HCT 8% Hits Based ON Conocophillips Common Stock

Hector Communications Corporation Reports Revenues and Earnings for the Second Quarter of 2004 HECTOR, Minn., Aug. 2 /PRNewswire-FirstCall/ -- Hector Communications Corporation (AMEX:HCT) today reported operating results for its second quarter and six month periods ended June 30, 2004. The Company's operating results for the corresponding 2003 periods have been restated to reflect the effects of the split-up of Alliance Telecommunications Corporation. Revenues from continuing operations were $7,992,000 for the three months ended June 30, 2004, a decrease of 1% from $8,054,000 in 2003. The revenue decrease was due to lower network access revenues from long distance providers and lower video service revenues due to sales of cable television systems in 2003. Operating income from continuing operations decreased 20% to $1,452,000 in 2004 from $1,820,000 in 2003. Income from the Company's investment in Midwest Wireless Holdings LLC was $626,000 in the 2004 period compared to $684,000 in 2003. The Company recorded gains on sales of cable television systems totaling $1,081,000 ($.17 per diluted share net of income taxes) in the 2003 period. Income from continuing operations was $954,000 or $.24 per diluted share in 2004 compared to $1,290,000 or $.34 per diluted share in 2003. Income from discontinued operations was $278,000 or $.08 per diluted share in 2003. Revenues from continuing operations were $15,938,000 for the six months ended June 30, 2004, a decrease of 1% from $16,087,000 in 2003. The revenue decrease was due to lower network access revenues from long distance providers and lower video service revenues due to sales of cable television systems in 2003. Operating income from continuing operations decreased 6% to $3,433,000 in 2004 from $3,652,000 in 2003. Income from the Company's investment in Midwest Wireless Holdings LLC was $1,308,000 in the 2004 period compared to $1,307,000 in 2003. The Company's 2003 results benefited from gains on sales of cable television systems totaling $1,081,000 ($.17 per diluted share net of income taxes). Income from continuing operations was $2,148,000 or $.55 per diluted share in 2004 compared to $2,022,000 or $.54 per diluted share in 2003. Income from discontinued operations was $672,000 or $.18 per diluted share in 2003. Curtis A. Sampson, chairman and chief executive officer, said that the Company's operating results in the first half of 2004 were a reflection of the increasingly tough competitive environment rural telephone companies face. He said that the Company is continuing to shed unprofitable operations and search for cost saving opportunities. The Company is continuing to see growth from its broadband offerings but that has not been enough to offset the decline in access revenues and the increases in the Company's operating costs. Hector Communications Corporation is a telecommunications holding company which through its subsidiaries provides telecommunications services in rural communities in Minnesota, Wisconsin and North Dakota. The Company serves 29,900 telephone access lines, 8,350 cable television subscribers and 10,900 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 June 30 2004 2003 Revenues from continuing operations $7,992,006 $8,054,450 Operating income from continuing operations 1,451,758 1,820,139 Other income (expense): Income (loss) from investments: Midwest Wireless Holdings, LLC 626,118 683,998 Other unconsolidated affiliates 134,255 51,208 Interest and dividend income 63,006 54,535 Interest expense (716,408) (875,731) Gain on sale of cable television systems 28,590 1,080,723 Net other income (expense) 135,561 994,733 Income from continuing operations before income taxes 1,587,319 2,814,872 Income tax expense (633,000) (1,060,000) Minority interest in earnings of continuing operations of Alliance Telecommunications Corp. (464,943) Income from continuing operations 954,319 1,289,929 Income from discontinued operations 278,106 Net Income $954,319 $1,568,035 Basic net income per common share: Continuing operations $.26 $.37 Discontinued operations .08 $.26 $.45 Diluted net income per share: Continuing operations $.24 $.34 Discontinued operations .08 $.24 $.42 Hector Communications Corporation and Subsidiaries Earnings Summary Six Months Ended June 30 2004 2003 Revenues from continuing operations $15,937,659 $16,087,407 Operating income from continuing operations 3,432,951 3,652,080 Other income (expense): Income (loss) from investments: Midwest Wireless Holdings, LLC 1,308,247 1,306,759 Other unconsolidated affiliates 179,441 (45,348) Interest and dividend income 116,532 135,466 Interest expense (1,487,877) (1,768,852) Gain on sale of cable television systems 28,590 1,080,723 Net other income (expense) 144,933 708,748 Income from continuing operations before income taxes 3,577,884 4,360,828 Income tax expense (1,430,000) (1,679,000) Minority interest in earnings of continuing operations of Alliance Telecommunications Corp. (659,624) Income from continuing operations 2,147,884 2,022,204 Income from discontinued operations 672,349 Net Income $2,147,884 $2,694,553 Basic net income per common share: Continuing operations $.60 $.58 Discontinued operations .20 $.60 $.78 Diluted net income per share: Continuing operations $.55 $.54 Discontinued operations .18 $.55 $.72 Hector Communications Corporation and Subsidiaries Condensed Balance Sheet June 30 December 31 2004 2003 Cash $19,659,766 $16,581,315 Other current assets 7,845,847 8,609,295 Property, plant and equipment, net 41,473,141 43,088,106 Excess of cost over net assets acquired 30,921,094 31,691,927 Investment in Midwest Wireless Holdings, LLC 14,203,468 13,349,155 Investments in other unconsolidated affiliates 2,890,376 2,796,035 Other investments 6,873,858 6,533,858 Other assets 384,207 409,664 Total Assets $124,251,757 $123,059,355 Notes payable and current portion of long-term debt $6,561,000 $6,537,800 Other current liabilities 3,928,671 5,338,386 Long-term debt, less current portion 56,324,345 57,529,378 Deferred taxes and credits 5,420,187 4,911,869 Deferred compensation 708,194 698,254 Stockholders' equity 51,309,360 48,043,668 Total Liabilities and Stockholders' Equity $124,251,757 $123,059,355 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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