HCT 8% Hits Based ON Conocophillips Common Stock

HECTOR, Minn., Aug. 10 /PRNewswire-FirstCall/ -- Hector Communications Corporation (AMEX:HCT) today reported that its operating results for its second quarter and six month periods ended June 30, 2006. Revenues were $8,054,000 for the three months ended June 30, 2006, an increase of 2% from $7,858,000 in 2005. The revenue improvement was mainly due to increased sales of high-speed digital subscriber line ("DSL") services to customers. Operating income decreased 21% to $1,355,000 compared to $1,716,000 in 2005. Operating income was negatively affected in the 2006 period by $474,000 in legal and consulting expenses associated with merger negotiations that culminated in the public announcement of our merger agreement with Hector Acquisition Corp. on June 27. HCT also recognized a $246,000 expense in the 2006 period from employee and director stock options as required by new accounting rules. Income from the Company's investment in Midwest Wireless Holdings LLC was $1,477,000 in the 2006 period compared to $1,297,000 in 2005. HCT expects the sale of Midwest Wireless to Alltel Corporation to be concluded in late September or early October. HCT recognized a net of income tax gain from the redemption of its Rural Telephone Bank stock of $6,063,000 ($1.44 per diluted share) in the 2006 period. Net income was $7,332,000 or $1.75 per diluted share in 2006 compared to $1,493,000 or $.37 per diluted share in 2005. Revenues were $15,808,000 for the six months ended June 30, 2006, an increase of 2% from $15,507,000 in 2005. Operating income decreased 9% to $3,224,000 compared to $3,529,000 in 2004. Legal and consulting expenses associated with merger negotiations and stock option expenses included in 2006 operating expenses were $526,000 and $290,000 respectively. Income from the Company's investment in Midwest Wireless Holdings LLC was $3,043,000 in the 2006 period compared to $2,367,000 in 2005. Net income was $9,031,000 or $2.16 per diluted share in 2006 compared to $2,879,000 or $.71 per diluted share in 2005. Curtis A. Sampson, Chairman and Chief Executive Officer, said, "Hector's operations performed well during our second quarter. Revenues increased year over year in a tough competitive environment. Excluding costs related to the merger negotiations and the new stock option accounting rules, our six-month operating income increased 14%. Our financial position at June 30, 2006 is in line with requirements in our merger agreement with Hector Acquisition Corp., and we are otherwise on track to complete this transaction in October. Shareholders will receive proxy materials within the next few weeks. It is very important for shareholders to promptly return their votes. The agreement with Hector Acquisition Corp. is the culmination of a process we began approximately one year ago to explore strategic alternatives available. We believe we have maximized shareholder value through this process." 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, 8,000 cable television subscribers and 11,700 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 2006 2005 2006 2005 Revenues $8,054,146 $7,858,092 $15,808,337 $15,507,089 Operating income 1,355,340 1,716,219 3,224,102 3,529,530 Other income (expense): Income (loss) from investments: Midwest Wireless Holdings, LLC 1,476,840 1,296,875 3,043,205 2,367,218 Other unconsolidated affiliates 46,855 46,630 (3,043) 44,429 Gain on sale of RTB Stock 10,340,908 10,340,908 Gain on sale of assets 87,852 87,852 Interest and dividend income 393,553 202,264 622,237 387,045 Interest expense (921,453) (745,175) (1,647,742) (1,475,347) Net other income 11,424,555 800,594 12,443,417 1,323,345 Income before income taxes 12,779,895 2,516,813 15,667,519 4,852,875 Income tax expense 5,448,000 1,024,000 6,637,000 1,974,000 Net Income $7,331,895 $1,492,813 $9,030,519 $2,878,875 Basic net income per common share: $1.81 $.40 $2.24 $.77 Diluted net income per share $1.75 $.37 $2.16 $.71 Cash dividends per share $.10 $.05 $.20 $.10 Hector Communications Corporation and Subsidiaries Condensed Balance Sheet June 30 December 31 2006 2005 Cash and cash equivalents $25,764,742 $25,245,358 Other current assets 4,056,566 4,477,313 Property, plant and equipment, net 35,383,606 37,381,570 Excess of cost over net assets acquired 30,921,095 30,921,094 Investment in Midwest Wireless Holdings, LLC 19,517,725 18,067,471 Investments in other unconsolidated affiliates 3,469,114 3,307,593 Other investments 6,385,900 8,037,986 Other assets 289,866 315,906 Total Assets $125,788,614 $127,754,291 Notes payable and current portion of long-term debt $6,437,000 $6,527,400 Other current liabilities 7,458,585 4,214,147 Long-term debt, less current portion 35,115,688 49,456,138 Deferred taxes and credits 5,193,247 5,308,790 Deferred compensation 792,848 802,116 Stockholders' equity 70,791,246 61,445,700 Total Liabilities and Stockholders' Equity $125,788,614 $127,754,291 DATASOURCE: Hector Communications Corporation CONTACT: Curtis A. Sampson, Chairman and Chief Executive Officer, or Steven H. Sjogren, President, or Paul N. Hanson, Vice President and Treasurer, all of Hector Communications Corporation, +1-320-848-6611

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