Hickory Tech Corporation ( HTCO)

Q3 2011 Earnings Call

November 2, 2011 10:00 AM ET

John Finke – President and CEO

Jennifer Spaude – Director of IR and Marketing

David Christensen – SVP and CFO



Good morning. My name is Lindsey, and I will be your conference operator today. At this time, I would like to welcome everyone to the HickoryTech's Third Quarter 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions)

Thank you. I would now like to turn the conference over to Jennifer Spaude, Director of Investor Relations and Marketing. You may begin.

Jennifer Spaude

Good morning, and thank you for joining HickoryTech's third quarter 2011 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 Relations section of our website at hickorytech.com. In addition, you will find a presentation for today's call which we hope you will find helpful in your analysis.

Now I'd like to draw your attention to our Safe Harbor statements. 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, 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 are cautioned not to place undue reliance on these forward-looking statements made during this conference call, which represents estimates as of November 1, 2011. These statements are not guarantees of future performance and involve certain risks, uncertainties and probabilities which are difficult to predict. There are many such 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 in 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 reports.

This presentation also contains certain non-GAAP financial measures. Reconciliation of these non-GAAP measures to the 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 on HickoryTech's Investor Relations 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. Good morning, everyone. I'm pleased to share with you HickoryTech's Third Quarter 2011 results and highlight the progress we've made with our strategic initiatives. Today, I will cover several key metrics and highlight several news items and events from the past quarter.

Dave will then walk you through our financial details for the third quarter. First off it was an eventful quarter and I'm pleased with our results. Revenue totaled $45.2 million for the quarter, up 4% from a year ago. We achieved continued strong growth in equipment sales, as well as in our fiber and data services and broadband services.

Operating income totaled $6.3 million and net income for the third quarter totaled $3 million. Net income was down year-over-year partly due to $1.9 million release of income tax reserves and $1.1 million net income from a fiber construction project in the third quarter of 2010, both of which increased net income in 2010.

Our third quarter results show continued positive progress with our long-term strategy with focuses on maintaining and leveraging our telecom business, growing our business and broadband services and pursuing new growth opportunities. As we work hard to achieve our long-term goals we continue to stay focused on managing our strong cash flows and leveraging investment in key strategic growth areas. While consumer business remained stable we continue to see solid demand for our business services.

As we extend our fiber network we will look for new opportunities to grow both organically and through acquisitions that will benefit HickoryTech across multiple customer segments in new and existing markets. In the third quarter, our business sector and our broadband revenue streams accounted for nearly three quarters of our total revenue and 70% on a year-to-date basis. We believe our strategic shift in focusing on business and broadband services has positioned HickoryTech for sustained and reliable growth.

We continue to make investments in growth opportunities and we broke ground on our Greater Minnesota Broadband Collaborative Project in the third quarter, which will further expand our fiber footprint in northern Minnesota. Now reviewing our business sector results, which represents our Enventis branded markets. Third-quarter business sector revenue totaled $28 million, up 10% year-over-year primarily driven by increase in equipment and support services and supported by solid growth in our fiber and data services.

Fiber and data revenues totaled $11.4 million, up 3% from the previous quarter, however down 14% year-over-year. A unique fiber construction project last year added $3.3 million of revenue and $1.9 million of pretax income to the fiber and data product line in the third quarter of 2010. Excluding this project fiber and data organic revenue growth was 14% in the third quarter of 2011.

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