HickoryTech Corporation (NASDAQ:HTCO) today reported fourth quarter revenue of $46.2 million. Net income for the fourth quarter totaled $1.9 million, and earnings per share totaled $0.14 per diluted share.
“For the quarter and full year we delivered strong Fiber and Data revenue growth, a key objective in our plan to expand fiber access networks and further diversify our company’s revenue stream,” said John Finke, HickoryTech’s president and chief executive officer. “More than three-fourths of our revenue is from business and broadband services and our Fiber and Data segment revenue is now larger than our Telecom Segment revenue, signifying Enventis’ strong position as a leading business and broadband provider. Looking forward, we are focused on increasing our profitability, growth in strategic business services and delivering the best customer experience through a unified brand.”
Fiber and Data Segment (before inter-segment eliminations)
- Fourth quarter Fiber and Data revenue totaled $17.3 million, up 5 percent year over year. This improvement is the result of 7 percent growth in business revenue and 3 percent growth in wholesale revenue within this segment.
- Costs and expenses for the segment totaled $15.1 million, up 11 percent driven by our investments in resources to support this segment’s revenue growth and due to increased depreciation.
- Fiber and Data Segment operating income totaled $2.1 million, a $610,000 decrease year over year.
- Net income totaled $1.4 million, a $350,000 decrease from the fourth quarter 2012.
Equipment Segment (before inter-segment eliminations)
- Fourth quarter Equipment Segment revenue totaled $14 million, a 6 percent decrease year over year, driven by lower equipment hardware sales.
- Equipment revenue was $10.3 million, a 22 percent decrease from a year ago and Support Services revenue was $3.7 million, an increase of 131 percent from fourth quarter 2012 driven by a higher level of professional services related to customer installations.
- Total costs and expenses were 7 percent lower than one year ago due to lower equipment sales
- Equipment Segment operating income totaled $577,000, an increase $179,000 year over year.
- Net income totaled $404,000, a $135,000 increase from fourth quarter 2012.
Telecom Segment (before inter-segment eliminations)
- Fourth quarter Telecom Segment revenue totaled $14.3 million, down 3 percent year over year. Telecom results were affected by declines in network access, local service and other legacy service revenue, due to access reform regulation, access line and minute-of-use erosion and increased competition.
- DSL subscribers increased 5 percent and Digital TV subscribers were up 10 percent; boosting broadband revenue 8 percent year over year.
- Costs and expenses totaled $12.3 million, and were down 3 percent year over year due to the company’s focus on controlling expenses in this line of business in order to maximize free cash flow.
- Net income totaled $1.4 million, down $31,000 compared to the fourth quarter 2012.
Total Company Capex, Depreciation and Amortization
Capital
expenditures in the fourth quarter totaled $7.2 million, which is down
from $11.5 million of capital expenditures in the fourth quarter 2012.
Depreciation and amortization expense increased $596,000 or 9 percent in the fourth quarter, primarily attributed to investments in capital expenditures associated with fiber network expansion and funding of success-based projects associated with routine capital expenditures to enhance our network.
Consolidated Fiscal 2013 Results
- Revenue for 2013 totaled $189.2 million, a 3 percent increase from fiscal 2012. The increase was driven by higher revenue in Fiber and Data, and higher support service revenue from the Equipment Segment which more than offset declines in the Telecom segment.
- Operating income in 2013 was $17.6 million, down 9 percent from 2012, and net income was $7.7 million, down $566,000 from 2012. Earnings per share totaled $0.57 in 2013, compared to $0.61 in 2012. An increase in depreciation and amortization expense caused the operating income decline.
- EBITDA totaled $47 million, a 2 percent increase compared to 2012.
- Fiber and Data Segment revenue totaled $67.9 million, an 11 percent increase from 2012.
- Equipment Segment revenue was $61.7 million, up 3 percent from 2012.
- Telecom Segment revenue was $57.9 million, down 4 percent from 2012.
- Capital expenditures were $28 million, a decrease from the $30.4 million invested in 2012. Sixty-seven percent of the 2013 capex investments funded projects directly related to new, success-based, revenue generating opportunities.
Debt Position
Long-term debt and current maturities,
including capitalized leases, totaled $135.2 million at Dec. 31, 2013.
The 2013 debt balance represents a year-over-year decrease of $1.6
million as a result of operating cash flow applied to ongoing debt
reduction.
In the fourth quarter, the company closed on 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.
Dividend
HickoryTech increased its fourth quarter 2013
dividend 3.4 percent to $0.15 cents per share of HickoryTech common
stock, representing the company’s fifth dividend increase in the past
six years. The company declared the first quarter 2013 dividend of $0.15
payable March 5. HickoryTech has paid a cash dividend to shareholders
for more than 65 years.
“The strong free cash flow generated across our business segments allows us to invest in strategic growth initiatives, pay down debt and pay a shareholder dividend,” added Finke. “Being a vibrant communications provider for more than a century requires adaptability, stability and commitment. We believe we are well positioned to deliver shareholder and customer value. As the next step in our unified brand strategy, we will ask for shareholder approval on our 2014 proxy to change our corporate name to Enventis Corporation aligning our service brand and corporate name.”
Fiscal Outlook for 2014
The Company expects revenue in 2014
to be within a range of $189 million to $199 million. Net income is
expected to be in a range of $6.4 million to $8.4 million. EBITDA is
expected to be in a range of $47.0 to $49.5 million. Capital
expenditures are expected to be $24 million to $28 million with
approximately 60 percent of capex expected for success-based
opportunities. The company expects its year-end 2014 debt balance to be
in a range of $133 million to $135 million.
Conference Call and Webcast
HickoryTech will hold a
conference call and webcast on Tuesday, March 4 at 9 a.m. CT to review
the company’s fourth quarter and fiscal 2013 results. The conference
call dial-in number is 877-372-0867, conference ID 59515217. A
simultaneous webcast with audio and presentation will be available at http://investor.hickorytech.com.
About HickoryTech Corporation
HickoryTech 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 520 employees and an
expanded, multi-state fiber network spanning more than 4,200 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 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 | % | Twelve Months Ended | % | |||||||||||||||||||||||||
(Dollars in thousands, except share data) | 2013 | 2012 | Change | 2013 | 2012 | Change | ||||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||||||
Services | $ | 35,860 | $ | 33,317 | 8 | % | $ | 137,735 | $ | 130,977 | 5 | % | ||||||||||||||||
Equipment | 10,342 | 13,265 | -22 | % | 51,465 | 52,219 | -1 | % | ||||||||||||||||||||
Total operating revenue | 46,202 | 46,582 | -1 | % | 189,200 | 183,196 | 3 | % | ||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||
Cost of sales, excluding depreciation and amortization | 10,005 | 11,390 | -12 | % | 45,016 | 45,054 | 0 | % | ||||||||||||||||||||
Cost of services, excluding depreciation and amortization | 16,871 | 16,164 | 4 | % | 67,847 | 63,753 | 6 | % | ||||||||||||||||||||
Selling, general and administrative expenses | 7,310 | 6,987 | 5 | % | 28,759 | 28,257 | 2 | % | ||||||||||||||||||||
Asset impairment | - | - | 638 | - | ||||||||||||||||||||||||
Depreciation and amortization | 7,547 | 6,951 | 9 | % | 29,322 | 26,746 | 10 | % | ||||||||||||||||||||
Total costs and expenses | 41,733 | 41,492 | 1 | % | 171,582 | 163,810 | 5 | % | ||||||||||||||||||||
Operating income | 4,469 | 5,090 | -12 | % | 17,618 | 19,386 | -9 | % | ||||||||||||||||||||
Interest and other income | 3 | 7 | -57 | % | 19 | 44 | -57 | % | ||||||||||||||||||||
Interest expense | (1,194 | ) | (1,114 | ) | 7 | % | (4,619 | ) | (5,749 | ) | -20 | % | ||||||||||||||||
Income before income taxes | 3,278 | 3,983 | -18 | % | 13,018 | 13,681 | -5 | % | ||||||||||||||||||||
Income tax provision | 1,355 | 1,458 | -7 | % | 5,286 | 5,383 | -2 | % | ||||||||||||||||||||
Net income | $ | 1,923 | $ | 2,525 | -24 | % | $ | 7,732 | $ | 8,298 | -7 | % | ||||||||||||||||
Basic earnings per share | $ | 0.14 | $ | 0.19 | -26 | % | $ | 0.57 | $ | 0.62 | -8 | % | ||||||||||||||||
Basic weighted average common shares outstanding | 13,561,444 | 13,455,561 | 13,548,007 | 13,409,743 | ||||||||||||||||||||||||
Diluted earnings per share | $ | 0.14 | $ | 0.19 | -26 | % | $ | 0.57 | $ | 0.61 | -7 | % | ||||||||||||||||
Diluted weighted average common and equivalent shares outstanding | 13,629,217 | 13,467,926 | 13,606,217 | 13,528,039 | ||||||||||||||||||||||||
Dividends per share | $ | 0.15 | $ | 0.145 | 3 | % | $ | 0.585 | $ | 0.565 | 4 | % | ||||||||||||||||
Consolidated Balance Sheets | ||||||||||
(unaudited) | ||||||||||
(Dollars and Share Data in Thousands) | December 31, 2013 | December 31, 2012 | ||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 7,960 | $ | 8,305 | ||||||
Receivables, net of allowance for doubtful accounts of $370 and $278 | 26,073 | 22,530 | ||||||||
Inventories | 1,668 | 6,201 | ||||||||
Income taxes receivable | 970 | 596 | ||||||||
Deferred income taxes, net | 2,660 | 1,887 | ||||||||
Prepaid expenses | 2,545 | 2,092 | ||||||||
Other | 1,386 | 1,399 | ||||||||
Total current assets | 43,262 | 43,010 | ||||||||
Investments | 3,414 | 3,213 | ||||||||
Property, plant and equipment | 461,712 | 437,623 | ||||||||
Accumulated depreciation and amortization | (280,386 | ) | (254,664 | ) | ||||||
Property, plant and equipment, net | 181,326 | 182,959 | ||||||||
Other assets: | ||||||||||
Goodwill | 29,028 | 29,028 | ||||||||
Intangible assets, net | 4,088 | 4,811 | ||||||||
Deferred costs and other | 5,762 | 5,283 | ||||||||
Total other assets | 38,878 | 39,122 | ||||||||
Total assets | $ | 266,880 | $ | 268,304 | ||||||
Liabilities and Shareholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 3,163 | $ | 5,818 | ||||||
Extended term payable | 8,879 | 8,115 | ||||||||
Deferred revenue | 6,056 | 7,362 | ||||||||
Accrued expenses and other | 10,443 | 10,881 | ||||||||
Financial derivative instruments | 242 | - | ||||||||
Current maturities of long-term obligations | 1,586 | 1,648 | ||||||||
Total current liabilities | 30,369 | 33,824 | ||||||||
Long-term liabilities: | ||||||||||
Debt obligations, net of current maturities | 133,621 | 135,133 | ||||||||
Accrued income taxes | 244 | 236 | ||||||||
Deferred revenue | 2,705 | 1,085 | ||||||||
Financial derivative instruments | 1,184 | 2,432 | ||||||||
Accrued employee benefits and deferred compensation | 12,344 | 12,481 | ||||||||
Deferred income taxes | 37,103 | 34,265 | ||||||||
Total long-term liabilities | 187,201 | 185,632 | ||||||||
Total liabilities | 217,570 | 219,456 | ||||||||
Commitments and contingencies | ||||||||||
Shareholders' equity: | ||||||||||
Common stock, no par value, $0.10 stated value | ||||||||||
Shares authorized: 100,000 | ||||||||||
Shares issued and outstanding: 15,569 in 2013 and 13,519 in 2012 | 1,357 | 1,352 | ||||||||
Additional paid-in capital | 16,462 | 15,950 | ||||||||
Retained earnings | 30,782 | 30,987 | ||||||||
Accumulated other comprehensive income | 709 | 559 | ||||||||
Total shareholders' equity | 49,310 | 48,848 | ||||||||
Total liabilities and shareholders' equity | $ | 266,880 | $ | 268,304 | ||||||
Fiber and Data Segment | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||||||||||
(Dollars in thousands) | 2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||||||||||||||||
Revenue before intersegment eliminations: | ||||||||||||||||||||||||
Business | $ | 9,407 | $ | 8,807 | 7 | % | $ | 36,770 | $ | 31,847 | 15 | % | ||||||||||||
Wholesale | 7,633 | 7,378 | 3 | % | 30,256 | 28,262 | 7 | % | ||||||||||||||||
Intersegment | 221 | 230 | -4 | % | 869 | 831 | 5 | % | ||||||||||||||||
Total Fiber and Data revenue | 17,261 | 16,415 | 5 | % | 67,895 | 60,940 | 11 | % | ||||||||||||||||
Cost of services | ||||||||||||||||||||||||
(excluding depreciation and amortization) | 8,597 | 8,008 | 7 | % | 34,343 | 29,827 | 15 | % | ||||||||||||||||
Selling, general and administrative expenses | 3,351 | 2,912 | 15 | % | 13,196 | 11,389 | 16 | % | ||||||||||||||||
Asset impairment | - | - | 638 | - | ||||||||||||||||||||
Depreciation and amortization | 3,196 | 2,768 | 15 | % | 11,992 | 9,923 | 21 | % | ||||||||||||||||
Total costs and expenses | 15,144 | 13,688 | 11 | % | 60,169 | 51,139 | 18 | % | ||||||||||||||||
Operating income | $ | 2,117 | $ | 2,727 | -22 | % | $ | 7,726 | $ | 9,801 | -21 | % | ||||||||||||
Net income | $ | 1,375 | $ | 1,725 | -20 | % | $ | 4,700 | $ | 5,933 | -21 | % | ||||||||||||
Capital expenditures | $ | 5,024 | $ | 7,854 | -36 | % | $ | 15,662 | $ | 19,812 | -21 | % | ||||||||||||
Equipment Segment | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||||||||||
(Dollars in thousands) | 2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||||||||||||||||
Revenue before intersegment eliminations: | ||||||||||||||||||||||||
Equipment | $ | 10,342 | $ | 13,265 | -22 | % | $ | 51,465 | $ | 52,219 | -1 | % | ||||||||||||
Support Services | 3,650 | 1,582 | 131 | % | 10,218 | 7,914 | 29 | % | ||||||||||||||||
Total Equipment revenue | 13,992 | 14,847 | -6 | % | 61,683 | 60,133 | 3 | % | ||||||||||||||||
Cost of sales | ||||||||||||||||||||||||
(excluding depreciation and amortization) | 10,005 | 11,390 | -12 | % | 45,016 | 45,054 | 0 | % | ||||||||||||||||
Cost of services | ||||||||||||||||||||||||
(excluding depreciation and amortization) | 1,849 | 1,563 | 18 | % | 7,155 | 6,704 | 7 | % | ||||||||||||||||
Selling, general and administrative expenses | 1,432 | 1,409 | 2 | % | 5,672 | 5,568 | 2 | % | ||||||||||||||||
Depreciation and amortization | 129 | 87 | 48 | % | 477 | 300 | 59 | % | ||||||||||||||||
Total costs and expenses | 13,415 | 14,449 | -7 | % | 58,320 | 57,626 | 1 | % | ||||||||||||||||
Operating income | $ | 577 | $ | 398 | 45 | % | $ | 3,363 | $ | 2,507 | 34 | % | ||||||||||||
Net income | $ | 404 | $ | 269 | 50 | % | $ | 2,058 | $ | 1,523 | 35 | % | ||||||||||||
Capital expenditures | $ | - | $ | 189 | -100 | % | $ | 992 | $ | 364 | 173 | % | ||||||||||||
Telecom Segment | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Three Months Ended | % | Twelve Months Ended | % | |||||||||||||||||||||
(Dollars in thousands) | 2013 | 2012 | Change | 2013 | 2012 | Change | ||||||||||||||||||
Revenue before intersegment eliminations: | ||||||||||||||||||||||||
Local Service | $ | 2,795 | $ | 3,054 | -8 | % | $ | 11,464 | $ | 12,955 | -12 | % | ||||||||||||
Network Access | 4,304 | 4,831 | -11 | % | 17,800 | 19,160 | -7 | % | ||||||||||||||||
Broadband | 5,286 | 4,909 | 8 | % | 20,773 | 19,748 | 5 | % | ||||||||||||||||
Other | 1,518 | 1,624 | -7 | % | 6,273 | 6,769 | -7 | % | ||||||||||||||||
Intersegment | 401 | 374 | 7 | % | 1,636 | 1,454 | 13 | % | ||||||||||||||||
Total Telecom revenue | $ | 14,304 | $ | 14,792 | -3 | % | $ | 57,946 | $ | 60,086 | -4 | % | ||||||||||||
Total Telecom revenue before intersegment eliminations | ||||||||||||||||||||||||
Unaffiliated Customers | $ | 13,903 | $ | 14,418 | $ | 56,310 | $ | 58,632 | ||||||||||||||||
Intersegment | 401 | 374 | 1,636 | 1,454 | ||||||||||||||||||||
14,304 | 14,792 | 57,946 | 60,086 | |||||||||||||||||||||
Cost of services (excluding depreciation and amortization) | 6,530 | 6,706 | -3 | % | 26,983 | 27,819 | -3 | % | ||||||||||||||||
Selling, general and administrative expenses | 2,078 | 2,267 | -8 | % | 8,593 | 9,329 | -8 | % | ||||||||||||||||
Depreciation and amortization | 3,655 | 3,669 | 0 | % | 14,852 | 15,150 | -2 | % | ||||||||||||||||
Total costs and expenses | 12,263 | 12,642 | -3 | % | 50,428 | 52,298 | -4 | % | ||||||||||||||||
Operating income | $ | 2,041 | $ | 2,150 | -5 | % | $ | 7,518 | $ | 7,788 | -3 | % | ||||||||||||
Net income | $ | 1,351 | $ | 1,382 | -2 | % | $ | 4,603 | $ | 4,743 | -3 | % | ||||||||||||
Capital expenditures | $ | 1,998 | $ | 2,634 | -24 | % | $ | 9,782 | $ | 7,560 | 29 | % | ||||||||||||
Key Metrics | ||||||||||||||||||||||||
Business access lines | 19,099 | 20,251 | -6 | % | ||||||||||||||||||||
Residential access lines | 20,620 | 22,145 | -7 | % | ||||||||||||||||||||
Total access lines | 39,719 | 42,396 | -6 | % | ||||||||||||||||||||
Digital Subscriber Line customers | 20,983 | 19,985 | 5 | % | ||||||||||||||||||||
Digital TV customers | 11,671 | 10,640 | 10 | % | ||||||||||||||||||||
Reconciliation of Non-GAAP Measures | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
(Dollars in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Reconciliation of consolidated net income to EBITDA: | ||||||||||||||||
Net income | $ | 1,923 | $ | 2,525 | $ | 7,732 | $ | 8,298 | ||||||||
Add: | ||||||||||||||||
Depreciation and amortization | 7,547 | 6,951 | 29,322 | 26,746 | ||||||||||||
Interest expense | 1,194 | 1,114 | 4,619 | 5,749 | ||||||||||||
Income taxes | 1,355 | 1,458 | 5,286 | 5,383 | ||||||||||||
EBITDA | 12,019 | 12,048 | 46,959 | 46,176 | ||||||||||||
Adjustments allowed under our credit agreement: | ||||||||||||||||
Asset impairment | - | - | 638 | 833 | ||||||||||||
EBITDA per our credit agreement | $ | 12,019 | $ | 12,048 | $ | 47,597 | $ | 47,009 | ||||||||
Year Ending | ||||||||||||||||
December 31, 2014 | ||||||||||||||||
(Dollars in thousands) | Guidance Range | |||||||||||||||
Reconciliation of net income to 2014 EBITDA guidance: | Low | High | ||||||||||||||
Projected net income | $ | 6,400 | $ | 8,400 | ||||||||||||
Add back: | ||||||||||||||||
Depreciation and amortization | 31,800 | 31,400 | ||||||||||||||
Interest expense | 4,500 | 4,100 | ||||||||||||||
Taxes | 4,300 | 5,600 | ||||||||||||||
Projected EBITDA guidance | $ | 47,000 | $ | 49,500 | ||||||||||||
Contacts:
David Christensen, CFO, 507-387-3355
or
Investor
Relations:
Jennifer Spaude, 507-386-3765