HickoryTech Reports Solid Fourth Quarter and Full Year 2005 Results
1 March 2006
HickoryTech Corporation (Nasdaq: HTCO) today reported financial results for its fourth quarter ended Dec. 31, 2005.
-- Net income of $1.85 million, a 40.4 percent increase for the fourth
quarter compared with the same period a year ago.
-- Diluted earnings per share from continuing operations were 14 cents
per share for the quarter, up 40 percent when compared to the fourth
quarter of 2004.
-- Total revenues were $21.8 million, a 4.2 percent reduction compared to
the fourth quarter of 2004.
-- Costs decreased $1.6 million, an 8.4 percent reduction compared to the
fourth quarter of 2004. Costs for the year increased 1.8 percent due
to higher revenues.
-- The acquisition of Enventis Telecom was completed on Dec. 30, 2005.
Operating results for Enventis were not material for one day of 2005,
however, the preliminary purchase price allocation is included in
HickoryTech's balance sheet.
-- Debt, which has been reduced by over $63 million since the beginning
of 2003, was increased for the $38.6 million purchase price of
Enventis, as well as for other working capital needs of Enventis.
Results for the Fourth Quarter 2005
HickoryTech reported $1.79 million in income from continuing operations in the fourth quarter of 2005, a 35.7 percent increase over the same period in 2004. Earnings per share from continuing operations were 14 cents per share for the quarter, up 40 percent when compared to the fourth quarter of 2004. When combined with $63,000 of income from discontinued operations, net income for the fourth quarter of 2005 was $1.85 million, or 14 cents per diluted share.
Total revenues were $21.8 million for the fourth quarter of 2005, compared to $22.8 million for the same period in 2004. Approximately half of the decline was from the Telecom Sector, and half of the decline was attributable to the Enterprise Solutions Sector. Costs and expenses totaled $17.8 million for the fourth quarter of 2005, an 8.4 percent decrease from $19.4 million for the same period in 2004.
"The improvement in net income for the quarter is encouraging," John Duffy, HickoryTech's president and chief executive officer, said. "Our Enterprise Solutions Sector produced a 25 percent increase in annual revenues even though their fourth quarter revenue was below last year's fourth quarter. Our Telecom Sector had strong results in overall broadband revenues, but not enough to offset the expected decline in network access revenue. HickoryTech is striving to drive revenue growth and to manage our costs, while balancing sound investments in systems and resources to effectively implement our strategic plan. We are also anticipating and adjusting to the changing forces in our industry."
Results for the 12 months ended Dec. 31, 2005
Total revenues of $92.5 million for the 12 months ended Dec. 31, 2005 were 2.2 percent higher than for the year 2004. Costs and expenses of $74.4 million for the year 2005 were 1.8 percent higher than for the same period in 2004. Net income of $8.5 million, or 65 cents per share, for the 12 months ended Dec. 31, 2005 was 12.4 percent higher than the same period in 2004. For 2005, diluted earnings per share from continuing operations were 64 cents per share, up 8.5 percent when compared to 2004.
"We are pleased to deliver a year of positive net income, balanced with strategic investments in our own operations for the future," said John Duffy. "Another noteworthy achievement and building block for our future was the Enventis acquisition."
Telecom Sector
In the fourth quarter of 2005, the Telecom Sector continued the trends of the 2005 third quarter.
Key Telecom metrics for the 2005 fourth quarter were as follows:
-- Telecom revenues were $18.4 million, versus $18.9 million a year ago.
-- Broadband initiatives consisting of data and Digital TV revenues were
$1.6 million versus $1.4 million in the fourth quarter of last year, a
17.9 percent increase.
-- Network access revenues were $7.7 million, compared to $8.4 million in
the same quarter last year.
-- Total DSL lines rose to 13,022, versus 10,430 for 2004, an increase of
24.9 percent compared to 2004.
-- Total Digital TV customers increased to 2,766, up 42.5 percent over
1,941 customers a year ago.
Enterprise Solutions Sector
The Enterprise Solutions Sector had a 25 percent increase in revenues for the full year of 2005. Fourth quarter 2005 revenue was $2.8 million, a 16 percent decline from $3.4 million for the same period last year. For the year ended Dec. 31, revenue rose strongly to $14.6 million from $11.7 million in 2004. "Enterprise Solutions had a very successful year, including a key IP Telephony system installation at Minnesota State University, Mankato and South Central College," said John Duffy. "We are well positioned in our business market and provide innovative IP Telephony solutions supported by excellent service after the sale."
Enventis Telecom Acquisition Closed
On Dec. 30, 2005, HickoryTech completed its acquisition of Enventis Telecom. The acquisition agreement was signed on Nov. 9, 2005. Operating results for Enventis were not material for the one day of 2005 and are not included in the consolidated statement of operations. The HickoryTech balance sheet includes the Enventis acquired balance sheet and preliminary purchase price allocation at Dec. 31, 2005. Total HickoryTech debt was increased late in the quarter and on Dec. 31, 2005 was $142.8 million including the $38 million in acquisition financing and $9 million in temporary transition working capital associated with the Enventis transaction. As a result, interest expense rose for the fourth quarter of 2005 and is expected to increase further in 2006.
Next Steps
"HickoryTech has adapted to changes in our industry, we're following through with our strategic plan, and together with Enventis we'll continue to provide excellent service to our customers," Duffy said. "Our goal is to balance the needs of all our stakeholders and strive for consistent and steady growth."
Further information on the fourth quarter results, as well as additional guidance regarding management's outlook, will be given during the company's quarterly conference call and Webcast with investors at 8:00 a.m. Central Standard Time on Feb. 28, 2006. Investors can access the Webcast through a link on HickoryTech's Investor Relations page at http://www.HickoryTech.com .
About HickoryTech
About HickoryTech Corporation: HickoryTech Corporation is a diversified communications company headquartered in Mankato, Minn., with approximately 475 employees in Minnesota and Iowa. In its 109th year of operation, HickoryTech offers a full array of telecommunications products and services to business and residential customers. The Telecom Sector offers local voice, long distance, Internet, Broadband services, Digital TV, and IP networking. The Enterprise Solutions Sector provides IP Telephony, call center management, and data network solutions. Enventis Telecom provides IP-based voice and data services and network solutions on a state wide SONET-based network. The Information Solutions Sector develops telecom and carrier access billing solutions. To learn more about HickoryTech Corporation, visit the company's Web site at http://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)
For Three Months Ended For Year Ended
(Dollars in Thousands) December 31 December 31
2005 2004 2005 2004
Revenues:
Telecom Sector $18,386 $18,906 $75,400 $76,097
Information Solutions
Sector 601 491 2,522 2,710
Enterprise Solutions
Sector 2,845 3,390 14,590 11,708
Enventis - - - -
Total Revenues 21,832 22,787 92,512 90,515
Costs and Expenses:
Cost of Sales,
Enterprise Solutions 2,070 2,551 10,329 8,211
Cost of Services,
excluding Depreciation
and Amortization 8,559 8,768 33,255 33,625
Selling, General and
Administrative
Expenses, -
excluding Depreciation
and Amortization 3,657 3,951 15,266 14,723
Depreciation 3,473 3,920 15,061 15,589
Amortization of
Intangibles 26 236 493 946
Total Costs and Expenses 17,785 19,426 74,404 73,094
Operating Income 4,047 3,361 18,108 17,421
Interest and Other Income 22 17 97 61
Interest Expense (1,235) (1,165) (4,363) (4,613)
Income Before Income Taxes 2,834 2,213 13,842 12,869
Income Tax Provision 1,046 895 5,499 5,205
Income from Continuing
Operations 1,788 1,318 8,343 7,664
Discontinued Operations
Income/(Loss) From
Operations of
Discontinued Component 101 - 308 (125)
Income Tax
Provision/(Benefit) 38 - 122 (51)
Income/(Loss) from
Discontinued Operations 63 - 186 (74)
Net Income $1,851 $1,318 $8,529 $7,590
(Not in thousands)
Basic Earnings Per Share -
Continuing Operations: $0.14 $0.10 $0.64 $0.59
Basic Earnings/(Loss) Per
Share - Discontinued
Operations: - - 0.01 (0.01)
$0.14 $0.10 $0.65 $0.58
Dividends Per Share $0.12 $0.11 $0.48 $0.44
Basic Weighted Average
Common Shares
Outstanding 13,114,692 13,037,835 13,083,252 12,993,280
Diluted Earnings Per Share
- Continuing Operations: $0.14 $0.10 $0.64 $0.59
Diluted Earnings/(Loss)
Per Share - Discontinued
Operations: - - 0.01 (0.01)
$0.14 $0.10 $0.65 $0.58
Diluted Weighted Average
Common and Equivalent
Shares Outstanding 13,123,685 13,068,330 13,097,417 13,025,637
Consolidated Balance Sheet
(unaudited)
(Dollars in Thousands)
2005 2004
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $601 $257
Receivables, Net of Allowance for
Doubtful Accounts
of $334 and $1,256 19,867 9,892
Income Taxes Receivable - 204
Costs in Excess of Billings on
Contracts 462 927
Inventories 4,577 3,182
Deferred Income Taxes 300 1,430
Prepaid Expenses 5,066 1,185
Other 1,155 1,214
TOTAL CURRENT ASSETS 32,028 18,291
INVESTMENTS 3,407 4,371
PROPERTY, PLANT AND EQUIPMENT 290,499 246,341
LESS ACCUMULATED DEPRECIATION 141,157 131,649
PROPERTY, PLANT AND EQUIPMENT, NET 149,342 114,692
OTHER ASSETS:
Goodwill 27,109 25,086
Intangible Assets, Net 4,312 387
Financial Derivative Instrument 3,429 2,501
Deferred Costs and Other 3,640 3,209
TOTAL OTHER ASSETS 38,490 31,183
TOTAL ASSETS $223,267 $168,537
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash Overdraft $514 $1,680
Accounts Payable 5,224 4,065
Accrued Expenses 6,809 3,202
Accrued Interest - 76
Accrued Taxes 4,765 -
Billings in Excess of Costs on
Contracts 283 260
Advanced Billings and Deposits 4,577 2,898
Current Maturities of Long-Term
Obligations 1,778 5,323
TOTAL CURRENT LIABILITIES 23,950 17,504
LONG-TERM OBLIGATIONS, Net of Current
Maturities 140,980 97,661
DEFERRED INCOME TAXES 15,346 15,270
DEFERRED REVENUE AND EMPLOYEE
BENEFITS 7,982 6,557
TOTAL LIABILITIES 188,258 136,992
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, no par value, $.10
stated value
Shares authorized: 100,000,000
Shares issued and outstanding:
2005, 13,124,928; 2004, 13,057,106 1,312 1,306
Additional Paid-In Capital 9,262 8,615
Retained Earnings 22,371 20,119
Accumulated Other Comprehensive
Income 2,064 1,505
TOTAL SHAREHOLDERS' EQUITY 35,009 31,545
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $223,267 $168,537
Telecom Sector Recap - Continuing Operations
(unaudited)
For Three Months For Twelve Months
(Dollars in Thousands) Ended December 31 Ended December 31
2005 2004 2005 2004
ILEC
Revenues
Local Service $3,764 $3,835 $14,962 $15,231
Network Access 7,224 8,053 31,399 33,064
Data 618 559 2,384 2,152
Intersegment 51 69 205 275
Other 1,618 1,769 6,580 6,747
Total Revenues $13,275 $14,285 $55,530 $57,469
Key Metrics
Access Lines 55,625 60,472
DSL Customers 8,964 7,074
CLEC
Revenues
Local Service $900 $891 $3,558 $3,657
Network Access 499 381 1,985 2,334
Long Distance 1,216 1,161 4,821 4,660
Internet 1,114 1,030 4,361 4,030
Data 689 615 2,584 1,916
Digital TV 293 183 979 554
Other 451 429 1,787 1,752
Total Revenues $5,162 $4,690 $20,075 $18,903
Key Metrics
Access Lines
Overbuild 11,325 10,417
Unbundled Network Element (UNE) 1,595 1,726
Total Service Resale (TSR) 1,545 1,943
Total 14,465 14,086
Long Distance Customers 40,321 43,702
Internet Customers 18,396 17,191
DSL Customers 4,058 3,356
Digital TV Customers 2,766 1,941
Total Continuing Telecom Sector
Revenues $18,437 $18,975 $75,605 $76,372
Cost of Services, excluding
Depreciation and Amortization 7,673 7,507 30,062 29,723
Selling, General and Administrative
Expenses,
excluding Depreciation and
Amortization 2,712 2,724 11,052 10,388
Depreciation and Amortization 3,132 3,479 13,355 13,752
Operating Income $4,920 $5,265 $21,136 $22,509
Income from Continuing Operations $3,092 $3,086 $12,746 $13,352
Other - Continuing Operations
Capital Expenditures $8,248 $7,014 $16,901 $16,100
Customers 128,807 135,451
DSL Customers 13,022 10,430
Digital TV Customers 2,766 1,941
Source: prnewswire
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