (40) (4,556)
Income tax
benefit (6) (1,226) (16) (1,589)
------------ ------------ ------------ ------------
Loss from
discontinued
operations (7) (2,426) (24) (2,967)
------------ ------------ ------------ ------------
Net income $ 1,524 $ (1,940) $ 8,611 $ 2,268
============ ============ ============ ============
Reconciliation of
operating income
to EBITDA:
Operating income $ 4,886 $ 2,978 $ 23,180 $ 15,831
Add:
Depreciation 4,657 4,461 17,847 16,949
Amortization of
intangibles 290 293 1,157 1,172
------------ ------------ ------------ ------------
EBITDA $ 9,833 $ 7,732 $ 42,184 $ 33,952
============ ============ ============ ============
(Not in thousands)
Basic earnings per
share -
continuing
operations: $ 0.12 $ 0.04 $ 0.65 $ 0.40
Basic loss per
share -
discontinued
operations: - (0.18) - (0.23)
------------ ------------ ------------ ------------
$ 0.12 $ (0.14) $ 0.65 $ 0.17
============ ============ ============ ============
Basic weighted
average common
shares
outstanding 13,283,103 13,196,494 13,258,369 13,163,480
============ ============ ============ ============
Diluted earnings
per share -
continuing
operations: $ 0.12 $ 0.04 $ 0.65 $ 0.40
Diluted loss per
share -
discontinued
operations: - (0.18) - (0.23)
------------ ------------ ------------ ------------
$ 0.12 $ (0.14) $ 0.65 $ 0.17
============ ============ ============ ============
Diluted weighted
average common
and equivalent
shares
outstanding 13,289,587 13,196,577 13,260,087 13,163,480
============ ============ ============ ============
Dividends per
share $ 0.12 $ 0.12 $ 0.48 $ 0.48
============ ============ ============ ============
Consolidated Balance Sheets
----------------------------------------------------------------------
(unaudited)
(In thousands) December 31, 2007 December 31, 2006
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 171 $ 84
Receivables, net of allowance
for doubtful accounts of
$1,184 and $851 28,357 20,780
Inventories 7,054 11,294
Income tax receivable 1,013 -
Deferred income taxes 1,334 815
Prepaid expenses 1,713 1,903
Other 1,196 1,662
----------------- -----------------
Total current assets 40,838 36,538
Investments 3,830 3,554
Property, plant and equipment 322,249 309,264
Less accumulated depreciation 169,318 156,429
----------------- -----------------
Property, plant and
equipment, net 152,931 152,835
Other assets:
Goodwill 25,239 25,239
Intangible assets, net 1,983 3,140
Financial derivative
instruments - 2,489
Deferred costs and other 2,674 3,105
----------------- -----------------
Total other assets 29,896 33,973
----------------- -----------------
Total assets $ 227,495 $ 226,900
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Checks written in excess of
available cash balances $ - $ 1,475
Extended term payable 14,443 7,719
Accounts payable 4,538 4,211
Accrued expenses 7,740 5,826
Accrued income taxes - 4,528
Advanced billings and deposits 5,158 3,488
Current maturities of long-term
obligations 731 1,560
----------------- -----------------
Total current liabilities 32,610 28,807
Long-term liabilities:
Debt obligations, net of
current maturities 128,475 141,529
Financial derivative
instruments 1,451 -
Accrued income taxes 7,747 -
Deferred income taxes 14,901 15,332
Deferred revenue 1,527 2,596
Accrued employee benefits and
deferred compensation 8,852 8,550
----------------- -----------------
Total long-term liabilities 162,953 168,007
Total liabilities 195,563 196,814
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par value,
$.10 stated value shares
authorized: 100,000
Shares issued and
outstanding: 13,285 in 2007
and 13,208 in 2006 1,329 1,321
Additional paid-in capital 11,031 9,992
Retained earnings 20,639 18,323
Accumulated other comprehensive
income/(loss) (1,067) 450
----------------- -----------------
Total shareholders'
equity 31,932 30,086
----------------- -----------------
Total liabilities and
shareholders' equity $ 227,495 $ 226,900
================= =================
Telecom Sector Recap
----------------------------------------------------------------------
(unaudited, before inter-segment eliminations)
Three Months Ended For Year Ended
December 31 December 31
------------------ -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
(Dollars in thousands)
Revenues:
Local Service $ 4,167 $ 4,502 $ 17,089 $ 18,224
Network Access 7,069 7,619 30,892 29,936
Long Distance 1,191 1,223 5,068 4,877
Data 1,728 1,527 6,900 6,048
Internet 1,192 1,112 4,612 4,467
Digital TV 667 467 2,273 1,457
Directory 1,033 917 3,854 3,624
Message Processing & Billing 610 421 2,474 2,127
Intersegment 133 138 467 260
Other 1,058 842 3,685 4,136
--------- -------- --------- ---------
Total Telecom Revenues $ 18,848 $ 18,768 $ 77,314 $ 75,156
Costs and expenses:
Cost of services, excluding
depreciation and
amortization 8,086 8,491 30,893 32,046
Selling, general and
administrative expenses 3,380 3,134 13,407 13,001
Depreciation and amortization 3,900 3,939 15,218 15,009
--------- -------- --------- ---------
Operating income $ 3,482 $ 3,204 $ 17,796 $ 15,100
========= ======== ========= =========
Net income $ 1,909 $ 2,039 $ 10,460 $ 9,237
========= ======== ========= =========
Capital expenditures $ 4,210 $ 3,257 $ 11,489 $ 15,631
========= ======== ========= =========
Key Metrics
------------------------------
Business access lines 27,403 27,014
Residential access lines 37,428 41,029
--------- --------
Total access lines 64,831 68,043
Long distance customers 40,956 41,196
DSL customers (1) 17,427 15,724
Digital TV customers 6,487 4,632
(1) DSL line counts were reduced by 478 in the fourth quarter of 2007
due to a data conversion. There was no restatement of prior periods.
Enventis Sector Recap
----------------------------------------------------------------------
(unaudited, before inter-segment eliminations)
Three Months Ended For Year Ended
December 31 December 31
------------------ -------------------
(Dollars In thousands) 2007 2006 2007 2006
--------- -------- --------- ---------
Revenues before eliminations:
ENS equipment revenue $ 11,651 $ 8,468 $ 51,046 $ 36,191
ENS services revenue 2,466 1,389 8,292 4,582
ETS services revenue 5,429 4,914 20,464 17,232
Intersegment 141 50 440 50
--------- -------- --------- ---------
$ 19,687 $ 14,821 $ 80,242 $ 58,055
Cost of sales, equipment
(excluding depreciation and
amortization) 9,762 7,830 45,340 31,152
Cost of services
(excluding depreciation and
amortization) 4,205 3,702 14,767 12,641
Selling, general and
administrative expenses, 2,497 2,216 9,476 8,974
Depreciation and amortization 1,037 811 3,755 3,048
--------- -------- --------- ---------
Operating income $ 2,186 $ 262 $ 6,904 $ 2,240
========= ======== ========= =========
Net income $ 1,236 $ 185 $ 4,074 $ 1,363
========= ======== ========= =========
Capital expenditures $ 1,899 $ 984 $ 5,928 $ 5,324
========= ======== ========= =========
Enventis Supplemental Line of Business Information
----------------------------------------------------------------------
(unaudited, before inter-segment eliminations)
Three Months Ended December 31
--------------------------------------
Network Services Transport Services
(Dollars in thousands) 2007 2006 2007 2006
--------------------------------------
Revenues before intersegment
eliminations:
Equipment revenue $ 11,651 $ 8,468 $ - $ -
Services revenue 2,466 1,389 5,429 4,914
Intersegment - - 141 50
--------- --------- --------- --------
$ 14,117 $ 9,857 $ 5,570 $ 4,964
Cost of sales, equipment
(excluding depreciation and
amortization) 9,656 7,527 106 303
Cost of services
(excluding depreciation and
amortization) 1,285 1,375 2,920 2,327
Selling, general and
administrative expenses 1,472 941 1,025 1,275
Depreciation and amortization 118 103 919 708
--------- --------- --------- --------
Operating income $ 1,586 $ (89) $ 600 $ 351
========= ========= ========= ========
Net income $ 917 $ (38) $ 319 $ 223
========= ========= ========= ========
Capital expenditures $ 69 $ 48 $ 1,830 $ 936
========= ========= ========= ========
For Year Ended December 31
--------------------------------------
Network Services Transport Services
(Dollars in thousands) 2007 2006 2007 2006
--------------------------------------
Revenues before intersegment
eliminations:
Equipment revenue $ 51,046 $ 36,191 $ - $ -
Services revenue 8,292 4,582 20,464 17,232
Intersegment - - 440 50
--------- --------- --------- --------
$ 59,338 $ 40,773 $ 20,904 $ 17,282
Cost of sales, equipment
(excluding depreciation and
amortization) 45,001 30,779 339 373
Cost of services
(excluding depreciation and
amortization) 4,539 3,871 10,228 8,770
Selling, general and
administrative expenses 5,115 4,587 4,361 4,387
Depreciation and amortization 494 349 3,261 2,699
--------- --------- --------- --------
Operating income $ 4,189 $ 1,187 $ 2,715 $ 1,053
========= ========= ========= ========
Net income $ 2,478 $ 720 $ 1,596 $ 643
========= ========= ========= ========
Capital expenditures $ 587 $ 258 $ 5,341 $ 5,066
========= ========= ========= ========