HickoryTech Reports Third Quarter 2013 Results

HickoryTech Corporation (NASDAQ:HTCO), doing business as Enventis, today reported total revenue of $47.1 million for the third quarter ending September 30, 2013, an increase of 3 percent year over year. Fiber & Data revenue increased 8 percent over third quarter 2012. Telecom revenue was $15.6 million and Equipment revenue was up 2 percent totaling $15.3 million. Net Income totaled $1.9 million, up 7 percent from a year ago.

“HickoryTech’s momentum continues as we have increased strategic fiber and data revenue 14 percent year to date,” said John Finke, HickoryTech’s president and chief executive officer. “Our disciplined approach to expand our fiber network directly to customers is well underway as we make targeted investments to drive future growth.”

Fiber and Data Segment (before inter-segment eliminations)Third quarter Fiber and Data revenue totaled $17.0 million, up 8 percent year over year. Revenue in this segment totaled $50.6 million for the nine-month period ended September 30, 2013, up 14 percent year over year. This growth is the result of increased sales within our business and wholesale services as well as nine months of Fargo operations.
  • Fiber and Data revenue is comprised of 57 percent retail business and 43 percent wholesale revenue in the third quarter 2013. Year to date, business services accounts for 56 percent and wholesale services accounts for 44 percent of fiber and data revenue.
  • Costs and expenses for this segment totaled $15.2 million and are up 15 percent due to increased costs to support growth in this segment.
  • Operating income totaled $1.7 million in this segment, down 30 percent year over year.
  • Net income totaled $1.0 million, down 30 percent year over year.
  • Year-to-date, operating income and net income are both down 21 percent. Increased depreciation and a pre-tax impairment charge of $638,000 are key drivers behind this decline.

Equipment Segment (before inter-segment eliminations)Third quarter Equipment Segment revenue totaled $15.3 million, a 2 percent increase year over year.
  • Equipment revenue was $12.8 million, a 1 percent decrease compared to a year ago, and Support Services revenue, which includes advisory, design, implementation and maintenance support services, was $2.5 million, a 19 percent increase over third quarter 2012.
  • Operating income totaled $1.0 million in this segment, a 16 percent increase over the prior year.
  • Net income totaled $614,000, a 16 percent increase over the prior year.

Telecom Segment (before inter-segment eliminations)Third quarter Telecom Segment revenue totaled $15.6 million, down 1 percent from a year ago. Telecom results are positively impacted by broadband growth and hindered by network access and local service revenue declines.
  • Broadband revenue increased 8 percent in the third quarter. DSL subscribers increased 5 percent and Digital TV subscribers were up 10 percent, totaling 20,793 and 11,327 subscribers respectively.
  • Costs and expenses totaled $14.1 million, down 2 percent year over year.
  • Operating income totaled $1.5 million in this segment, a 9 percent increase over the prior year.
  • Net income totaled $891,000, a 9 percent increase compared to the third quarter 2012.

Total capital expenditures in the third quarter were $8.5 million, compared with $9.4 million in the comparable quarter in 2012. On a nine-month, year-to-date basis, capital expenditures were $20.8 million compared to $18.9 million for the same period in 2012.

During the third quarter, the company purchased no additional shares of HickoryTech stock as part of a previously authorized stock repurchase plan, but on a year-to-date basis the company has purchased and retired 124,285 company shares for $1,275,000.

Debt PositionLong-term debt and current maturities, including capitalized leases, totaled $135.6 million as of September 30, 2013. The third quarter 2013 debt balance represents a leverage ratio of 2.85 to one times EBITDA, as defined by the company’s credit agreement.

“The strength and free cash flow of our business enables us to maintain favorable financing terms and gives us the flexibility to pursue strategic initiatives while maintaining shareholder value,” added Finke.

Amended Debt AgreementOn October 30, the company signed an amendment to its credit facility, which provides financing for six years through December 31, 2019, a reduction in interest costs, and expanded terms and features within the agreement. The Company has an unused revolving credit line of $30 million within the credit facility, and access to additional term debt for acquisitions. Eight banks participated in the amended syndicated bank facility.

Dividend IncreaseFor the fourth consecutive year, the company announced a quarterly dividend increase. The dividend payable December 5 will be $0.15 per share, a 3.4 percent increase over the previously declared dividend.

Brand ChangeIn October 2013, the company announced it will align all its services under a unified brand, Enventis, across the company’s entire service area. The company will also seek shareholder approval to change its corporate name to Enventis Corporation at its shareholder meeting in May 2014.

Fiscal Outlook for 2013HickoryTech confirms its previous fiscal 2013 outlook.
  • Revenue 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 services 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 WebcastHickoryTech will hold a conference call and webcast on Tuesday, November 5, at 9 a.m. CT to review the company’s third-quarter 2013 results. The conference call dial-in number is 877-372-0867 for U.S. and Canadian callers, conference ID 90953264. A simultaneous webcast with audio and presentation will be available at http://investor.hickorytech.com.

About HickoryTechHickoryTech Corporation is a leading communications provider serving business and residential customers in the upper Midwest and is doing business as Enventis. With headquarters in Mankato, Minn., the corporation has 500 employees and an expanded, multi-state fiber network spanning more than 4,100 route miles serving Minnesota, Iowa, North Dakota and South Dakota. The company provides IP-based voice and data solutions, MPLS networking, data center and managed hosted services and communication systems to businesses across a five-state region. The company also offers 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, and is a member of the Russell 2000 Index. For more information, visit www.enventis.com.

Non-GAAP MeasuresTo 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 statementCertain 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 EndedSeptember 30
%

Nine Months EndedSeptember 30
%
(Dollars in thousands, except share data) 2013 2012 Change 2013 2012 Change
Operating revenue:
Equipment $ 12,849 $ 12,915 -1 % $ 41,123 $ 38,954 6 %
Services   34,239     32,898   4 %   101,875     97,660   4 %
Total operating revenue 47,088 45,813 3 % 142,998 136,614 5 %
 
Costs and expenses:
Cost of sales, excluding depreciation and amortization 10,929 10,906 0 % 35,011 33,664 4 %
Cost of services, excluding depreciation and amortization 17,406 16,358 6 % 50,976 47,589 7 %
Selling, general and administrative expenses 6,953 7,123 -2 % 21,449 21,270 1 %
Asset impairment - - 638 -
Depreciation and amortization   7,514     6,869   9 %   21,775     19,795   10 %
Total costs and expenses   42,802     41,256   4 %   129,849     122,318   6 %
 
Operating income 4,286 4,557 -6 % 13,149 14,296 -8 %
 
Interest and other income 1 3 -67 % 16 37 -57 %
Interest expense   (1,155 )   (1,625 ) -29 %   (3,425 )   (4,635 ) -26 %
Income before income taxes 3,132 2,935 7 % 9,740 9,698 0 %
Income tax provision   1,270     1,194   6 %   3,931     3,925   0 %
 
Net income $ 1,862   $ 1,741   7 % $ 5,809   $ 5,773   1 %
 
Basic earnings per share $ 0.14   $ 0.13   8 % $ 0.43   $ 0.43   0 %
 
Basic weighted average common shares outstanding   13,543,062     13,427,883     13,543,479     13,394,224  
 
Diluted earnings per share $ 0.14   $ 0.13   8 % $ 0.43   $ 0.43   0 %
 
Diluted weighted average common and equivalent shares outstanding   13,592,577     13,485,143     13,594,198     13,452,642  
 
Dividends per share $ 0.145   $ 0.14   4 % $ 0.435   $ 0.42   4 %
 
 
Consolidated Balance Sheets
(unaudited)
       
(Dollars and Share Data in Thousands) September 30, 2013 December 31, 2012
Assets
Current assets:
Cash and cash equivalents $ 6,516 $ 8,305
Receivables, net of allowance for doubtful accounts of $312 and $278 22,598 22,530
Inventories 5,408 8,379
Income taxes receivable - 596
Deferred income taxes, net 1,623 1,887
Prepaid expenses 2,610 2,092
Other   1,106     1,399  
Total current assets 39,861 45,188
 
Investments 3,414 3,213
 
Property, plant and equipment 455,290 437,623
Accumulated depreciation and amortization   (273,608 )   (254,664 )
Property, plant and equipment, net 181,682 182,959
 
Other assets:
Goodwill 29,028 29,028
Intangible assets, net 4,108 4,811
Deferred costs and other   2,865     3,105  
Total other assets   36,001     36,944  
 
Total assets $ 260,958   $ 268,304  
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,191 $ 5,818
Extended term payable 7,520 8,115
Deferred revenue 5,415 7,362
Accrued expenses and other 8,734 10,881
Financial derivative instruments 318 -
Current maturities of long-term obligations   1,584     1,648  
Total current liabilities 26,762 33,824
 
Long-term liabilities:
Debt obligations, net of current maturities 134,018 135,133
Accrued income taxes 222 236
Deferred revenue 2,867 1,085
Financial derivative instruments 1,356 2,432
Accrued employee benefits and deferred compensation 12,857 12,481
Deferred income taxes   34,111     34,265  
Total long-term liabilities 185,431 185,632
 
Total liabilities 212,193 219,456
 
Commitments and contingencies
 
Shareholders' equity:
Common stock, no par value, $0.10 stated value
Shares authorized: 100,000
Shares issued and outstanding: 13,553 in 2013 and 13,519 in 2012 1,355 1,352
Additional paid-in capital 16,188 15,950
Retained earnings 30,896 30,987
Accumulated other comprehensive income   326     559  
Total shareholders' equity   48,765     48,848  
 
Total liabilities and shareholders' equity $ 260,958   $ 268,304  
 
 
Fiber and Data Segment
(unaudited)
                       

Three Months EndedSeptember 30

Nine Months EndedSeptember 30
(Dollars in thousands) 2013 2012 % Change 2013 2012 % Change
Revenue before intersegment eliminations:
Business $ 9,543 $ 8,808 8 % $ 28,206 $ 23,928 18 %
Wholesale 7,193 6,720 7 % 21,780 19,996 9 %
Intersegment   222   215 3 %   648   601 8 %
Total Fiber and Data revenue 16,958 15,743 8 % 50,634 44,525 14 %
 
Cost of services
(excluding depreciation and amortization) $ 8,906 $ 7,735 15 % $ 25,746 $ 21,819 18 %
Selling, general and administrative expenses 3,252 2,925 11 % 9,845 8,477 16 %
Asset impairment - - 638 -
Depreciation and amortization   3,078   2,638 17 %   8,796   7,155 23 %
Total costs and expenses   15,236   13,298 15 %   45,025   37,451 20 %
 
Operating income $ 1,722 $ 2,445 -30 % $ 5,609 $ 7,074 -21 %
Net income $ 1,024 $ 1,454 -30 % $ 3,325 $ 4,208 -21 %
 
Capital expenditures $ 4,725 $ 6,390 -26 % $ 10,638 $ 11,958 -11 %
 
 
Equipment Segment
(unaudited)
                       

Three Months EndedSeptember 30

Nine Months EndedSeptember 30
(Dollars in thousands) 2013 2012 % Change 2013 2012 % Change
Revenue before intersegment eliminations:
Equipment $ 12,849 $ 12,915 -1 % $ 41,123 $ 38,954 6 %
Support Services   2,489   2,086   19 %   6,568   6,332 4 %
Total Equipment revenue 15,338 15,001 2 % 47,691 45,286 5 %
 
Cost of sales
(excluding depreciation and amortization) $ 10,929 $ 10,906 0 % $ 35,011 $ 33,664 4 %
Cost of services
(excluding depreciation and amortization) 1,803 1,802 0 % 5,306 5,141 3 %
Selling, general and administrative expenses 1,436 1,332 8 % 4,240 4,159 2 %
Depreciation and amortization   139   71   96 %   348   213 63 %
Total costs and expenses   14,307   14,111   1 %   44,905   43,177 4 %
 
Operating income $ 1,031 $ 890   16 % $ 2,786 $ 2,109 32 %
Net income $ 614 $ 529   16 % $ 1,654 $ 1,254 32 %
 
Capital expenditures $ 31 $ (15 ) 307 % $ 992 $ 175 467 %
 
 

Telecom Segment
(unaudited)
                       

Three Months EndedSeptember 30
%

Nine Months EndedSeptember 30
%
(Dollars in thousands) 2013 2012 Change 2013 2012 Change
Revenue before intersegment eliminations:
Local Service $ 2,821 $ 3,124 -10 % $ 8,669 $ 9,901 -12 %
Network Access 4,313 4,677 -8 % 13,496 14,329 -6 %
Broadband 5,241 4,861 8 % 15,487 14,840 4 %
Directory 677 764 -11 % 2,137 2,316 -8 %
Long Distance 593 611 -3 % 1,749 1,895 -8 %
Bill Processing 1,061 950 12 % 2,914 3,190 -9 %
Intersegment 552 465 19 % 1,696 1,319 29 %
Other   308   297 4 %   869   933 -7 %
Total Telecom revenue $ 15,566 $ 15,749 -1 % $ 47,017 $ 48,723 -4 %
 
Total Telecom revenue before intersegment eliminations
Unaffiliated Customers $ 15,014 $ 15,284 $ 45,321 $ 47,404
Intersegment   552   465   1,696   1,319
15,566 15,749 47,017 48,723
 
Cost of services (excluding depreciation and amortization) 7,415 7,447 0 % 22,095 22,373 -1 %
Selling, general and administrative expenses 2,359 2,779 -15 % 7,330 8,429 -13 %
Depreciation and amortization   4,289   4,146 3 %   12,608   12,364 2 %
Total costs and expenses   14,063   14,372 -2 %   42,033   43,166 -3 %
 
Operating income $ 1,503 $ 1,377 9 % $ 4,984 $ 5,557 -10 %
 
Net income $ 891 $ 816 9 % $ 2,952 $ 3,301 -11 %
 
Capital expenditures $ 3,746 $ 2,979 26 % $ 9,125 $ 6,777 35 %
 

Key Metrics
Business access lines 19,317 20,546 -6 %
Residential access lines   21,149   22,715 -7 %
Total access lines 40,466 43,261 -6 %
Long distance customers 29,001 30,662 -5 %
Digital Subscriber Line customers 20,793 19,751 5 %
Digital TV customers 11,327 10,341 10 %
 
 
Reconciliation of Non-GAAP Measures
         
Three Months Ended
(Dollars in thousands) Sep-13 Jun-13 Mar-13 Dec-12
Reconciliation of net income to EBITDA:
Net income $ 1,862 $ 2,321 $ 1,626 $ 2,525
Add:
Depreciation and amortization 7,514 7,252 7,009 6,951
Interest expense 1,155 1,131 1,139 1,114
Income taxes   1,270   1,567   1,094   1,458
EBITDA $ 11,801 $ 12,271 $ 10,868 $ 12,048
Adjustments allowed under our credit agreement:
Asset impairment   -   5   633   -
Adjusted EBITDA as defined in our credit agreement $ 11,801 $ 12,276 $ 11,501 $ 12,048
 
Debt to EBITDA ratio
Total outstanding debt as of September 30, 2013 (including outstanding letters of credit) $ 135,622
Adjusted EBITDA for the last (4) consecutive fiscal quarters as presented above   47,626
Debt to EBITDA ratio as of September 30, 2013   2.85
 
 
 

Three Months EndedSeptember 30

Nine Months EndedSeptember 30
(Dollars in thousands) 2013 2012 2013 2012
Reconciliation of consolidated net income to EBITDA:
Net income $ 1,862 $ 1,741 $ 5,809 $ 5,773
Add:
Depreciation and amortization 7,514 6,869 21,775 19,795
Interest expense 1,155 1,625 3,425 4,635
Income taxes   1,270   1,194   3,931   3,925
EBITDA   11,801   11,429   34,940   34,128
Adjustments allowed under our credit agreement:
Asset impairment   -   -   638   -
Adjusted EBITDA as defined in our credit agreement $ 11,801 $ 11,429 $ 35,578 $ 34,128
 
               
(Dollars in thousands)        
Reconciliation of net debt: Sep-13 Jun-13 Mar-13 Dec-12
Debt obligations, net of current maturities $ 134,018 $ 134,324 $ 134,723 $ 135,133
Current maturities of long-term obligations   1,584     1,655     1,648   1,648
Total Debt $ 135,602 $ 135,979 $ 136,371 $ 136,781
Less:
Cash and cash equivalents   6,516     5,197     4,306   8,305
Net Debt $ 129,086   $ 130,782   $ 132,065 $ 128,476
 
 
Year Ending
December 31, 2013
(Dollars in thousands) Guidance Range
Reconciliation of net income to 2013 EBITDA guidance: Low High
Projected net income $ 7,700 $ 9,500
Add back:
Depreciation and amortization 29,000 28,500
Interest expense 5,000 5,500
Taxes   5,300     6,500  
Projected EBITDA guidance $ 47,000   $ 50,000  
 
Prior Year EBITDA $ 46,176 $ 46,176
% Change +2 % +8 %
 

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX