HECTOR, Minn., Aug. 10 /PRNewswire-FirstCall/ -- Hector
Communications Corporation (AMEX:HCT) today reported that its
operating results for its second quarter and six month periods
ended June 30, 2006. Revenues were $8,054,000 for the three months
ended June 30, 2006, an increase of 2% from $7,858,000 in 2005. The
revenue improvement was mainly due to increased sales of high-speed
digital subscriber line ("DSL") services to customers. Operating
income decreased 21% to $1,355,000 compared to $1,716,000 in 2005.
Operating income was negatively affected in the 2006 period by
$474,000 in legal and consulting expenses associated with merger
negotiations that culminated in the public announcement of our
merger agreement with Hector Acquisition Corp. on June 27. HCT also
recognized a $246,000 expense in the 2006 period from employee and
director stock options as required by new accounting rules. Income
from the Company's investment in Midwest Wireless Holdings LLC was
$1,477,000 in the 2006 period compared to $1,297,000 in 2005. HCT
expects the sale of Midwest Wireless to Alltel Corporation to be
concluded in late September or early October. HCT recognized a net
of income tax gain from the redemption of its Rural Telephone Bank
stock of $6,063,000 ($1.44 per diluted share) in the 2006 period.
Net income was $7,332,000 or $1.75 per diluted share in 2006
compared to $1,493,000 or $.37 per diluted share in 2005. Revenues
were $15,808,000 for the six months ended June 30, 2006, an
increase of 2% from $15,507,000 in 2005. Operating income decreased
9% to $3,224,000 compared to $3,529,000 in 2004. Legal and
consulting expenses associated with merger negotiations and stock
option expenses included in 2006 operating expenses were $526,000
and $290,000 respectively. Income from the Company's investment in
Midwest Wireless Holdings LLC was $3,043,000 in the 2006 period
compared to $2,367,000 in 2005. Net income was $9,031,000 or $2.16
per diluted share in 2006 compared to $2,879,000 or $.71 per
diluted share in 2005. Curtis A. Sampson, Chairman and Chief
Executive Officer, said, "Hector's operations performed well during
our second quarter. Revenues increased year over year in a tough
competitive environment. Excluding costs related to the merger
negotiations and the new stock option accounting rules, our
six-month operating income increased 14%. Our financial position at
June 30, 2006 is in line with requirements in our merger agreement
with Hector Acquisition Corp., and we are otherwise on track to
complete this transaction in October. Shareholders will receive
proxy materials within the next few weeks. It is very important for
shareholders to promptly return their votes. The agreement with
Hector Acquisition Corp. is the culmination of a process we began
approximately one year ago to explore strategic alternatives
available. We believe we have maximized shareholder value through
this process." Hector Communications Corporation is a
telecommunications holding company that, through its subsidiaries,
provides local telephone, video and high-speed Internet service in
rural communities in Minnesota, Wisconsin and North Dakota. The
Company serves 29,300 telephone access lines, 8,000 cable
television subscribers and 11,700 Internet customers and has
minority ownership interests in other telecommunications companies.
From time to time in reports filed with the Securities and Exchange
Commission, in press releases, and in other communications to
shareholders and the investing public, the Company may make
statements regarding the Company's future financial performance.
Such forward looking statements are subject to risks and
uncertainties, including but not limited to, the effects of the
Telecommunications Act, new technological developments which may
reduce barriers for competitors entering the Company's local
exchange or cable television markets, higher than expected expenses
and other risks involving the telecommunications industry
generally. All such forward-looking statements should be considered
in light of such risks and uncertainties. Hector Communications
Corporation and Subsidiaries Earnings Summary Three Months Ended
June 30 Six Months Ended June 30 2006 2005 2006 2005 Revenues
$8,054,146 $7,858,092 $15,808,337 $15,507,089 Operating income
1,355,340 1,716,219 3,224,102 3,529,530 Other income (expense):
Income (loss) from investments: Midwest Wireless Holdings, LLC
1,476,840 1,296,875 3,043,205 2,367,218 Other unconsolidated
affiliates 46,855 46,630 (3,043) 44,429 Gain on sale of RTB Stock
10,340,908 10,340,908 Gain on sale of assets 87,852 87,852 Interest
and dividend income 393,553 202,264 622,237 387,045 Interest
expense (921,453) (745,175) (1,647,742) (1,475,347) Net other
income 11,424,555 800,594 12,443,417 1,323,345 Income before income
taxes 12,779,895 2,516,813 15,667,519 4,852,875 Income tax expense
5,448,000 1,024,000 6,637,000 1,974,000 Net Income $7,331,895
$1,492,813 $9,030,519 $2,878,875 Basic net income per common share:
$1.81 $.40 $2.24 $.77 Diluted net income per share $1.75 $.37 $2.16
$.71 Cash dividends per share $.10 $.05 $.20 $.10 Hector
Communications Corporation and Subsidiaries Condensed Balance Sheet
June 30 December 31 2006 2005 Cash and cash equivalents $25,764,742
$25,245,358 Other current assets 4,056,566 4,477,313 Property,
plant and equipment, net 35,383,606 37,381,570 Excess of cost over
net assets acquired 30,921,095 30,921,094 Investment in Midwest
Wireless Holdings, LLC 19,517,725 18,067,471 Investments in other
unconsolidated affiliates 3,469,114 3,307,593 Other investments
6,385,900 8,037,986 Other assets 289,866 315,906 Total Assets
$125,788,614 $127,754,291 Notes payable and current portion of
long-term debt $6,437,000 $6,527,400 Other current liabilities
7,458,585 4,214,147 Long-term debt, less current portion 35,115,688
49,456,138 Deferred taxes and credits 5,193,247 5,308,790 Deferred
compensation 792,848 802,116 Stockholders' equity 70,791,246
61,445,700 Total Liabilities and Stockholders' Equity $125,788,614
$127,754,291 DATASOURCE: Hector Communications Corporation CONTACT:
Curtis A. Sampson, Chairman and Chief Executive Officer, or Steven
H. Sjogren, President, or Paul N. Hanson, Vice President and
Treasurer, all of Hector Communications Corporation,
+1-320-848-6611
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