HCT 8% Hits Based ON Conocophillips Common Stock

HECTOR, Minn., Aug. 3 /PRNewswire-FirstCall/ -- Hector Communications Corporation (AMEX:HCT) today reported operating results for its second quarter and six month periods ended June 30, 2005. Revenues were $7,858,000 for the three months ended June 30, 2005, a decrease of 2% from $7,992,000 in 2004. The revenue decrease was mainly due to lower access revenues from long distance and wireless carriers. Operating income increased 18% to $1,716,000 compared to $1,452,000 in 2004 due to divestitures of unprofitable business the Company made in the last half of 2004. Income from the Company's investment in Midwest Wireless Holdings LLC was $1,297,000 in the 2005 period compared to $626,000 in 2004. Net income was $1,493,000 or $.37 per diluted share in 2005 compared to $954,000 or $.24 per diluted share in 2004. Revenues were $15,507,000 for the six months ended June 30, 2005, a decrease of 3% from $15,938,000 in 2004. Operating income increased 3% to $3,530,000 compared to $3,433,000 in 2004. Income from the Company's investment in Midwest Wireless Holdings LLC was $2,367,000 in the 2005 period compared to $1,308,000 in 2004. Net income was $2,879,000 or $.71 per diluted share in 2005 compared to $2,148,000 or $.55 per diluted share in 2004. Curtis A. Sampson, Chairman and Chief Executive Officer, said "Hector's growth in operating income and net income in 2005 are reflective of the outstanding performance of Midwest Wireless and our determination to focus on core business opportunities and eliminate unprofitable operations. However, our outlook on our industry has not changed; the Company's core business, wireline telephone service in rural communities, will continue to face significant challenges. We expect access revenue will continue to decline due to the impact of the dramatic growth in wireless telephony. We believe competitive challenges from new technologies, including the emergence of Voice over Internet Protocol (VoIP) will significantly impact our business and will change the marketplace for telecommunications services. We recognize that possible changes to the level of regulatory support for rural telecommunications could be detrimental to Hector. Given these factors, the management and Board of Directors of the Company continue to assess all strategic options available to it and have retained the investment banking firm of Legg Mason Wood Walker, Inc. to assist in this effort." 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, 7,800 cable television subscribers and 11,200 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 2005 2004 2005 2004 Revenues $7,858,092 $7,992,006 $15,507,089 $15,937,659 Operating income 1,716,219 1,451,758 3,529,530 3,432,951 Other income (expense): Income (loss) from investments: Midwest Wireless Holdings, LLC 1,296,875 626,118 2,367,218 1,308,247 Other unconsolidated affiliates 46,630 134,255 44,429 179,441 Interest and dividend income 202,264 63,006 387,045 116,532 Interest expense (745,175) (716,408) (1,475,347) (1,487,877) Gain on sale of cable television systems 28,590 28,590 Net other income 800,594 135,561 1,323,345 144,933 Income before income taxes 2,516,813 1,587,319 4,852,875 3,577,884 Income tax expense 1,024,000 633,000 1,974,000 1,430,000 Net Income $1,492,813 $954,319 $2,878,875 $2,147,884 Basic net income per common share: $.40 $.26 $.77 $.60 Diluted net income per share $.37 $.24 $.71 $.55 Hector Communications Corporation and Subsidiaries Condensed Balance Sheet June 30 December 31 2005 2004 Cash and cash equivalents $25,124,324 $19,980,506 Other current assets 5,107,963 8,032,610 Property, plant and equipment, net 37,531,094 40,040,493 Excess of cost over net assets acquired 30,921,094 30,921,094 Investment in Midwest Wireless Holdings, LLC 16,824,819 15,380,543 Investments in other unconsolidated affiliates 3,284,663 3,304,726 Other investments 7,707,289 6,880,549 Other assets 361,569 382,322 Total Assets $126,862,815 $124,922,843 Notes payable and current portion of long-term debt $6,630,000 $6,352,000 Other current liabilities 4,578,409 4,060,611 Long-term debt, less current portion 52,287,445 54,084,480 Deferred taxes and credits 5,667,079 5,463,894 Deferred compensation 743,271 749,128 Stockholders' equity 56,956,611 54,212,730 Total Liabilities and Stockholders' Equity $126,862,815 $124,922,843 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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