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

(unaudited)

Three Months Ended March 31

%

(Dollars in thousands, except share data)

2013

2012

Change

Operating revenue:

Equipment

$

15,364

$

15,299

0

%

Services

33,405

31,645

6

%

Total operating revenue

48,769

46,944

4

%

Costs and expenses:

Cost of sales, excluding depreciation and amortization

13,222

13,466

-2

%

Cost of services, excluding depreciation and amortization

16,599

15,326

8

%

Selling, general and administrative expenses

7,449

6,706

11

%

Asset impairment

633

-

Depreciation and amortization

7,009

6,194

13

%

Total costs and expenses

44,912

41,692

8

%

Operating income

3,857

5,252

-27

%

Interest and other income

2

20

-90

%

Interest expense

(1,139

)

(1,411

)

-19

%

Income before income taxes

2,720

3,861

-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

(unaudited)

(Dollars and Share Data in Thousands)

March 31, 2013

December 31, 2012

Assets

Current assets:

Cash and cash equivalents

$

4,306

$

8,305

Receivables, net of allowance for doubtful accounts of $272and $278

24,660

22,530

Inventories

7,254

8,379

Income taxes receivable

96

596

Deferred income taxes, net

1,735

1,887

Prepaid expenses

3,204

2,092

Other

724

1,399

Total current assets

41,979

45,188

Investments

3,396

3,213

Property, plant and equipment

442,402

437,623

Accumulated depreciation and amortization

(261,067

)

(254,664

)

Property, plant and equipment, net

181,335

182,959

Other assets:

Goodwill

29,028

29,028

Intangible assets, net

4,548

4,811

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 payable

10,418

8,115

Deferred revenue

5,606

7,362

Accrued expenses and other

7,655

10,881

Current maturities of long-term obligations

1,648

1,648

Total current liabilities

29,359

33,824

Long-term liabilities:

Debt obligations, net of current maturities

134,723

135,133

Accrued income taxes

236

236

Deferred revenue

1,223

1,085

Financial derivative instruments

2,179

2,432

Accrued employee benefits and deferred compensation

12,688

12,481

Deferred income taxes

34,217

34,265

Total long-term liabilities

185,266

185,632

Total liabilities

214,625

219,456

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 2012

1,355

1,352

Additional paid-in capital

16,316

15,950

Retained earnings

30,643

30,987

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

(unaudited)

Three Months Ended

March 31

(Dollars in thousands)

2013

2012

% Change

Revenue before intersegment eliminations:

Services

$

16,471

$

13,219

25

%

Intersegment

213

193

10

%

Total Fiber and Data revenue

16,684

13,412

24

%

Cost of services

(excluding depreciation and amortization)

8,257

6,595

25

%

Selling, general and administrative expenses

3,360

2,506

34

%

Asset impairment

633

-

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

$