HickoryTech Reports First Quarter 2013 Results

HickoryTech Reports First Quarter 2013 Results

  • Total revenue increased 4 percent
  • Fiber and data revenue increased 24 percent
  • Strategic Broadband and Business Revenue represents 79 percent of total revenue

MANKATO, Minn.--(BUSINESS WIRE)-- HickoryTech Corporation (NAS: HTCO) today reported revenue of $48.8 million for the first quarter ending March 31, 2013, an increase of 4 percent year over year. Adjusted EBITDA, as defined by our credit agreement, totaled $11.5 million in the first quarter.

"We are executing on our strategy to grow fiber and data revenue, which increased 24 percent in first quarter as we focus on expanding our distribution networks and building fiber directly to our customers," said John Finke, HickoryTech's president and chief executive officer. "We exceeded our solid first quarter revenue from last year and continue to make investments to drive future growth."

First quarter results include a pre-tax impairment charge of $630,000 related to a portion of the assets obtained with the IdeaOne acquisition. The charge is related to a decision to remove a non-strategic wireless internet product from our Fargo market. The charge, which totaled $380,000 after tax, negatively affected net income by approximately $0.03 per share.

Fiber and Data Segment (before inter-segment eliminations)
First quarter Fiber and Data revenue totaled $16.7 million, up 24 percent year over year. This growth is the result of increased sales within retail and wholesale customer segments and a full quarter of IdeaOne operations following the March 2012 acquisition.

  • Costs and expenses for this segment totaled $15.0 million, up 36 percent, and include the impairment charge.
  • Operating income totaled $1.6 million, down 30% year over year.
  • Net income totaled $961,000, down 31 percent year over year.

"We invested $2.9 million of capital in our Fiber and Data segment in the first quarter and are also investing in the resources to continue to support and grow this line of business," added Finke.

Equipment Segment (before inter-segment eliminations)
First quarter Equipment Segment revenue totaled $17.2 million, a 1 percent decrease year over year.

  • Equipment revenue was $15.4 million, even compared to a year ago, and Support Services revenue was $1.9 million, down 12 percent from first quarter 2012.
  • Equipment Segment operating income totaled $821,000, approximately the same as the prior year.
  • Net income totaled $485,000, even with the first quarter 2012.

Telecom Segment (before inter-segment eliminations)
First quarter Telecom Segment revenue totaled $15.6 million, down 6 percent from a year ago. Telecom results were affected by declines in network access, local service and bill processing revenue.

  • DSL subscribers increased 5 percent and Digital TV subscribers were up 6 percent; however, competitive price compression is impacting broadband revenue which was the same year over year.
  • Costs and expenses totaled $14 million, down 3 percent year over year.
  • Net income totaled $943,000, a 27 percent decrease compared to the first quarter 2012.

Total Capital expenditures in the first quarter were $5.8 million, compared with $3.6 million in the comparable quarter in 2012.

Depreciation and amortization expense increased $815,000, or 13 percent in the first quarter. The increase is primarily attributed to increased capital expenditures associated with fiber network expansion and success-based capital expenditures associated with Fiber and Data revenue growth.

During the first quarter, the company purchased and retired approximately 53,000 shares of HickoryTech stock, at an average cost of $10.01 per share, as part of a previously authorized stock repurchase plan.

Debt Position
Long-term debt and current maturities, including capitalized leases, totaled $136.4 million as of March 31, 2013. The first quarter 2013 debt balance represents a year-over-year decrease of $5.5 million, as a result of the debt repayments made since the acquisition of IdeaOne Telecom.

Fiscal Outlook for 2013
HickoryTech confirms its previous fiscal 2013 outlook. Revenue in 2013 is expected to be within a range of a 2 percent decline to a 3 percent increase as compared to 2012 revenue. The company expects growth in business revenue to offset the majority of the declines in legacy Telecom services. Net income is expected to be in a range of a 7 percent decline to a 14 percent increase versus 2012 net income. Capital expenditures are expected to decline by 6 percent to 20 percent compared with 2012 and be between $24 million and $28.2 million. EBITDA is expected to be in a range of a 2 percent to 8 percent increase as compared to 2012 EBITDA. The company expects its year-end debt balance to be down 1 percent to 3 percent and be in a range of $133 million to $136 million.

Conference Call and Webcast
HickoryTech will hold a conference call and webcast on Wednesday, May 1, at 9 a.m. CT to review the company's first quarter 2013 results. The conference call dial-in number is 877-774-2369, conference ID 45481080. A simultaneous webcast with audio and presentation will be available at http://investor.hickorytech.com.

About HickoryTech
HickoryTech Corporation is a leading communications provider serving business and residential customers in the upper Midwest. With headquarters in Mankato, Minn., HickoryTech has 500 employees and a five-state fiber network spanning more than 4,100 route miles across Minnesota and into Iowa, North Dakota, South Dakota and Wisconsin. Enventis provides business IP voice, data and video solutions, MPLS networking, data center and managed hosted services and communication systems. HickoryTech delivers broadband Internet, Digital TV, voice and data services to businesses and consumers in southern Minnesota and northwest Iowa. The Company trades on the NASDAQ, symbol: HTCO. For more information, visit www.hickorytech.com.

Non-GAAP Measures
To supplement the Company's financial statements presented in accordance with GAAP, the Company provides certain non-GAAP financial measures of financial performance and position. The Company's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, or superior to, GAAP results. These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance, financial position and ability to generate cash flows. In many cases non-GAAP financial measures are used by analysts and investors to evaluate the Company's performance and financial position. Reconciliation to the nearest GAAP measure included in this press release can be found in the financial table included below.

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. HickoryTech undertakes no obligation to update any of its forward-looking statements, except as required by law.

Consolidated Statements of Income
Three Months Ended March 31%
(Dollars in thousands, except share data)20132012Change
Operating revenue:
Services 33,405  31,645 6%
Total operating revenue48,76946,9444%
Costs and expenses:
Cost of sales, excluding depreciation and amortization13,22213,466-2%
Cost of services, excluding depreciation and amortization16,59915,3268%
Selling, general and administrative expenses7,4496,70611%
Asset impairment633-
Depreciation and amortization 7,009  6,194 13%
Total costs and expenses 44,912  41,692 8%
Operating income3,8575,252-27%
Interest and other income220-90%
Interest expense (1,139) (1,411)-19%
Income before income taxes2,7203,861-30%
Income tax provision 1,094  1,567 -30%
Net income$1,626 $2,294 -29%
Basic earnings per share$0.12 $0.17 -29%
Basic weighted average common shares outstanding 13,556,515  13,349,791 
Diluted earnings per share$0.12 $0.17 -29%
Diluted weighted average common and equivalent shares outstanding 13,578,429  13,405,357 
Dividends per share$0.145 $0.14 4%
Consolidated Balance Sheets
(Dollars and Share Data in Thousands)March 31, 2013December 31, 2012
Current assets:
Cash and cash equivalents$4,306$8,305
Receivables, net of allowance for doubtful accounts of $272and $27824,66022,530
Income taxes receivable96596
Deferred income taxes, net1,7351,887
Prepaid expenses3,2042,092
Other 724  1,399 
Total current assets41,97945,188
Property, plant and equipment442,402437,623
Accumulated depreciation and amortization (261,067) (254,664)
Property, plant and equipment, net181,335182,959
Other assets:
Intangible assets, net4,5484,811
Deferred costs and other 3,139  3,105 
Total other assets 36,715  36,944 
Total assets$263,425 $268,304 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable$4,032$5,818
Extended term payable10,4188,115
Deferred revenue5,6067,362
Accrued expenses and other7,65510,881
Current maturities of long-term obligations 1,648  1,648 
Total current liabilities29,35933,824
Long-term liabilities:
Debt obligations, net of current maturities134,723135,133
Accrued income taxes236236
Deferred revenue1,2231,085
Financial derivative instruments2,1792,432
Accrued employee benefits and deferred compensation12,68812,481
Deferred income taxes 34,217  34,265 
Total long-term liabilities185,266185,632
Total liabilities214,625219,456
Commitments and contingencies
Shareholders' equity:
Common stock, no par value, $.10 stated value
Shares authorized: 100,000
Shares issued and outstanding: 13,553in 2013 and 13,519 in 20121,3551,352
Additional paid-in capital16,31615,950
Retained earnings30,64330,987
Accumulated other comprehensive (loss) 486  559 
Total shareholders' equity 48,800  48,848 
Total liabilities and shareholders' equity$263,425 $268,304 
Fiber and Data Segment
Three Months Ended
March 31
(Dollars in thousands)20132012% Change
Revenue before intersegment eliminations:
Intersegment 213  193 10%
Total Fiber and Data revenue16,68413,41224%
Cost of services
(excluding depreciation and amortization)8,2576,59525%
Selling, general and administrative expenses3,3602,50634%
Asset impairment633-
Depreciation and amortization 2,796  1,966 42%
Total costs and expenses 15,046  11,067 36%
Operating income$1,638 $2,345 -30%
Net income$961 $1,395 -31%
Capital expenditures$
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