HickoryTech Reports Second Quarter 2013 Results

HickoryTech Reports Second Quarter 2013 Results

  • Total revenue increased 7%

  • Fiber and Data revenue increased 11%

  • Equipment revenue increased 18%

  • Net income increased 34%

MANKATO, Minn.--(BUSINESS WIRE)-- HickoryTech Corporation (NAS: HTCO) today reported total revenue of $47.1 million for the second quarter ending June 30, 2013, an increase of 7 percent year over year. Adjusted EBITDA, as defined by our credit agreement, totaled $12.3 million in the second quarter, a 9 percent increase over last year. Net Income totaled $2.3 million, up 34 percent from a year ago.

"HickoryTech's strong momentum continues as we have increased strategic fiber and data revenue 17 percent year to date," said John Finke, HickoryTech's president and chief executive officer. "Our disciplined approach to expanding our fiber access networks is well underway as we make targeted investments to drive future growth. Net income increased 34 percent in the second quarter and our EBITDA grew 9 percent, demonstrating the progress we are making growing our business services and positioning HickoryTech for the future as we offset declines in our legacy telecom service."


Fiber and Data Segment (before inter-segment eliminations)
Second quarter Fiber and Data revenue totaled $17 million, up 11 percent year over year. Revenue in this segment totaled $33.7 million for the six-month period at June 30, 2013, up 17 percent year over year. This growth is the result of increased sales within our retail and wholesale customer segments.

  • Costs and expenses for this segment totaled $14.7 million, up 13 percent.

  • Operating income totaled $2.2 million, down 2 percent year over year.

  • Net income totaled $1.3 million, down 1 percent year over year.

Equipment Segment (before inter-segment eliminations)
Second quarter Equipment Segment revenue totaled $15.1 million, an 18 percent increase year over year.

  • Equipment revenue was $12.9 million, a 20 percent increase compared to a year ago, and Support Services revenue, which includes advisory, design, implementation and maintenance support services, was $2.2 million, a 4 percent increase over second quarter 2012.

  • Equipment Segment operating income totaled $934,000, a 134 percent increase over the prior year.

  • Net income totaled $555,000, a 132 percent increase over the second quarter 2012.

Telecom Segment (before inter-segment eliminations)
Second quarter Telecom Segment revenue totaled $15.8 million, down 3 percent from a year ago. Telecom results were affected by network access and local service revenue declines.

  • Broadband revenue increased 5 percent in the second quarter. DSL subscribers increased 6 percent and Digital TV subscribers were up 9 percent, totaling 20,538 and 11,001 subscribers respectively.

  • Costs and expenses totaled $13.9 million, down 2 percent year over year.

  • Net income totaled $1.1 million, a 6 percent decrease compared to the second quarter 2012.

Total capital expenditures in the second quarter were $6.5 million, compared with $5.9 million in the comparable quarter in 2012.

During the second quarter, the company purchased and retired approximately 72,000 shares of HickoryTech stock, at a cost of $746,000, as part of a previously authorized stock repurchase plan.

Debt Position
Long-term debt and current maturities, including capitalized leases, totaled $136 million as of June 30, 2013. The second quarter 2013 debt balance represents a decrease of $5.5 million from one year ago, as a result of the debt repayments made in the past 12 months.

"As we approach the second half of the year, we are on track to achieve our key objectives and position Enventis, our growth brand, for the future," added Finke.

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 legacy Telecom services decline. 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 spending, ranging from $24 million to $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 Tuesday, August 6, at 9 a.m. CT to review the company's second-quarter 2013 results. The conference call dial-in number is 877-774-2369 for U.S. and Canadian callers, conference ID12634558. 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 Operations

(unaudited)

Three Months Ended June 30

%

Six Months Ended June 30

%

(Dollars in thousands, except share data)

2013

2012

Change

2013

2012

Change

Operating revenue:

Equipment

$

12,910

$

10,740

20

%

$

28,274

$

26,039

9

%

Services

34,231

33,117

3

%

67,636

64,762

4

%

Total operating revenue

47,141

43,857

7

%

95,910

90,801

6

%

Costs and expenses:

Cost of sales, excluding depreciation and amortization

10,860

9,292

17

%

24,082

22,758

6

%

Cost of services, excluding depreciation and amortization

16,971

15,905

7

%

33,570

31,231

7

%

Selling, general and administrative expenses

7,047

7,441

-5

%

14,496

14,147

2

%

Asset impairment

5

-

638

-

Depreciation and amortization

7,252

6,732

8

%

14,261

12,926

10

%

Total costs and expenses

42,135

39,370

7

%

87,047

81,062

7

%

Operating income

5,006

4,487

12

%

8,863

9,739

-9

%

Interest and other income

13

14

-7

%

15

34

-56

%

Interest expense

(1,131

)

(1,599

)

-29

%

(2,270

)

(3,010

)

-25

%

Income before income taxes

3,888

2,902

34

%

6,608

6,763

-2

%

Income tax provision

1,567

1,164

35

%

2,661

2,731

-3

%

Net income

$

2,321

$

1,738

34

%

$

3,947

$

4,032

-2

%

Basic earnings per share

$

0.17

$

0.13

31

%

$

0.29

$

0.30

-3

%

Basic weighted average common shares outstanding

13,531,007

13,404,628

13,543,690

13,377,209

Diluted earnings per share

$

0.17

$

0.13

31

%

$

0.29

$

0.30

-3

%

Diluted weighted average common and equivalent shares outstanding

13,576,967

13,454,707

13,584,749

13,433,277

Dividends per share

$

0.145

$

0.14

4

%

$

0.29

$

0.28

4

%

Consolidated Balance Sheets

(unaudited)

(Dollars and Share Data in Thousands)

June 30, 2013

December 31, 2012

Assets

Current assets:

Cash and cash equivalents

$

5,197

$

8,305

Receivables, net of allowance for doubtful accounts of $264and $278

27,346

22,530

Inventories

6,312

8,379

Income taxes receivable

1,025

596

Deferred income taxes, net

1,623

1,887

Prepaid expenses

2,599

2,092

Other

917

1,399

Total current assets

45,019

45,188

Investments

3,408

3,213

Property, plant and equipment

448,535

437,623

Accumulated depreciation and amortization

(267,930

)

(254,664

)

Property, plant and equipment, net

180,605

182,959

Other assets:

Goodwill

29,028

29,028

Intangible assets, net

4,328

4,811

Deferred costs and other

3,002

3,105

Total other assets

36,358

36,944

Total assets

$

265,390

$

268,304

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

3,332

$

5,818

Extended term payable

10,867

8,115

Deferred revenue

5,598

7,362

Accrued expenses and other

9,326

10,881

Current maturities of long-term obligations

1,655

1,648

Total current liabilities

30,778

33,824

Long-term liabilities:

Debt obligations, net of current maturities

134,324

135,133

Accrued income taxes

221

236

Deferred revenue

2,864

1,085

Financial derivative instruments