$3.2 million net income largest in eight years
MANKATO, Minn. July 31, 2007--HickoryTech Corp. (Nasdaq:HTCO) today reported financial results for the second fiscal quarter ended June 30, 2007. The company reported total second quarter revenues of $45.6 million, a 34 percent growth over the same period in fiscal 2006. Net income for the second quarter was $3.2 million, up 136 percent from the comparable period last year. The previously announced one-time IntereXchange Carrier (IXC) settlement accounted for $1.9 million of revenue and $1.1 million of the after-tax net income in the company's second quarter 2007 results. The Enventis Sector continued its robust growth trend recording a 127 percent increase in net income following the 143 percent increase of the first quarter of 2007.
Highlights for the second quarter 2007 as compared to second quarter 2006
-- 34 percent increase in revenues
-- 72 percent increase in operating income
-- 105 percent increase in income from continuing operations
-- 136 percent increase in net income, after the loss from discontinued operations
-- 150 percent increase in diluted earnings per share
-- 66 percent increase in Enventis revenues
-- $2.4 million reduction in long-term debt in the second quarter of 2007
Consolidated results for the second quarter 2007
HickoryTech's consolidated operating revenues for the second quarter were $45.6 million, an increase of 34 percent compared to the second quarter of 2006. This, HickoryTech's sixth consecutive quarter of comparative revenue increase was due to the continued revenue growth in the company's Enventis Sector coupled with the previously reported settlement with a large IXC recorded in the Telecom Sector. The 66 percent Enventis revenue growth over the same quarter last year was driven by a 79 percent growth in Enterprise Network Services (equipment sales and service) and 31 percent growth in Transport Services (wholesale and retail transport and hosted IP services) revenues. Excluding the one-time IXC settlement, consolidated revenue growth for the second quarter totaled 28 percent.
HickoryTech's consolidated operating income for the second quarter totaled $7.7 million, an increase of 72 percent compared to the second quarter of 2006. The primary drivers for the increase are the Enventis operating income increase of $0.9 million and the previously announced settlement of $1.9 million.
Consolidated income from continuing operations for the second quarter 2007 totaled $3.3 million, up from $1.6 million in the same period of 2006. Excluding the one-time IXC settlement, operating income and income from continuing operations for the quarter increased 30 percent and 34 percent respectively.
"Our overall results demonstrate the strength of our business model, our continued success in achieving strong growth in our Enventis Sector and our stability and competitiveness within our Telecom Sector," said John Finke, HickoryTech president and chief executive officer. "While our Q2 results benefited from the one-time IXC settlement, our second quarter's revenue and net income growth within our core businesses underscores our ability to grow our network equipment, transport and broadband services."
Telecom Sector (before inter-segment eliminations)
In the second quarter of 2007, the Telecom Sector experienced many positive results with increasing broadband revenue; an increase in network access revenue, stable operating income and reduced capital expenditures. Excluding the $1.9 million pre-tax IXC settlement, which is recorded in network access revenue, the Telecom Sector performance was positive.
Key Telecom Sector metrics for the second quarter 2007 as compared to same period 2006
-- Pre-elimination Telecom Sector revenues increased to $20.6 million versus $18.9 million.
-- Broadband revenues grew 25 percent to $2.3 million, versus $1.8 million. The increase in these revenues, which include DSL, data and Digital TV services, outpaced the decline in local access revenues. DSL lines increased 17 percent, totaling 16,677. Digital TV lines posted a 53 percent increase totaling 5,194.
-- Network access revenues were $9.4 million a 27 percent increase. Excluding the one-time $1.9 million IXC settlement, network access revenues were higher than last year. This higher trend is expected to revert to a pattern of year-over-year declines in the third quarter based on anticipated access revenue declines and interstate rate changes which went into effect July 1, 2007.
-- Local service revenue declined 7.6 percent due to competition and price compression in rates charged to wireless carriers. For the year, our local lines declined 3.3 percent, a decline that continues to be less than that of industry peers.
Enventis Sector (before inter-segment eliminations)
Enventis Sector revenue in the second quarter was $25.2 million, consisting of $20 million from Enterprise Network Services (ENS) and $5.2 million from Enterprise Transport Services (ETS). Enventis total revenues increased $10.1 million, or 66 percent compared with the second quarter of 2006. The increase in Enventis operating income for the second quarter was $0.9 million, up 126 percent compared with the same quarter in 2006. Enventis is a key catalyst of the HickoryTech growth strategy and a strong contributor to consolidated operating income in the second quarter of 2007. The 79 percent growth in ENS revenue was driven by success in large IP telephony and data sales and the ETS revenue growth of 31 percent is attributed to strong wholesale transport growth and increased demand for our hosted unified communications solution.
Capital Expenditures and Debt
HickoryTech reported capital expenditures of $3.3 million for the second quarter 2007 and $6.0 million for the first six months. Investments supported the fiber network upgrades and network expansions as well as success-based network improvements. This investment was $4.2 million less than the first six months of 2006 and is part of a planned reduction of capital expenditures from the $21 million level of 2006. The long-term debt balance was $136.7 million as of June 30, 2007, representing a $2.4 million reduction in the second quarter of 2007.
Future Outlook
Due to increasing business success, coupled with the one-time $1.9 million pre-tax IXC settlement, the company is updating its future expectations for 2007 full-year results to the following ranges:
Total Revenues $150 million to $157 million
Net Income $7.7 million to $8.3 million
CAPEX $17 million to $19 million
Debt Balance end of 2007 $135 million to $137 million
Webcast Details
Further information on the results of the second quarter 2007 will be discussed during the company's quarterly conference call and webcast with investors on Aug. 1, 2007 at 9 a.m. CT. Investors may access the webcast through a link on HickoryTech's investor relations page at www.hickorytech.com. A telephone replay of the conference call will be available from noon Aug. 1 through Aug. 8, 2007. The replay number is +1 888 286 8010; enter pass code 62832141.
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 400 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 June 30 Six Months Ended June 30
-------------------------- -------------------------
2007 2006 2007 2006
------------- ------------ ------------ ------------
Revenues:
Telecom Sector $ 20,448 $ 18,912 $ 39,485 $ 37,568
Enventis 25,154 15,178 43,044 29,262
------------- ------------ ------------ ------------
Total Revenues 45,602 34,090 82,529 66,830
Costs and
Expenses:
Cost of sales,
Enventis 16,559 8,456 26,873 16,139
Cost of
services,
(excluding
depreciation
and
amortization) 10,778 10,982 21,695 21,356
Selling, general
and
administrative
expenses,
(excluding
depreciation
and
amortization) 5,891 5,708 11,727 11,873
Depreciation 4,432 4,207 8,936 8,253
Amortization of
intangibles 289 293 578 586
------------- ------------ ------------ ------------
Total costs and
expenses 37,949 29,646 69,809 58,207
------------- ------------ ------------ ------------
Operating income 7,653 4,444 12,720 8,623
Interest and
other income 47 36 131 65
Interest expense (2,031) (1,830) (4,213) (3,478)
------------- ------------ ------------ ------------
Income from
continuing
operations
before income
taxes 5,669 2,650 8,638 5,210
Income tax
provision 2,415 1,063 3,616 2,090
------------- ------------ ------------ ------------
Income from
continuing
operations 3,254 1,587 5,022 3,120
Discontinued
operations
Loss from
operations of
discontinued
component (13) (355) (15) (595)
Income tax
benefit (5) (142) (6) (238)
------------- ------------ ------------ ------------
Loss from
discontinued
operations (8) (213) (9) (357)
------------- ------------ ------------ ------------
Net income $ 3,246 $ 1,374 $ 5,013 $ 2,763
============= ============ ============ ============
Reconciliation of
operating income
to EBITDA:
Operating income $ 7,653 $ 4,444 $ 12,720 $ 8,623
Add:
Depreciation 4,432 4,207 8,936 8,253
Amortization of
intangibles 289 293 578 586
------------- ------------ ------------ ------------
EBITDA $ 12,374 $ 8,944 $ 22,234 $ 17,462
============= ============ ============ ============
(Not in
thousands)
Basic earnings
per share -
continuing
operations: $ 0.25 $ 0.12 $ 0.38 $ 0.24
Basic loss per
share -
discontinued
operations: (0.00) (0.02) (0.00) (0.03)
------------- ------------ ------------ ------------
$ 0.25 $ 0.10 $ 0.38 $ 0.21
============= ============ ============ ============
Dividends per
share $ 0.12 $ 0.12 $ 0.12 $ 0.12
============= ============ ============ ============
Basic weighted
average common
shares
outstanding 13,247,508 13,151,626 13,241,079 13,142,770
============= ============ ============ ============
Diluted earnings
per share -
continuing
operations: $ 0.25 $ 0.12 $ 0.38 $ 0.24
Diluted loss per
share -
discontinued
operations: (0.00) (0.02) (0.00) (0.03)
------------- ------------ ------------ ------------
$ 0.25 $ 0.10 $ 0.38 $ 0.21
============= ============ ============ ============
Diluted weighted
average common
and equivalent
shares
outstanding 13,247,508 13,154,710 13,241,079 13,146,141
============= ============ ============ ============
Consolidated Balance Sheets
----------------------------------------------------------------------
(unaudited)
(In Thousands Except Per Share
Amounts) June 30, 2007 December 31, 2006
------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 410 $ 84
Receivables, net of allowance for
doubtful accounts of $980 and $851
28,022 20,780
Inventories 9,169 11,294
Deferred income taxes 815 815
Prepaid expenses 1,636 1,903
Other 945 1,662
------------- -----------------
Total current assets 40,997 36,538
Investments 3,830 3,554
Property, plant and equipment 311,037 309,264
Less accumulated depreciation 160,591 156,429
------------- -----------------
Property, plant and equipment,
net 150,446 152,835
Other assets:
Goodwill 25,239 25,239
Intangible assets, net 2,562 3,140
Financial derivative instruments 593 2,489
Deferred costs and other 2,869 3,105
------------- -----------------
Total other assets 31,263 33,973
------------- -----------------
Total assets $ 226,536 $ 226,900
============= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Checks written in excess of
available cash balances $ - $ 1,475
Short-term financing 11,949 7,719
Accounts payable 3,565 4,211
Accrued expenses 5,175 5,167
Accrued interest 390 447
Accrued income taxes 522 4,528
Advanced billings and deposits 3,365 3,488
Current portion - post retirement
benefits 279 212
Current maturities of long-term
obligations 1,603 1,560
------------- -----------------
Total current liabilities: 26,848 28,807
Long-term liabilities:
Debt obligations, net of current
maturities 135,089 141,529
Accrued income taxes 6,814 -
Deferred income taxes 14,536 15,332
Deferred revenue 1,930 2,596
Accrued employee benefits and
deferred compensation 8,719 8,550
------------- -----------------
Total long-term liabilities: 167,088 168,007
Total liabilities 193,936 196,814
Commitments and contingencies (Note 8) - -
Shareholders' equity:
Common stock, no par value, $.10
stated value shares authorized:
100,000
Shares issued and outstanding:
13,254 in 2007 and 13,208 in 2006
1,325 1,321
Additional paid-in capital 10,376 9,992
Retained earnings 20,225 18,323
Accumulated other comprehensive
income 674 450
------------- -----------------
Total shareholders' equity 32,600 30,086
------------- -----------------
Total liabilities and shareholders'
equity $ 226,536 $ 226,900
============= =================
Telecom Sector Recap
----------------------------------------------------------------------
(unaudited, before inter-segment eliminations)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
2007 2006 2007 2006
------------ ------------- ------------ -----------
(Dollars in
Thousands)
Revenues:
Local Service $ 4,227 $ 4,576 $ 8,675 $ 9,171
Network Access 9,378 7,415 16,737 14,756
Long Distance 1,297 1,254 2,629 2,402
Data 1,715 1,486 3,391 2,877
Internet 1,130 1,131 2,256 2,284
Digital TV 536 318 1,025 603
Directory 899 903 1,784 1,797
Message
Processing &
Billing 514 534 1,203 1,222
Intersegment 111 32 218 64
Other 752 1,295 1,785 2,456
------------ ------------- ------------ -----------
Total Telecom
Revenues $ 20,559 $ 18,944 $ 39,703 $ 37,632
Costs and
Expenses:
Cost of
services,
excluding
depreciation
and
amortization 7,158 8,049 15,013 15,738
Selling, general
and
administrative
expenses,
excluding
depreciation
and
amortization 3,373 3,182 6,646 6,343
Depreciation and
amortization 3,789 3,713 7,702 7,290
------------ ------------- ------------ -----------
Operating income $ 6,239 $ 4,000 $ 10,342 $ 8,261
============ ============= ============ ===========
Income from
Continuing
Operations, net
of tax $ 3,736 $ 2,395 $ 6,175 $ 5,025
============ ============= ============ ===========
Capital
Expenditures $ 2,288 $ 3,848 $ 3,934 $ 7,075
============ ============= ============ ===========
Key Metrics
-----------------
Access Lines 67,022 69,307
Long Distance
Customers 41,287 40,788
Internet
Customers 20,526 19,205
DSL Customers 16,677 14,282
Digital TV
Customers 5,194 3,389
Enventis Sector Recap
----------------------------------------------------------------------
(unaudited, before inter-segment eliminations)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
(Dollars In
Thousands) 2007 2006 2007 2006
------------- ------------ ------------ -----------
Revenues before
eliminations:
Enterprise
Network Services $ 19,968 $ 11,144 $ 33,145 $ 21,175
Enterprise
Transport
Services 5,186 4,034 9,899 8,087
Intersegment 85 - 147 -
------------- ------------ ------------ -----------
$ 25,239 $ 15,178 $ 43,191 $ 29,262
============= ============ ============ ===========
Cost of sales 16,559 8,456 26,873 16,139
Cost of services
(excluding
depreciation
and
amortization) 3,786 2,932 6,984 5,619
Selling, general
and
administrative
expenses,
(excluding
depreciation
and
amortization) 2,318 2,291 4,503 4,701
Depreciation and
amortization 927 768 1,802 1,505
------------- ------------ ------------ -----------
Operating income $ 1,649 $ 731 $ 3,029 $ 1,298
============= ============ ============ ===========
Net income $ 990 $ 437 $ 1,812 $ 775
============= ============ ============ ===========
Capital
expenditures $ 1,017 $ 2,593 $ 2,101 $ 3,100
============= ============ ============ ===========