Hector Communications Corporation Reports Revenues and Earnings for
the Fourth Quarter of 2003 HECTOR, Minn., March 10
/PRNewswire-FirstCall/ -- Hector Communications Corporation today
reported operating results for its fourth quarter and twelve-month
periods ended December 31, 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 $8,128,000 for the three months ended December 31, 2003, an
increase of 9% from $7,451,000 in 2002. The revenue increase was
due to increased universal service fund support generated by
Company investments in new equipment delivering advanced
telecommunications services to customers. Operating income from
continuing operations increased 108% to $2,184,000 in 2003 from
$1,047,000 in 2002. Income from the Company's investment in Midwest
Wireless Holdings LLC was $245,000 in the 2003 period compared to
$427,000 in 2002. Net income was $1,267,000 or $.33 per diluted
share in 2003 compared to $504,000 or $.14 per diluted share in
2002. Net income in 2002 included income from discontinued
operations of $386,000 or $.11 per diluted share. Revenues from
continuing operations for 2003 were $32,322,000, an increase of 6%
from $30,517,000 in 2002. Operating income from continuing
operations increased 20% to $7,957,000 in 2003 from $6,641,000 in
2002. Income from the Company's investment in Midwest Wireless
Holdings LLC was $2,148,000 in 2003 compared to $2,261,000 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 2003. Incomefrom continuing operations was
$4,297,000 or $1.14 per diluted share in 2003 compared to
$2,324,000 or $.62 per diluted share in 2002. Income from
discontinued operations, including the $210,000 gain on the
split-up of Alliance, was $882,000 or $.23 per diluted share in
2003. Income from discontinued operations in 2002 was $1,331,000 or
$.35 per diluted share. Income before the cumulative effect of a
change in accounting principle for 2003 was $5,179,000 or $1.37 per
diluted share, compared to $3,655,000 or $.97 per diluted share in
2002. In 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 and 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 $3,147,000 ($.84 per diluted share) and
recorded it as a cumulative effect of change in accounting
principle against first quarter 2002 earnings. Net income for 2002,
after the impairment loss, was $508,000 or $.13 per diluted share.
Curtis A. Sampson, Chairman and Chief Executive Officer, said he
was pleased with the Company's 2003 financial performance. "The
Company's growth in revenues and operating income, despite the
challenging economic and regulatory environment, are reflective of
the hard work of our managers and employees to meet the
telecommunications needs of our customers. The broadband initiative
now offered in four of the Company's exchanges has proven very
successful. The Company is aggressively pursuing new revenue
sources to offset the decline in access lines and access revenues
the wholeindustry is experiencing." Hector Communications
Corporation is a telecommunications holding company which, through
its wholly-owned and majority-owned subsidiaries, provides local
telephone service, video and high-speed internet service in rural
communities in Minnesota, Wisconsin, South Dakota, North Dakota and
Iowa. The Company serves 29,900 telephone access lines, 9,100 cable
television subscribers and 10,200 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 December 31 2003 2002 Revenues from continuing
operations $8,128,433 $7,451,172 Operating income from continuing
operations 2,184,252 1,047,347 Other income (expense): Income
(loss) from investments: Midwest Wireless Holdings, LLC 245,354
426,907 Other unconsolidated affiliates 172,203 (61,310) Other
income 204,976 30,939 Interest expense (671,053) (833,843) Net
other expense (48,520) (437,307) Income from continuing operations
before income taxes and minority interest 2,135,732 610,040 Income
tax expense (869,000) (481,000) Minority interest in earnings of
continuing operations of Alliance Telecommunications Corp. (11,384)
Income from continuing operations 1,266,732 117,656 Income from
discontinued operations 386,003 Net Income $1,266,732 $503,659
Basic net income per common share: Continuing operations $.36 $.03
Discontinued operations .11 $.36 $.14 Diluted net income per share:
Continuing operations $.33 $.03 Discontinued operations .11 $.33
$.14 Hector Communications Corporation and Subsidiaries Earnings
Summary Twelve Months Ended December 31 2003 2002 Revenues from
continuing operations $32,322,428 $30,516,790 Operating income from
continuing operations 7,956,646 6,641,371 Other income (expense):
Income (loss) from investments: Midwest Wireless Holdings, LLC
2,148,444 2,261,420 Other unconsolidated affiliates 96,299 (56,311)
Gain on sale of cable television systems 1,080,723 Other income
391,897 199,213 Interest expense (3,401,479) (3,457,093) Net other
income (expense) 315,884 (1,052,771) Income from continuing
operations before income taxes and minority interest 8,272,530
5,588,600 Income tax expense (3,316,000) (2,483,000) Minority
interest in earnings of continuing operations of Alliance
Telecommunications Corp. (659,624) (781,403) Income from continuing
operations 4,296,906 2,324,197 Income from discontinued operations
881,854 1,330,692 Income before cumulative effect of change in
accounting principle 5,178,760 3,654,889 Cumulative effect of
change in accounting principle, net of income taxes and minority
interest (3,146,569) Net income $5,178,760 $508,320 Basic net
income (loss) per common share: Before cumulative effect of change
in accounting principle Continuing operations $1.23 $.67
Discontinued operations .25 .38 1.48 1.05 Cumulative effect of
accounting change (.90) $1.48 $.15 Diluted net income (loss) per
common share: Before cumulative effect of change in accounting
principle Continuing operations $1.14 $.62 Discontinued operations
.23 .35 1.37 .97 Cumulative effect of accounting change (.84) $1.37
$.13 Hector Communications Corporation and Subsidiaries Condensed
Balance Sheet December 31 December 31 2003 2002 Cash $16,581,315
$12,020,186 Other current assets 7,852,069 6,888,678 Property,
plant and equipment, net 43,088,106 56,665,798 Excess of cost over
net assets acquired, net 31,691,927 49,074,993 Investment in
Midwest Wireless Holdings, LLC 13,349,155 16,232,707 Investments in
other unconsolidated affiliates 2,796,035 4,373,597 Other
investments 6,533,858 8,818,502 Other assets 409,664 411,499 Total
Assets $122,302,129 $154,485,960 Notes payable and current portion
of long-term debt $6,537,800 $7,364,600 Other current liabilities
4,581,160 5,826,281 Long-term debt, less current portion 57,529,378
75,147,560 Deferred taxes and credits 4,911,869 5,894,308 Deferred
compensation 698,254 976,179 Minority Interest 17,027,697
Stockholders' equity 48,043,668 42,249,335 Total Liabilities and
Stockholders' Equity $122,302,129 $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, all of Hector Communications
Corporation, +1-320-848-6231
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