CTCI CT Communications (MM)

CT Communications Announces Second Quarter Results CONCORD, N.C., July 28 /PRNewswire-FirstCall/ -- CT Communications, Inc. (NASDAQ:CTCI) announces consolidated operating revenue for the quarter ended June 30, 2005 of $41.0 million, representing a 0.7% increase over the same period last year. Operating revenue from CT's non-ILEC operations grew 6.7% to $19.0 million from the $17.8 million reported in the second quarter of 2004. The non-ILEC growth was driven by an 8.7% increase in Wireless revenue, a 28.8% increase in Greenfield revenue and a 6.0% increase in Internet and Data revenue. Offsetting these gains were decreases in the ILEC and CLEC's operating revenue of 4.0% and 4.6%, respectively, driven by lower access and interconnection revenue coupled with a decline in customer recurring line revenue. Operating income for the second quarter of 2005 was $3.5 million, or an 8.6% operating margin, compared to $6.2 million, or a 15.2% operating margin, for the second quarter of 2004. The decline in operating income was attributable to a $2.9 million increase in operating expense, which was driven by a $1.3 million increase in Wireless roaming and network expenses, a $0.7 million increase in certain personnel expenses and a $0.6 million increase in depreciation expense. The increase in personnel expense was primarily due to changes in certain of the Company's incentive programs for stock-based compensation. These changes in compensation programs modified the timing of expense recognition, but were designed to have no effect on the total compensation that employees are eligible to receive under the programs. Other Income for the second quarter of 2005 increased to $1.4 million from the $0.8 million reported in the second quarter of 2004 primarily due to a $1.1 million gain on the sale of an investment. Net income for the second quarter of 2005 was $3.0 million, or $0.15 per diluted common share, compared to $4.2 million, or $0.22 per diluted common share in the second quarter of 2004. Operating revenue for the six months ended June 30, 2005 increased $1.1 million, or 1.4%, to $82.4 million in comparison to the same period in 2004. Operating income decreased to $8.6 million from the $13.1 million reported in the same prior year period. The decrease in operating income was attributable to a $5.6 million increase in operating expense driven by a $1.9 million increase in Wireless roaming and network expenses, a $1.2 million increase in certain personnel expenses, a $1.0 million increase in depreciation expense and a $0.8 million increase in professional fees. The increase in personnel expense was largely attributable to a $0.5 million increase in benefits expense and a $0.4 million increase relating to changes in incentive programs for stock-based compensation. Net income for the six months ended June 30, 2005 was $5.9 million, or $0.31 per diluted common share, compared to $8.4 million, or $0.44 per diluted common share for the six months ended June 30, 2004. In June 2005, CT announced that it had entered into an agreement with Fixed Wireless Holdings, LLC, an affiliate of Clearwire Corporation, to sell its Broadband Radio Service "BRS" spectrum licenses and Educational Broadband Service "EBS" spectrum lease rights for up to $16.0 million in cash. The closing of the sale, which is expected to occur in 2005, is subject to the consent of the EBS spectrum licensors, regulatory approvals and other customary closing conditions. Results by business unit: - ILEC -- ("Concord Telephone") Concord Telephone's operating revenue and income decreased to $22.0 million and $4.1 million, respectively, in the second quarter of 2005. The decline in operating results was attributable to a $0.9 million decrease in operating revenue coupled with a $1.4 million increase in operating expense. The decrease in revenue was primarily due to a $0.5 million reduction in access and interconnection revenue and a decline in long distance revenue primarily attributable to the migration of customers to flat rate unlimited long distance calling plans. The growth in operating expense was primarily driven by an increase in benefit costs and the changes to certain of the Company's compensation programs regarding stock-based compensation. Concord Telephone ended the second quarter of 2005 with 111,767 access lines in service, a 2% decrease from the second quarter of 2004. - Wireless Service -- ("CTC Wireless") CTC Wireless second quarter 2005 operating revenue increased 8.7% to $9.0 million from the $8.2 million reported in the second quarter of 2004. Contributing to the increase in wireless revenue was a $0.2 million increase in customer recurring revenue associated with an 11% growth in wireless subscribers and an increase of $0.5 million, or 19.0%, in settlement and roaming revenue. Minutes of use on CTC's wireless network increased 28% in comparison to the second quarter of last year. Operating expense for the second quarter of 2005 increased to $8.6 million, a $1.5 million increase over the prior year period. Driving the increase in operating expense was a $0.9 million increase in switching and other network expenses and a $0.4 million increase in roaming expense. In February 2005, Cingular implemented home-on-home roaming with another carrier in several North Carolina market areas. This change has negatively impacted CTC Wireless roaming costs and settlement revenue, shifting higher than expected customer traffic to the other carrier's network. CTC Wireless is working closely with Cingular to address this issue. Operating income for the second quarter of 2005 was $0.4 million compared to $1.2 million for the second quarter of 2004. Customer churn declined 15% in the second quarter of 2005 compared to the same period last year and was attributable to the Company's ongoing focus on customer retention. CTC Wireless ended the second quarter with 44,723 subscribers compared to 40,358 at the end of the second quarter of 2004. - CLEC -- ("CTC Exchange Services") CLEC operating revenue was $4.7 million in the second quarter of 2005 compared to $5.0 million in the second quarter of 2004. The decline in operating revenue was driven by a $0.2 million decrease in access and interconnection revenue due to the June 2004 reduction in interstate access rates. Offsetting the decline in operating revenue was a $0.1 million reduction in operating expense driven by lower line-related costs and a reduction in personnel expense. Operating loss for the second quarter of 2005 was $0.3 million compared to $0.2 million in the second quarter of 2004. CLEC ended the second quarter of 2005 with 31,644 access lines in service compared to 30,686 at the end of the second quarter of 2004. CLEC ended the second quarter of 2005 with 24,739 long distance lines, an increase of 2,568 long distance lines compared with the end of the second quarter of 2004. - Greenfield -- ("CTC Exchange Services") Greenfield's second quarter 2005 operating revenue increased 28.8% to $2.4 million compared to the same period last year. Greenfield line revenue and access lines grew 26.8% and 21%, respectively, while operating expense for the second quarter grew only 4.5% in comparison to the same quarter last year. Operating loss for the second quarter of 2005 improved to $0.6 million compared to an operating loss of $1.0 million for the second quarter of 2004. Depreciation expense was $0.8 million and $0.7 million in the second quarter of 2005 and 2004, respectively. Greenfield ended the second quarter of 2005 with 13,864 access lines and 7,631 long distance lines in service, which represented increases of 21% and 35%, respectively. As of June 30, 2005 the Company had signed 111 agreements, which in total represent a potential of more than 49,500 lines at the completion of the projects. - Internet & Data -- ("CTC Internet Services") CTC Internet Services' second quarter 2005 operating revenue grew 6.0% to $2.9 million in comparison to the second quarter of 2004. DSL revenue grew 35.9% while subscribers grew 41% from the same quarter last year. Offsetting the DSL revenue growth was the continued churn of dial-up customers and a decline in high-speed services revenue due to continued price competition for data solutions for business customers. Operating expense was relatively flat in the second quarter of 2005 compared to the same period last year. Operating income grew 40.4% to $0.4 million compared to the same period last year. CTC Internet Services ended the second quarter of 2005 with 16,334 DSL subscribers compared to 11,582 subscribers at the end of the second quarter of 2004. Dial-up accounts decreased 23% to 7,774 and high- speed accounts increased 10% to 632 at June 30, 2005 compared to June 30, 2004. Future Period Guidance We currently expect operating results to approximate the following during these future periods: - 3rd Quarter 2005 - Revenue of $42.5 to $43.5 million - Operating income of $5.2 to $5.8 million - Depreciation expense of $8.0 to $8.1 million - Consolidated earnings per diluted share of $0.20 to $0.22 - Capital expenditures of $7.0 to $8.0 million - Full Year 2005 - Revenue of $166.0 to $169.0 million - Operating income of $19.0 to $22.0 million - Depreciation expense of $31.5 to $33.0 million - Consolidated earnings per diluted share of $0.70 to $0.75 - Capital expenditures of $27.5 to $30.5 million CT Communications will host a conference call to discuss the results of the second quarter on Friday, July 29, 2005 at 10:00 AM ET. You are invited to listen to the conference call that will be broadcast live over the Internet at http://www.ctc.net/. If you are unable to listen during the live webcast, the call will be archived on the web site at http://www.ctc.net/ until August 31, 2005. Additionally, a replay of the call will be available until 5:00 PM ET on Friday, August 5th at 800-633-8284. Enter access number 21253152. CT Communications, Inc. is headquartered in Concord, N.C. and is a growing provider of integrated telecommunications and related services to residential and business customers located primarily in North Carolina. CT Communications, Inc. offers a comprehensive package of telecommunications services, including local and long distance telephone services, Internet and data services and wireless services. Certain statements contained in this press release are "forward-looking statements," within the meaning of federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks, uncertainties and assumptions made by management about us, including, among other things, changes in industry conditions created by the Telecommunications Act of 1996 and related state and federal legislation and regulations, the impact of economic conditions related to financial performance of customers, business partners, competitors and peers within the telecommunications industry, the recovery of the substantial costs incurred over the past few years in connection with our expansion into new businesses, retention of our existing customer base and our ability to attract new customers, our ability to control pricing and product offerings in a highly competitive industry, our ability to attract and retain key personnel, the performance of our investments, rapid changes in technology, our ability to manage capital expenditures related to changes in technology, actions of our competitors, and the impact of economic and political events on our business, operating regions and customers, including terrorist attacks. In some cases, these forward- looking statements can be identified by the use of words such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "project," "intend" or "potential" or the negative of those words or other comparable words. These forward-looking statements may differ materially from actual events or results because they involve estimates, assumptions and uncertainties and should be viewed with caution. We undertake no obligation to update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. Readers are also directed to consider the risks, uncertainties and other factors discussed in documents filed by us with the Securities and Exchange Commission, including those matters summarized under the caption "Risk Factors" in our Annual Report on Form 10-K/A (Amendment No. 1) for the year ended December 31, 2004. CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Three Months Ended June 30, % 2005 2004 Change Operating Revenue ILEC Services $21,996 $22,906 (4.0%) Wireless Services 8,963 8,247 8.7% CLEC Services 4,721 4,951 (4.6%) Greenfield Services 2,427 1,885 28.8% Internet & Data Services 2,926 2,760 6.0% Total Operating Revenue 41,033 40,749 0.7% Operating Expense ILEC Services 17,894 16,499 8.5% Wireless Services 8,554 7,031 21.7% CLEC Services 4,992 5,106 (2.2%) Greenfield Services 3,014 2,885 4.5% Internet & Data Services 2,511 2,465 1.9% Other 520 583 (10.8%) Total Operating Expense 37,485 34,569 8.4% Operating Income 3,548 6,180 (42.6%) Other Income (Expense) Investment, Equity Method 1,305 1,338 (2.5%) Gains, Interest, Dividends 1,529 495 208.9% Impairment on Investments (111) (21) NMF Other Expenses, Principally Interest (1,356) (1,020) 32.9% Total Other Income 1,367 792 72.6% Pre-Tax Income 4,915 6,972 (29.5%) Income Tax Expense 1,962 2,807 (30.1%) Net Income $2,953 $4,165 (29.1%) Weighted Average Diluted Shares 19,090 19,051 Earnings Per Diluted Common Share $0.15 $0.22 CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Six Months Ended June 30, % 2005 2004 Change Operating Revenue ILEC Services $44,675 $46,605 (4.1%) Wireless Services 17,455 15,369 13.6% CLEC Services 9,856 9,989 (1.3%) Greenfield Services 4,718 3,830 23.2% Internet & Data Services 5,726 5,520 3.7% Total Operating Revenue 82,430 81,313 1.4% Operating Expense ILEC Services 35,155 31,954 10.0% Wireless Services 16,241 13,806 17.6% CLEC Services 10,243 10,130 1.1% Greenfield Services 5,977 5,824 2.6% Internet & Data Services 5,114 5,317 (3.8%) Other 1,052 1,171 (10.2%) Total Operating Expense 73,782 68,202 8.2% Operating Income 8,648 13,111 (34.0%) Other Income (Expense) Investment, Equity Method 2,548 2,729 (6.6%) Gains, Interest, Dividends 1,677 750 123.6% Impairment on Investments (529) (40) NMF Other Expenses, Principally Interest (2,531) (2,452) 3.2% Total Other Income 1,165 987 18.0% Pre-Tax Income 9,813 14,098 (30.4%) Income Tax Expense 3,871 5,694 (32.0%) Net Income $5,942 $8,404 (29.3%) Weighted Average Diluted Shares 19,035 18,999 Earnings Per Diluted Common Share $0.31 $0.44 CT Communications, Inc. Consolidated Balance Sheets (Unaudited, in thousands) June 30, December 31, 2005 2004 ASSETS Cash and Cash Equivalents $21,257 $28,358 Accounts Receivable and Unbilled Revenue, Net 15,851 17,371 Wireless Spectrum Held-for-Sale 15,507 - Other Assets 5,583 6,244 Current Assets 58,198 51,973 Investment Securities 4,724 5,190 Investments in Unconsolidated Companies 17,048 16,002 Property, Plant and Equipment, Net 204,377 207,072 Other Assets 35,549 50,395 TOTAL ASSETS $319,896 $330,632 LIABILITIES AND STOCKHOLDERS' EQUITY Current Portion of Long-Term Debt $20,000 $5,000 Accounts Payable 5,736 6,822 Customer Deposits and Advance Billings 2,952 3,307 Other Accrued Liabilities 17,755 18,475 Liabilities of Discontinued Operations 364 604 Current Liabilities 46,807 34,208 Long-Term Debt 42,500 65,000 Deferred Credits and Other Liabilities 40,689 43,196 Stockholders' Equity 189,900 188,228 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $319,896 $330,632 CT Communications, Inc. Customer Information June 30, June 30, % 2005 2004 Change ILEC Access Lines Business Lines 28,560 29,068 (1.7%) Residential Lines 83,207 85,394 (2.6%) Total ILEC Access Lines 111,767 114,462 (2.4%) CLEC Access Lines 31,644 30,686 3.1% Greenfield Access Lines 13,864 11,479 20.8% Total Wired Access Lines 157,275 156,627 0.4% Wireless Subscribers 44,723 40,358 10.8% Long Distance Lines In ILEC 84,774 84,763 - In CLEC 24,739 22,171 11.6% In Greenfield 7,631 5,655 34.9% Total Long Distance Lines 117,144 112,589 4.0% Internet Access Customers Dial-Up 7,774 10,038 (22.6%) DSL 16,334 11,582 41.0% High Speed 632 577 9.5% Total Internet Access Customers 24,740 22,197 11.5% Greenfield Projects Lines in Potential Total Service Lines Projects By Year Signed Previous Years 9,220 27,002 51 2002 3,532 12,694 24 2003 790 4,846 18 2004 302 3,864 12 2005 20 1,417 6 Total 13,864 49,823 111 By Type Mall 2,520 2,800 3 Single Family Homes 7,679 34,505 59 Multi-Dwelling Units 2,946 11,289 40 Business 719 1,229 9 Total 13,864 49,823 111 CT Communications, Inc. Other Selected Financial Data (Unaudited, in thousands) Capital Expenditures Three Months Six Months Ended June 30, Ended June 30, 2005 2004 2005 2004 ILEC $3,748 $3,564 $8,207 $5,552 Wireless 374 236 1,467 618 CLEC 437 185 660 396 Greenfield 1,655 1,198 3,003 1,940 Internet 170 379 598 676 Other 206 289 413 582 Total $6,590 $5,851 $14,348 $9,764 % of Revenue 16.1% 14.4% 17.4% 12.0% Depreciation Three Months Six Months Ended June 30, Ended June 30, 2005 2004 2005 2004 ILEC $5,129 $4,958 $10,238 $9,672 Wireless 576 479 1,080 948 CLEC 634 624 1,263 1,259 Greenfield 840 745 1,650 1,465 Internet 455 283 934 799 Other 339 334 674 705 Total $7,973 $7,423 $15,839 $14,848 DATASOURCE: CT Communications, Inc. CONTACT: Jim Hausman, +1-704-722-2410, or Duane Johnson, +1-704-722-3231, both of CT Communications, Inc. Web site: http://www.ctc.net/

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