Hickory Tech Corporation. (HTCO)

Q2 2010 Earnings Call

July 29, 2010 10:00 a.m. ET


Jennifer Spaude - Director, IR and Public Relations

John Finke - President and CEO

David Christensen - Sr. VP and CFO


Beth Lilly - Gabelli

Jay Kumar - Midsouth Investment Fund



Good morning, my name is Tasha and I will be your conference operator today. At this time I would like to welcome everyone to the HickoryTech Second Quarter 2010 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be question-and-answer session. (Operator Instructions) Thank you.

I would now like to turn the call over Director of Investors and Public Relation, Ms. Spaude. You may begin your conference.

Jennifer Spaude

Good morning and thank you for joining HickoryTech's second quarter 2010 earnings conference call. I'm Jennifer Spaude and with me today are John Finke, HickoryTech's President and Chief Executive Officer; and David Christensen, Senior Vice President and Chief Financial Officer.

Before we get started, let me remind you that our earnings release was issued yesterday afternoon and is available on the Investor Relation section of our website at HickoryTech.com. In addition you'll find a presentation for today's call which we hope you will find helpful in your analysis.

Now just to draw your attention to our Safe Harbor statement. Information in today's presentation contains certain statements and predictions that are not historical facts, but are forward-looking in nature. These forward-looking statements are based on current expectations, estimates and projections about the industry in which HickoryTech operates and management's beliefs and assumptions as of the time of this call.

Such forward-looking statements are subject to uncertainties. Actual results or outcomes may differ materially from those indicated or suggested by any forward-looking statements whether as a result of new information, future events or otherwise. You're cautioned not to place undue reliance on these forward-looking statements made during this conference call which represents estimates as of July 29, 2010. These statements are not guarantees of future performance and involve certain risks, uncertainties and probabilities which are difficult to predict. There are many suck risks and uncertainties which could affect the economy, our industry and our company in particular. Some or all of which could affect future results.

More information on potential risks and uncertainties is available on the company's recent filings with the Securities and Exchange Commission including HickoryTech's Annual Form 10-K report, quarterly Form 10-Q report, and Form 8-K report. This presentation also contains certain non-GAAP financial measures, reconciliation of these non-GAAP measures to our most directly comparable GAAP measures are available in our presentation.

All participants are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. The audio will be archived in HickoryTech's Investor Relation's website for the next 30 days. Following management's discussion, today we will open the call to a Q&A session.

At this time, I'd like to turn the call over to John Finke.

John Finke

Thank you Jennifer and good morning everyone. Our second quarter results released yesterday. First let me say that I am very pleased with our results and another quarter of solid increases. I’ll begin my remarks today with a few financial highlights and I’ll update you on our fiber network expansion and our growth plans. David will take you through the financial details of our second quarter later in the call.

HickoryTech's second quarter revenue totaled $38.3 million up 18% from a year ago. Operating income for the second quarter totaled $5.7 million and was up 7% from one year ago. Net income totaled $3.5 million a 66% increase from a year ago. Double digit revenues increases in all Inventor Sector product lines and stable Telecom operating results produced a very solid second quarter for HickoryTech. Earnings were also positively impacted by a couple listing factors. In income tax reserve release and a joint construction project as part of our fiber network expansion. David will provide details on these factors during his remarks.

These results demonstrate our continued growth through our Inventor Sector and focused on growing our business-to-business services. Additionally, the result reflect our effort to transform our company which is producing an increasing level of diversification, strong operating results and a sound financial position.

Looking specifically at our financial results in the Inventor Sector revenues totaled $21.2 million in the second quarter, up 44% from a year ago. Inventors operating income totaled $2.3 million up 33%, Inventors net income of $1.4 million was also up 33% driven mainly by the ongoing growth in our fiber and data services and a recovery in the equipment and services business. Cost and expenses in the Inventor sector for the second quarter were up primarily due to the addition of CP Telecom operations and higher equipment cost, resulting from higher equipment sales.

We have expanded our direct sales force throughout Minnesota and into moving Iowa to focus on small to medium sized businesses. We have also added operational staff to support this imitative. We have made investments in mid-band Ethernet capabilities in specific markets over the past year and we have strategically expanded our network to reach more customers and reduce our off net cost in these markets.

The business fiber and data services revenue totaled $10.8 million an increase of 63% year-over-year, this line of business continues to produce steady double-digit growth. 43% growth in the first quarter 2010, 29% growth in 2009 and 18% growth in 2008. This strong revenue growth is attribute to increase sale of high capacity Ethernet, MPOS and fiber services. The addition of CP Telecom which we acquired in August of 2009 and the impact of our joint fiber construction project.

Read the rest of this transcript for free on seekingalpha.com

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