27 percent increase in net income, $4 million reduction in debt
MANKATO, Minn. May 2, 2007--HickoryTech Corp. (Nasdaq:HTCO) today reported financial results for the first quarter of 2007. The Company reported total revenues of $36.9 million, double-digit overall revenue growth and a 27 percent increase in net income. The Enventis Sector achieved a 27 percent revenue increase and a 143 percent increase in net income.
"We're very pleased with the solid revenue and earnings per share results delivered in the first quarter and with the continued growth in broadband services and the momentum in our business markets," said John Finke, HickoryTech's president and chief executive officer. "The combined expertise and market position of our Telecom and Enventis Sectors are allowing us to win new business. We are making great progress in implementing our long-term strategies of delivering integrated business solutions of voice, data and network equipment."
Highlights for the first quarter 2007 as compared to same quarter 2006:
- 12.8 percent increase in revenues
- 27.0 percent increase in Enventis revenues
- 21.2 percent increase in operating income
- 15.3 percent increase in income from continuing operations
- 27.2 percent increase in net income, after the loss from discontinued operations
- 18.2 percent increase in diluted earnings per share
- $4 million reduction in long-term debt from the beginning of first quarter of 2007
Consolidated Results for the First Quarter:
HickoryTech's consolidated operating revenues for the quarter were $36.9 million, an increase of 12.8 percent compared to the first quarter of 2006. HickoryTech's fifth consecutive quarter of comparative revenue increase was due to continued revenue growth in the Enventis Sector. The $3.8 million Enventis revenue growth was driven by a 31.3 percent growth in Enterprise Network Services (equipment sales and service) and 16.3 percent growth in Transport Services (wholesale and retail transport and hosted IP services) revenues.
HickoryTech's consolidated operating income for the quarter was $5.1 million, an increase of 21.2 percent compared to the first quarter of 2006. The Enventis operating income increase of $0.8 million was the primary driver for this improvement. Consolidated income from continuing operations for the first quarter 2007 was $1.8 million, compared to $1.5 million in the same period of 2006.
HickoryTech reported $1.8 million in net income in the first quarter of 2007 compared to $1.4 million the same period in 2006, an increase of 27.2 percent. Diluted earnings per share increased to 13 cents for the quarter, versus 11 cents in the prior year's first quarter.
HickoryTech reported capital expenditures of $2.7 million for the first quarter 2007. Investments supported the fiber network upgrades and network expansions as well as success-based network improvements. This investment was $1.1 million less than the same period in 2006. The long-term debt balance was $139.1 million as of March 31, 2007, representing a $4 million reduction from the level at the beginning of the first quarter of 2007.
Telecom Sector (before inter-segment eliminations):
In the first quarter of 2007, the Telecom Sector experienced many positive trends with increasing broadband revenue, a slight increase in network access revenue, stable operating income and reduced capital expenditures.
Key Telecom Sector metrics for the first quarter 2007, as compared to same period 2006:
- Revenues increased to $19.1 million, versus $18.7 million
- Broadband revenues grew 28.2 percent to $2.2 million, versus $1.7 million. These revenues, which include DSL, data and Digital TV services, outpaced the decline in local access revenues. The upward growth trend in DSL lines continued, totaling 16,313, an increase of 18 percent.
- Total Digital TV customers grew to 4,865, up 67.5 percent.
- Network access revenues were $7,359,000, slightly higher than the same quarter last year.
- Local service revenue declined 3.2 percent due to competition. Our local lines declined 2.8 percent for the year, a decline that continues to be less than that of industry peers.
Enventis Sector (before inter-segment eliminations):
Enventis, a key element of the HickoryTech growth strategy, repeated its performance as a strong contributor to consolidated operating income in the first quarter of 2007. Enventis revenue in the first quarter was $18.0 million, consisting of $13.2 million from Enterprise Network Services and $4.8 million from Enterprise Transport Services. Enventis total revenues increased $3.9 million, or 27.5 percent compared with the first quarter of 2006. The increase in Enventis operating income for the first quarter was $813,000 or 143% compared with the same quarter in 2006.
Outlook:
"We are energized with our first quarter results and will continue to focus on our business plan to deliver results for the full year 2007," said Finke. "We will 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 to new markets and increasing penetration of broadband services in existing markets."
Webcast Details:
Further information on the first quarter will be given during the Company's quarterly conference call and webcast with investors on May 3, 2007 at 9 a.m. CDT. Investors may access the webcast through a link on HickoryTech's 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 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.
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) For Three Months Ended March 31
-------------------------------
2007 2006
-------------- ----------------
Revenues:
Telecom Sector $19,037 $18,656
Enventis 17,890 14,084
-------------- ----------------
Total Revenues 36,927 32,740
Costs and Expenses:
Cost of Sales, Enventis 10,314 7,683
Cost of Services, excluding
Depreciation and Amortization 10,917 10,416
Selling, General and Administrative
Expenses, excluding Depreciation and
Amortization 5,836 6,124
Depreciation 4,504 4,045
Amortization of Intangibles 289 293
-------------- ----------------
Total Costs and Expenses 31,860 28,561
-------------- ----------------
Operating Income 5,067 4,179
Interest and Other Income 84 30
Interest Expense (2,182) (1,649)
-------------- ----------------
Income from Continuing Operations
Before Income Taxes 2,969 2,560
Income Taxes 1,201 1,027
-------------- ----------------
Income from Continuing Operations 1,768 1,533
Discontinued Operations
Loss from Operations of Discontinued
Component (2) (240)
Income Tax (Benefit) (1) (96)
-------------- ----------------
Loss from Discontinued Operations (1) (144)
-------------- ----------------
Net Income $1,767 $1,389
============== ================
Reconciliation of Operating Income to
EBITDA
Operating Income $5,067 $4,179
Add:
Depreciation 4,504 4,045
Amortization of Intangibles 289 293
-------------- ----------------
EBITDA $9,860 $8,517
============== ================
(Not in thousands)
Basic Earnings Per Share - Continuing
Operations: $0.13 $0.12
Loss Per Share - Discontinued
Operations: - (0.01)
-------------- ----------------
$0.13 $0.11
============== ================
Basic Weighted Average Common Shares
Outstanding 13,240,434 13,133,817
============== ================
Diluted Earnings Per Share -
Continuing Operations: $0.13 $0.12
Loss Per Share - Discontinued
Operations: - (0.01)
-------------- ----------------
$0.13 $0.11
============== ================
Diluted Weighted Average Common and
Equivalent Shares Outstanding 13,241,010 13,134,467
============== ================
Dividends Per Share $0.12 $0.12
============== ================
Consolidated Balance Sheet
(unaudited)
March 31, December 31,
(In Thousands, Except per Shares Amount) 2007 2006
----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $1,791 $84
Receivables, net of allowance for
doubtful accounts of $829 and $851 22,861 20,780
Inventories 8,446 11,294
Income tax receivable 998 -
Deferred income taxes 815 815
Prepaid expenses 2,007 1,903
Other 818 1,662
----------- ------------
Total current assets 37,736 36,538
Investments 3,830 3,554
Property, plant and equipment 308,630 309,264
Less accumulated depreciation 157,055 156,429
----------- ------------
Property, plant and equipment,
net 151,575 152,835
Other assets:
Goodwill 25,239 25,239
Intangible assets, net 2,851 3,140
Financial derivative instruments - 2,489
Deferred costs and other 2,979 3,105
----------- ------------
Total other assets 31,069 33,973
----------- ------------
Total assets $224,210 $226,900
=========== ============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Checks written in excess of available
cash balances $- $1,475
Short-term financing 9,743 7,719
Accounts payable 3,601 4,211
Accrued expenses 5,073 5,167
Accrued interest 415 447
Accrued income taxes - 4,528
Advanced billings and deposits 3,413 3,488
Current Portion - post retirement
benefits 264 212
Current maturities of long-term
obligations 1,635 1,560
----------- ------------
Total current liabilties 24,144 28,807
Long-term liabilities:
Debt obligations, net of current
maturities 137,474 141,529
Accrued Income Taxes 6,666 -
Deferred income taxes 14,294 15,332
Deferred revenue 2,368 2,596
Accrued employee benefits and deferred
compensation 8,566 8,550
Financial derivative instruments 66 -
----------- ------------
Total long-term liabilities: 169,434 168,007
Total liabilities 193,578 196,814
Commitments and Contingencies - -
Shareholders' equity:
Common Stock, no par value, $.10
stated value. Shares authorized:
100,000
Shares issued and outstanding:
13,248 in 2007 and 13,208 in 2006 1,325 1,321
Additional paid-in capital 10,148 9,992
Retained earnings 18,568 18,323
Accumulated other comprehensive
income/(loss) 591 450
----------- ------------
Total shareholders' equity 30,632 30,086
----------- ------------
Total liabilities and shareholders' equity $224,210 $226,900
=========== ============
Telecom Sector Recap
(unaudited, before inter-segment eliminations)
For Three Months Ended March 31
-------------------------------
2007 2006
--------------- ---------------
(Dollars in Thousands)
Revenues:
Local Service $4,448 $4,595
Network Access 7,359 7,341
Long Distance 1,332 1,148
Data 1,676 1,391
Internet 1,126 1,153
Digital TV 489 285
Directory 885 894
Message Processing & Billing 689 688
Intersegment 107 32
Other 1,033 1,161
--------------- ---------------
Total Telecom Revenues $19,144 $18,688
Costs and Expenses:
Cost of services, excluding
depreciation and amortization 7,855 7,688
Selling, general and administrative
expenses, excluding depreciation
and amortization 3,273 3,161
Depreciation and amortization 3,913 3,575
--------------- ---------------
Operating income $4,103 $4,264
=============== ===============
Income from Continuing Operations,
net of tax $2,439 $2,633
=============== ===============
Key Metrics
-------------------------------------
Capital Expenditures $1,646 $3,227
Access Lines 67,578 69,556
Long Distance Customers 41,237 40,372
Internet Customers 20,387 18,959
DSL Customers 16,313 13,820
Digital TV Customers 4,865 2,967
Enventis Sector Recap
(unaudited, before inter-segment eliminations)
For Three Months Ended March 31
-------------------------------
(Dollars In Thousands) 2007 2006
--------------- ---------------
Revenues before eliminations:
Enterprise Network Services $13,177 $10,031
Enterprise Transport Services 4,713 4,053
Intersegment 62 -
--------------- ---------------
$17,952 $14,084
=============== ===============
Cost of sales 10,314 7,683
Cost of services
(excluding depreciation and
amortization) 3,198 2,687
Selling, general and administrative
expenses,
(excluding depreciation and
amortization) 2,185 2,410
Depreciation and amortization 875 737
--------------- ---------------
Operating income $1,380 $567
=============== ===============
Net income $822 $338
=============== ===============
Capital expenditures $1,084 $507
=============== ===============