- Total Revenue increased 5 percent
- Fiber and Data Segment revenue up 5
percent, profits increased 6 percent
- Equipment Segment revenue up 15
percent, profits increase 84 percent
- EBITDA, per the company’s credit
agreement, increased 3 percent
Enventis Corporation (NASDAQ: ENVE) today reported total revenue
of $49.7 million for the second quarter ending June 30, 2014, an
increase of 5 percent year over year. Revenue was driven by strong
fiber and data and equipment segment results, which were up 5
percent and 15 percent respectively. EBITDA, per the company’s
credit agreement, totaled $12.6 million in the second quarter, up 3
percent year over year. Net income totaled $1.9 million for the
second quarter, a decrease of 18 percent year over year, and was
impacted by $911,000 of pre-tax costs related to the proposed
merger agreement with Consolidated Communications Holdings, Inc.
Excluding these unique costs, net income would have been $542,000
higher and would have been up $132,000 or 6 percent year over
year.
“We are very pleased with the strong second quarter results we
produced and the positive momentum we have moving into the second
half of the year,” said John Finke, president and chief executive
officer at Enventis. We’re excited about the potential of our
recently launched Cloud Services and the value and benefit this
suite of services offer our business customers. Overall, we remain
focused on our strategic initiatives and driving revenue growth and
profitability across all lines of business.”
Fiber and Data Segment (before inter-segment
eliminations)
- Fiber and Data revenue totaled $17.8
million, up 5 percent year over year. This growth is driven by a 6
percent boost in retail revenue and a 4 percent increase in
wholesale or carrier services revenue.
- Costs and expenses for this segment
totaled $15.5 million, up 5 percent from the prior year.
- Operating income totaled $2.4 million,
up 6 percent year over year.
- Net income totaled $1.4 million, an
increase of 6 percent year over year.
Equipment Segment (before inter-segment eliminations)
- Second quarter Equipment Segment
revenue totaled $17.4 million, a 15 percent increase year over
year.
- Equipment sales revenue was $14.1
million, an increase of 9 percent compared to a year ago. Equipment
revenue tends to fluctuate quarter to quarter based on sales and
installation schedules.
- Support Services revenue in the
Equipment Segment was $3.4 million, a 52 percent increase from the
second quarter 2013.
- Operating income totaled $1.7 million,
an 84 percent increase year over year.
- Net income totaled $1 million, up 84
percent over the second quarter 2013.
Telecom Segment (before inter-segment eliminations)
- Second quarter Telecom Segment revenue
totaled $14.4 million, down 2 percent from a year ago. Telecom
results were affected by legacy service declines primarily in
network access and local service revenue. Broadband service revenue
grew 4 percent, offsetting part of the Telecom revenue decline.
Competitive price compression is impacting the growth rates of
broadband services.
- Digital TV subscribers were up 7
percent and DSL subscribers increased 3 percent and year over
year.
- Costs and expenses totaled $12.5
million, down 1 percent year over year.
- Operating and Net income were both down
5 percent compared to a year ago.
Total Capex, Depreciation and AmortizationTotal capital
expenditures in the second quarter were $6.8 million, compared with
$6.5 million in the second quarter 2013. Depreciation and
amortization expense increased $258,000 or 4 percent in the second
quarter. The increase is primarily attributed to increased capital
expenditures associated with fiber network expansion and
success-based capital expenditures supporting Fiber and Data
revenue growth.
Debt PositionLong-term debt and current maturities,
including capitalized leases, totaled $134.4 million as of June 30,
2014. The second quarter 2014 debt balance represents a decrease of
$800,000 from the beginning of the year, a reduction of $1.6
million year over year, and a reduction of $7.5 million since the
company’s acquisition of Fargo, No. Dakota-based, IdeaOne Telecom
in March 2012. Net debt, which measures financial balance sheet
strength and subtracts cash on hand from the debt balance, was
$126.9 million as of June 30, 2014.
Shareholders Approved Corporate Name Change to
EnventisThe company’s shareholders approved a corporate name
change from HickoryTech Corporation to Enventis Corporation at the
company’s annual shareholder meeting on May 6. The company’s stock
is now traded as Enventis on the NASDAQ exchange under ticker
symbol “ENVE.” The corporate name change was the final step in the
company’s move to a unified brand following its service brand
change to Enventis in October 2013.
Launch of New and Expanded Cloud ServicesOn June 23,
2014, Enventis announced the launch and expansion of its expanded
suite of cloud-based services bringing enterprise-class, cloud
capabilities and features to businesses of all sizes. Enventis’
SingleLink Unified Communications solution was enhanced to include
a more powerful set of features and Cloud Compute, Data Protection
and Cloud Wifi solutions were launched offering businesses
reliable, yet simple to deploy cloud solutions backed by a proven
partner. As a Cisco Gold Partner with a Master Cloud Builder
Specialization, Enventis has the technical expertise and capability
to deploy and support cloud-ready integrated infrastructure
including both public and private cloud strategies.
Agreement and Plan of MergerOn June 30, 2014, Enventis
announced its Board of Directors approved a definitive agreement
for Enventis to merge with Consolidated Communications. This
agreement is an all-stock transaction in which Consolidated
Communications will acquire 100 percent of Enventis’ 13.8 million
(fully diluted) shares outstanding in a transaction valued at
approximately $350 million. Under the terms of the agreement,
Enventis shareholders will receive a fixed exchange ratio of 0.7402
shares of CNSL common stock for each share of ENVE common stock.
Completion of the merger is subject to various customary closing
conditions, including, but not limited to, approval and adoption by
Enventis and Consolidated shareholders and certain regulatory
approvals. We incurred $911,000 of transaction fees related to
entering the merger agreement during the quarter ended June 30,
2014.
About EnventisEnventis, formerly HickoryTech, (NASDAQ:
ENVE) is a leading provider of advanced communication solutions
including data, cloud and IT services to businesses throughout the
upper Midwest. The company also provides residential broadband
services in select southern Minnesota and northwest Iowa
communities. The Enventis fiber network spans more than 4,200 route
miles across Minnesota and into Iowa, North Dakota, South Dakota
and Wisconsin. The company has 520 employees with corporate
headquarters located in Mankato, Minn. and a 116-year track record
of stability. Learn more about Enventis at www.enventis.com.
Non-GAAP MeasuresTo supplement the Company’s financial
statements presented in accordance with GAAP, the Company provides
certain non-GAAP financial measures of financial performance and
position. The Company’s reference to these non-GAAP measures should
be considered in addition to results prepared under current
accounting standards, but are not a substitute for, or superior to,
GAAP results. These non-GAAP measures are provided to enhance
investors’ overall understanding of the Company’s current financial
performance, financial position and ability to generate cash flows.
In many cases non-GAAP financial measures are used by analysts and
investors to evaluate the Company’s performance and financial
position. Reconciliation to the nearest GAAP measure included in
this press release can be found in the financial table included
below.
Forward-looking statementCertain statements included in
this press release that are not historical facts are
"forward-looking statements." Such forward-looking statements are
based on current expectations, estimates and projections about the
industry in which Enventis operates and management's beliefs and
assumptions. The forward-looking statements are subject to
uncertainties. These statements are not guarantees of future
performance and involve certain risks, uncertainties and
probabilities. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such
forward-looking statements. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date on which they were made. Enventis undertakes no
obligation to update any of its forward-looking statements, except
as required by law.
Important Merger Information and Additional
Information
This document does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of such jurisdiction.
In connection with the proposed transaction, Enventis and
Consolidated Communications will file relevant materials with the
SEC. Consolidated will file a registration statement on Form S-4
with the Securities and Exchange Commission (the “SEC”). ENVENTIS
SHAREHOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND
ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME
AVAILABLE, INCLUDING THE PROXY STATEMENT/PROSPECTUS THAT WILL BE
PART OF THE REGISTRATION STATEMENT BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE TRANSACTION. The final proxy
statement/prospectus will be mailed to Enventis shareholders. The
registration statement and proxy statement/prospectus and other
documents filed by Enventis with the SEC are, or when filed will
be, available free of charge at the SEC web site at www.sec.gov.
Copies of the registration statement and proxy statement/prospectus
(when available) and other filings made by Enventis with the SEC
can also be obtained, free of charge, by directing a request to
Enventis Corporation, 221 East Hickory Street, P.O. Box 3248,
Mankato, MN, Attn: Investor Relations. The registration statement
and proxy statement/prospectus (when available) and such other
documents are also available for free in the investor relations
portion of our web site at www.enventis.com, as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the SEC.
Participants in the Solicitation
Enventis and Consolidated Communications, and certain of their
respective directors and officers and other persons may be deemed
to be participants in the solicitation of proxies from its
shareholders in connection with the proposed acquisition
transaction. Information regarding directors and executive officers
of Enventis in the solicitation is set forth in the Enventis proxy
statements and Annual Reports on Form 10-K, previously filed with
the SEC. Information regarding directors and executive officers of
Consolidated in the solicitation is set forth in the Consolidated
proxy statements and Annual Reports on Form 10-K, previously filed
with the SEC. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the proxy statement/prospectus and other relevant materials to be
filed with the SEC when they become available. Investors should
read the proxy statement/prospectus carefully when it becomes
available before making any voting or investment decisions.
Consolidated Statements of Income (unaudited)
Three Months Ended June 30
%
Six Months Ended June 30
% (Dollars in thousands, except share data)
2014 2013
Change
2014 2013 Change Operating revenue: Services
$
35,671 $ 34,231 4 %
$ 69,884 $ 67,636 3 %
Equipment
14,052 12,910 9 %
24,079 28,274 -15 % Total
operating revenue
49,723 47,141 5 %
93,963 95,910 -2
% Costs and expenses: Cost of sales, excluding depreciation
and amortization
12,357 10,860 14 %
20,901 24,082 -13
% Cost of services, excluding depreciation and amortization
17,335 16,971 2 %
33,995 33,570 1 % Selling, general
and administrative expenses
8,327 7,047 18 %
15,290
14,496 5 % Asset impairment
- 5
- 638 Depreciation
and amortization
7,510 7,252 4 %
15,090 14,261 6 % Total costs
and expenses
45,529 42,135 8 %
85,276 87,047 -2 %
Operating income
4,194 5,006 -16 %
8,687 8,863 -2 %
Interest and other income
8 13 -38 %
8 15 -47
% Interest expense
(991 ) (1,131 ) -12
%
(1,970 ) (2,270 ) -13 % Income before
income taxes
3,211 3,888 -17 %
6,725 6,608 2 % Income
tax provision
1,300 1,567 -17 %
2,741 2,661 3 % Net
income
$ 1,911 $ 2,321 -18 %
$
3,984 $ 3,947 1 % Basic earnings per
share
$ 0.14 $ 0.17 -18 %
$
0.29 $ 0.29 0 %
Basic weighted average common shares outstanding
13,641,564 13,531,007
13,619,055 13,543,690 Diluted
earnings per share
$ 0.14 $ 0.17 -18 %
$ 0.29 $ 0.29 0 %
Diluted weighted average common and equivalent shares outstanding
13,696,119 13,576,967
13,679,378 13,584,749 Dividends
per share
$ 0.15 $ 0.145 3 %
$
0.30 $ 0.29 3 %
Consolidated
Balance Sheets (unaudited) (Dollars
and Share Data in Thousands)
June 30, 2014 December 31, 2013
Assets Current assets: Cash and cash equivalents
$
7,478 $ 7,960 Receivables, net of allowance for doubtful
accounts of $344 and $370
31,650 26,073 Inventories
1,043 1,668 Income taxes receivable
3,334 970
Deferred income taxes, net
2,377 2,660 Prepaid expenses
2,753 2,545 Other
1,034 1,386
Total current assets
49,669 43,262 Investments
3,595 3,414 Property, plant and equipment
471,823 461,712 Accumulated depreciation and amortization
(293,754 ) (280,386 ) Property, plant
and equipment, net
178,069 181,326 Other assets:
Goodwill
29,028 29,028 Intangible assets, net
3,827
4,088 Deferred costs and other
6,435
5,762 Total other assets
39,290
38,878 Total assets
$ 270,623 $
266,880 Liabilities and Shareholders' Equity Current
liabilities: Accounts payable
$ 3,586 $ 3,163
Extended term payable
13,068 8,879 Deferred revenue
5,202 6,056 Accrued expenses and other
11,201 10,443
Financial derivative instruments
371 242 Current maturities
of long-term obligations
1,504 1,586
Total current liabilities
34,932 30,369
Long-term liabilities: Debt obligations, net of current maturities
132,938 133,621 Accrued income taxes
246 244 Deferred
revenue
2,570 2,705 Financial derivative instruments
537 1,184 Accrued employee benefits and deferred
compensation
12,357 12,344 Deferred income taxes
37,199 37,103 Total long-term
liabilities
185,847 187,201 Total liabilities
220,779 217,570 Commitments and contingencies
Shareholders' equity: Common stock, no par value, $0.10 stated
value Shares authorized: 100,000 Shares issued and outstanding:
13,646 in 2014 and 13,569 in 2013
1,365 1,357 Additional
paid-in capital
17,271 16,462 Retained earnings
30,675 30,782 Accumulated other comprehensive income
533 709 Total shareholders' equity
49,844 49,310 Total
liabilities and shareholders' equity
$ 270,623
$ 266,880
Fiber and Data Segment
(unaudited)
Three Months Ended June
Six Months Ended
30
June 30
(Dollars in thousands)
2014 2013 % Change
2014 2013 %
Change Revenue before intersegment eliminations: Business
$
9,811 $ 9,239 6 %
$ 19,474 $ 18,064 8 %
Wholesale
7,821 7,540 4 %
15,636 15,186 3 %
Intersegment
211 213 -1 %
432
426 1 % Total Fiber and Data revenue
17,843 16,992 5
%
35,542 33,676 6 % Cost of services (excluding
depreciation and amortization)
8,865 8,583 3 %
17,071
16,840 1 % Selling, general and administrative expenses
3,494 3,233 8 %
6,850 6,593 4 % Asset impairment
- 5
- 638 Depreciation and amortization
3,107 2,922 6 %
6,297 5,718 10 %
Total costs and expenses
15,466 14,743 5 %
30,218 29,789 1 % Operating income
$ 2,377 $ 2,249 6 %
$ 5,324 $ 3,887 37
% Net income
$ 1,415 $ 1,340 6 %
$
3,154 $ 2,301 37 % Capital expenditures
$
3,180 $ 2,970 7 %
$ 5,768 $ 5,913 -2 %
Equipment Segment (unaudited)
Three Months Ended June
Six Months Ended June
30
30
(Dollars in thousands)
2014 2013 % Change
2014 2013 %
Change Revenue before intersegment eliminations: Equipment
$
14,052 $ 12,910 9 %
$ 24,079 $ 28,274 -15 %
Services
3,355 2,206 52 %
5,576
4,079 37 % Total operating revenue
17,407 15,116 15 %
29,655 32,353 -8 % Cost of sales (excluding
depreciation and amortization)
12,357 10,860 14 %
20,901 24,082 -13 % Cost of services (excluding depreciation
and amortization)
1,737 1,808 -4 %
3,514 3,503 0 %
Selling, general and administrative expenses
1,467 1,390 6 %
2,770 2,804 -1 % Depreciation and amortization
130 124 5 %
268 209 28 % Total
costs and expenses
15,691 14,182 11 %
27,453 30,598 -10 % Operating income
$
1,716 $ 934 84 %
$ 2,202 $ 1,755 25 % Net
income
$ 1,020 $ 555 84 %
$ 1,307 $
1,040 26 % Capital expenditures
$ 28 $ 403 -93
%
$ 137 $ 961 -86 %
Telecom
Segment (unaudited)
Three Months Ended June
Six Months Ended
30
% June 30 % (Dollars in thousands)
2014
2013 Change
2014 2013 Change Revenue before intersegment
eliminations: Local Service
$ 2,799 $ 2,885 -3 %
$ 5,529 $ 5,848 -5 % Network Access
4,220
4,482 -6 %
8,635 9,183 -6 % Broadband
5,455 5,241 4 %
10,731 10,246 5 % Other
1,486 1,598 -7 %
2,999
3,177 -6 % Intersegment
426 416 2 %
860 833 3 % Total operating revenue
$
14,386 $ 14,622 -2 %
$ 28,754 $ 29,287 -2 %
Total Telecom revenue before intersegment eliminations
Unaffiliated Customers
$ 13,960 $ 14,206
$
27,894 $ 28,454 Intersegment
426 416
860 833
14,386 14,622
28,754
29,287 Cost of services (excluding depreciation and
amortization)
6,845 6,767 1 %
13,654 13,614 0 %
Selling, general and administrative expenses
1,981 2,146 -8
%
3,967 4,391 -10 % Depreciation and amortization
3,708 3,756 -1 %
7,386 7,459 -1
% Total costs and expenses
12,534 12,669 -1 %
25,007 25,464 -2 % Operating income
$ 1,852 $ 1,953 -5 %
$ 3,747 $ 3,823 -2
% Net income
$ 1,103 $ 1,163 -5 %
$
2,221 $ 2,267 -2 % Capital expenditures
$
3,508 $ 2,622 34 %
$ 5,312 $ 4,382 21 %
Key
Metrics
Business access lines
18,660 19,628 -5 % Residential access
lines
19,914 21,496 -7 % Total access lines
38,574 41,124 -6 % High-speed Internet ("DSL") customers
21,185 20,538 3 % Digital TV customers
11,749 11,001
7 %
Reconciliation of Non-GAAP Measures
Three Months
Ended Six Months Ended June 30 June 30
(Dollars in thousands)
2014 2013
2014 2013
Reconciliation of consolidated net income to EBITDA: Net
income
$ 1,911 $ 2,321
$ 3,984 $ 3,947
Add: Depreciation and amortization
7,510 7,252
15,090
14,261 Interest expense
991 1,131
1,970 2,270 Income
taxes
1,300 1,567
2,741
2,661 EBITDA
11,712 12,271
23,785 23,139 Adjustments allowed under our credit
agreement: Merger Costs/Asset impairment
911 5
911 638 EBITDA per our credit agreement
$ 12,623 $ 12,276
$ 24,696 $ 23,777
Three Months Ended Six Months Ended
(Dollars in thousands)
June 30 June 30
2014 2013
2014 2013
Reconciliation of net income to net
income without merger costs:
Net income
$ 1,911 $ 2,321
$ 3,984 $
3,947 Add back: After-tax merger costs
542 -
542 - Net income excluding merger costs
$ 2,453 $ 2,321
$ 4,526 $ 3,947
(Dollars in thousands)
Reconciliation of net debt:
Jun-14 Mar-14 Dec-13 Sep-13 Debt obligations, net of current
maturities $ 132,938 $ 133,289 $ 133,621 $ 134,018 Current
maturities of long-term obligations 1,504 1,551
1,586 1,584 Total Debt $ 134,442 $ 134,840 $ 135,207
$ 135,602 Less: Cash and cash equivalents 7,478
12,243 7,960 6,516 Net Debt $ 126,964 $ 122,597 $
127,247 $ 129,086
Enventis CorporationDavid Christensen, CFO,
507-387-3355orJennifer Spaude, Investor Relations, 507-386-3765
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