Hector Communications Corporation Reports Revenues and Earnings for
The Third Quarter of 2003 HECTOR, Minn., Nov. 18
/PRNewswire-FirstCall/ -- Hector Communications Corporation today
reported operating results for its third quarter and nine-month
periods ended September 30, 2003. The Company's operating results
for the current and prior periods have been restated pursuant to
SFAS 144 to reflect the effects of the split-up of Alliance
Telecommunications Corporation. Revenues from continuing operations
were $8,107,000 for the three months ended September 30, 2003, a
decrease of 2% from $8,299,000 in 2002. The revenue decrease was
due to lower access revenues from interexchange carriers and lower
video service revenues following the sales of five cable television
systems in the second quarter of 2003. Operating income from
continuing operations decreased 19% to $2,120,000 in 2003 from
$2,629,000 in 2002. Income from the Company's investment in Midwest
Wireless Holdings LLC was $596,000 in the 2003 period compared to
$642,000 in 2002. Income from continuing operations was $1,008,000
or $.27 per diluted share in 2003 compared to $1,087,000 or $.29
per diluted share in 2002. The Company recorded a gain on the
split-up of Alliance Telecommunications Corporation of $210,000 in
the 2003 period. Income from discontinued operations was $242,000
in the 2002 period. Net income came to $1,217,000 or $.32 per
diluted share in 2003, compared to $1,329,000 or $.35 per diluted
share in 2002. Revenues from continuing operations for the first
nine months of 2003 were $24,194,000, an increase of 5% from
$23,066,000 in the same period of 2002. Operating income from
continuing operations increased 3% to $5,772,000 in 2003 from
$5,594,000 in 2002. Income from the Company's investment in Midwest
Wireless Holdings LLC was $1,903,000 in the 2003 period compared to
$1,835,000 in 2002. The Company recorded gains on sales of cable
television systems totaling $1,081,000 ($.12 per diluted share net
of income taxes and minority interest) in the 2003 period. Income
from continuing operations was $3,030,000 or $.81 per diluted share
in 2003 compared to $2,207,000 or $.58 per diluted share in 2002.
Income from discontinued operations, including the $210,000 gain on
the split-up of Alliance, was $882,000 in 2003. Income from
discontinued operations in the 2002 period totaled $945,000. Income
before the cumulative effect of a change in accounting principle
for the 2003 period was $3,912,000 or $1.04 per diluted share,
compared to $3,151,000 or $.83 per diluted share in 2002. During
the first half of 2002, the Company tested the value of its
goodwill and intangible assets as required under the provisions of
Statement of Financial Accounting Standards No. 142. As a result of
this test, the Company concluded that the carrying value of the
goodwill and intangible assets in certain of its operating units
exceeded the market value. Accordingly, the Company recognized an
impairment loss, net of income taxes and minority interest, of
$3,147,000 ($.83 per diluted share) and recorded it as a cumulative
effect of change in accounting principle against first quarter 2002
earnings. The Company's net income for the first nine months of
2002, after the impairment loss, was $5,000. The Company completed
the Alliance Telecommunications Corporation split-up transactions
on July 7, 2003. In the transactions, Golden West
Telecommunications Cooperative, Inc. and Alliance Communications
Cooperative, Inc. exchanged their minority interests in Alliance
for the Company's majority interest in two rural ILECs which serve
8,650 telephone access lines and 2,400 cable television customers.
The minority partners also received their pro rata share of
Alliance's ownership interest in Midwest Wireless Holdings, LLC,
which reduced the Company's ownership interest in Midwest Wireless
Holdings from 10.4% to 8.0%. As part of the transaction the
Company's debt to CoBank was reduced by 35% and stands at
$26,812,000 at September 30, 2003. Curtis A. Sampson, Chairman and
Chief Executive Officer, said he was pleased the Company had
completed the split-up of Alliance. "The split-up will facilitate
efforts to streamline the Company's operating costs due to
efficiencies gained in eliminating the minority interests and the
elimination of further expenses related to the split-up. The
Company is aggressively pursuing new revenue sources to offset the
decline in access revenues the whole industry is experiencing. The
broadband initiative now offered in four of the Company's exchanges
has proven very successful. The Company offers packages of local
service, video and high-speed internet service in those exchanges
using state-of-the-art technology." Hector Communications
Corporation is a telecommunications holding company which, through
its wholly-owned and majority-owned subsidiaries, provides
telecommunications services in rural communities in Minnesota,
Wisconsin, South Dakota, North Dakota and Iowa. The Company serves
30,060 telephone access lines, 9,100 cable television subscribers
and 10,100 internet customers and has minority ownership interests
in many 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 September 30 2003
2002 Revenues from continuing operations $8,106,588 $8,298,827
Operating income from continuing operations 2,120,314 2,628,740
Other income (expense): Income (loss) from investments: Midwest
Wireless Holdings, LLC 596,331 641,727 Other unconsolidated
affiliates (30,556) 70,242 Other income 51,455 56,090 Interest
expense (961,574) (897,167) Net other expense (344,344) (129,108)
Income from continuing operations before income taxes 1,775,970
2,499,632 Income tax expense (768,000) (1,005,000) Minority
interest in earnings of continuing operations of Alliance
Telecommunications Corp. (408,059) Income from continuing
operations 1,007,970 1,086,573 Income from discontinued operations
209,505 242,227 Net Income $1,217,475 $1,328,800 Basic net income
per common share: Continuing operations $.29 $.31 Discontinued
operations .06 .07 $.35 $.38 Diluted net income per share:
Continuing operations $.27 $.29 Discontinued operations .05 .06
$.32 $.35 Hector Communications Corporation and Subsidiaries
Earnings Summary Nine Months Ended September 30 2003 2002 Revenues
from continuing operations $24,193,995 $23,065,618 Operating income
from continuing operations 5,772,394 5,594,024 Other income
(expense): Income (loss) from investments: Midwest Wireless
Holdings, LLC 1,903,090 1,834,513 Other unconsolidated affiliates
(75,904) 4,999 Gain on sale of cable television systems 1,080,723
Other income 186,921 168,274 Interest expense (2,730,426)
(2,623,250) Net other expense 364,404 (615,464) Income from
continuing operations before income taxes 6,136,798 4,978,560
Income tax expense (2,447,000) (2,002,000) Minority interest in
earnings of continuing operations of Alliance Telecommunications
Corp. (659,624) (770,019) Income from continuing operations
3,030,174 2,206,541 Income from discontinued operations 881,854
944,689 Income before cumulative effect of change in accounting
principle 3,912,028 3,151,230 Cumulative effect of change in
accounting principle, net of income taxes and minority interest
(3,146,569) Net income $3,912,028 $4,661 Basic net income per
common share: Before cumulative effect of change in accounting
principle Continuing operations $.87 $.63 Discontinued operations
.25 .27 1.12 .90 Cumulative effect of accounting change (.90) $1.12
$ - Diluted net income per common share: Before cumulative effect
of change in accounting principle Continuing operations $.81 $.58
Discontinued operations .23 .25 1.04 .83 Cumulative effect of
accounting change (.83) $1.04 $ - Hector Communications Corporation
and Subsidiaries Condensed Balance Sheet September 30 December 31
2003 2002 Cash $15,565,965 $12,020,186 Other current assets
8,951,961 6,888,678 Property, plant and equipment, net 44,011,389
56,665,798 Excess of cost over net assets acquired, net 31,691,927
49,074,993 Investment in Midwest Wireless Holdings, LLC 13,352,542
16,232,707 Investments in other unconsolidated affiliates 2,664,125
4,373,597 Other investments 6,444,798 8,818,502 Other assets
438,103 411,499 Total Assets $123,120,810 $154,485,960 Notes
payable and current portion of long-term debt $6,127,300 $7,364,600
Other current liabilities 4,968,406 5,826,281 Long-term debt, less
current portion 59,640,204 75,147,560 Deferred taxes and credits
5,002,862 5,894,308 Deferred compensation 651,389 976,179 Minority
Interest 17,027,697 Stockholders' equity 46,730,649 42,249,335
Total Liabilities and Stockholders' Equity $123,120,810
$154,485,960 DATASOURCE: Hector Communications Corporation CONTACT:
Curtis A. Sampson, Chairman and Chief Executive Officer, Steven H.
Sjogren, President, or Paul N. Hanson, Vice President and
Treasurer, of Hector Communications Corporation, +1-320-848-6611
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