CTCI CT Communications (MM)

CONCORD, N.C., March 2 /PRNewswire-FirstCall/ -- Fourth Quarter 2005 Highlights - Operating revenue increased 6.7% to $44.3 million - Operating income increased 5.5% to $6.2 million - Net income of $3.9 million - 41% increase in Digital Subscriber Line "DSL" customers - 7% increase in Wireless subscribers - Completion of previously announced ILEC broadband initiative - Planning for future broadband product, service and network capabilities underway Fourth Quarter 2005 Results CT Communications, Inc. (NASDAQ:CTCI) announces operating revenue of $44.3 million for the fourth quarter of 2005, a 6.7% increase compared to the fourth quarter of 2004. The $2.8 million increase in operating revenue was driven by a $2.3 million increase in access and interconnection revenue, a $0.3 million increase in customer recurring revenue and a $0.2 million increase in Wireless roaming and settlement revenue. The increase in access and interconnection revenue primarily related to the recovery of previously disputed carrier billings, while the increase in customer recurring revenue was driven by customer growth. During the fourth quarter of 2005, the Company continued to generate strong customer growth in many of its non-ILEC businesses. DSL customers increased 41%, Wireless subscribers increased 7% and Greenfield access lines increased 15% compared to the end of 2004. Partially offsetting the growth generated by the Company's non-ILEC businesses was a 2.5% decline in the Company's ILEC access lines. During the fourth quarter, the Company completed its previously announced plan to enhance the broadband capabilities in its ILEC territory. The Company now offers broadband speeds of up to 10 megabits per second throughout much of its ILEC service area. Broadband customer growth has continued to accelerate in the ILEC with the availability of higher bandwidth services. Maintaining superior broadband service capabilities has been and will continue to be central to our on-going competitive strategy. The Company has been working internally and with consultants to develop the next evolution of our network architecture and the services that will be delivered over our network. The plan, when complete, will define the voice, data, video and entertainment products and services to be delivered to our customers, as well as the network design and bandwidth necessary to provide those products and services. The Company expects to complete this product, service and network plan in the next several months to build upon the network enhancements completed in 2005. The 2006 capital plan has reserved approximately $8.0 million to support the initial product and network requirements to be finalized upon completion of the plan that will enable the Company to maintain its superior broadband service capabilities. Operating expense in the fourth quarter of 2005 increased $2.4 million to $38.1 million compared to the fourth quarter of 2004. The increase in operating expense was attributable to a $2.2 million increase in cost of service and a $0.5 million increase in depreciation expense. Partially offsetting these increases was a $0.2 million decrease in selling, general and administrative expense. The increase in cost of service was mainly due to a $1.1 million increase in network operations expense, a $0.4 million increase in access and interconnection expense and a $0.4 million increase in cost of sales. The increase in network operations expense was driven by the growth in the Company's Wireless and Greenfield businesses, while the increase in cost of sales primarily related to higher handset costs in the Company's Wireless business. Operating income increased $0.3 million to $6.2 million in the fourth quarter of 2005, a 5.5% increase compared to the fourth quarter of 2004. Operating margin was 14.1% for the fourth quarter of 2005 and 14.2% for the fourth quarter of 2004. Other income decreased $0.2 million to $0.1 million in the fourth quarter of 2005 primarily due to a $0.9 million decrease in income from the Company's Palmetto MobileNet wireless investment that was partially offset by a $0.4 million increase in investment income and a $0.3 million decrease in investment impairment charges. Net income was $3.9 million and $4.1 million for the three months ended December 31, 2005 and 2004, respectively. The decrease in net income was primarily due to a reduction in income tax expense during the fourth quarter of 2004 related to a federal income tax deduction for the disposal and sale of the Company's Webserve product line. Diluted earnings per share were $0.20 per share for the fourth quarter of 2005 and $0.21 per share for the fourth quarter of 2004, which included approximately a $0.02 per share income tax benefit from Webserve. Full Year 2005 Results Operating revenue for the year ended December 31, 2005 increased 4.9% to $171.7 million compared to $163.7 million for the year ended December 31, 2004. The $8.0 million increase in operating revenue was driven by a $2.4 million increase in Wireless roaming and settlement revenue, a $2.3 million increase in access and interconnection revenue and a $1.6 million increase in customer recurring revenue. In addition, NECA regulatory settlement revenue increased $1.2 million and sales of telephone systems increased $0.8 million. Operating expense increased $9.6 million to $149.7 million for the year ended December 31, 2005, compared to the same period last year. The increase in operating expense was attributable to a $6.4 million increase in cost of service, a $2.1 million increase in selling, general and administrative expense and a $1.1 million increase in depreciation expense. The increase in cost of service expense was due to a $3.4 million increase in network operations expense largely associated with the growth in Wireless's minutes of use, a $1.9 million increase in cost of sales and a $1.1 million increase in Wireless's roaming and settlement expense. The increase in administrative expense was driven by a $2.2 million increase in personnel expense resulting from an increase in medical benefit costs and changes to certain incentive programs for stock based compensation. Partially offsetting the increase in administrative expense was a $0.2 million decrease in selling expense. Operating income decreased $1.6 million to $22.0 million for the year ended December 31, 2005, compared to the year ended December 31, 2004. Other income (expense) increased $1.3 million to $1.9 million for the year ended December 31, 2005, compared to the same period last year. The increase in other income primarily related to a $1.5 million increase in investment income coupled with a $1.3 million decrease in investment impairment charges, partially offset by a $1.5 million decrease in income from the Company's Palmetto MobileNet wireless investment. Net income was $14.5 million and $14.7 million for the years ended December 31, 2005 and 2004, respectively. Diluted earnings per share for the full year 2005 and 2004 were $0.77 per share. Fourth Quarter 2005 Results by Business Unit - ILEC - ("Concord Telephone") Concord Telephone's operating revenue increased 6.9% to $24.6 million in the fourth quarter of 2005 compared to the same quarter in 2004. The $1.6 million increase in operating revenue was driven by a $1.9 million increase in access and interconnection revenue and a $0.2 million increase in telephone system sales. The increase in access and interconnection revenue was due to the recovery of previously disputed carrier billings and to higher facility billings largely attributable to an increase in billing rates. Partially offsetting these revenue increases were a $0.3 million decrease in NECA regulatory settlements and a $0.2 million decrease in customer recurring revenue. Operating expense increased 5.4% to $17.7 million in the fourth quarter of 2005 compared to the same quarter in 2004. The $0.9 million increase in operating expense was primarily attributable to a $0.9 million increase in cost of service and a $0.4 million increase in depreciation expense. Partially offsetting these increases was a $0.4 million decrease in selling, general and administrative expense. The increase in cost of service was mainly due to a $0.3 million increase in access and interconnection expense, a $0.2 million increase in network operations expense driven by license and maintenance agreements and a $0.1 million increase in cost of sales. Operating income increased 11.0% to $7.0 million in the fourth quarter of 2005 compared to the same period last year. This resulted in an operating margin of 28.2% for the fourth quarter of 2005 compared to 27.2% for the fourth quarter of 2004. Concord Telephone ended the fourth quarter of 2005 with 110,117 access lines in service, a 2.5% decrease from the fourth quarter of 2004. - Wireless Service - ("Wireless") Wireless operating revenue increased 5.5% to $9.5 million in the fourth quarter of 2005 compared to the same period in 2004. The $0.5 million increase in operating revenue was driven by a $0.4 million increase in customer recurring revenue associated with a 7% growth in subscribers and a $0.2 million increase in settlement and roaming revenue. Operating expense increased $0.8 million to $8.6 million in the fourth quarter of 2005 compared to the same period last year. The increase in operating expense was primarily due to a $0.7 million increase in cost of service that was attributable to a $0.4 million increase in network operations expense and a $0.3 million increase in cost of goods sold for handset and accessory sales. The increase in network operations expense was primarily due to a $0.3 million reduction in tower lease expense in the fourth quarter of 2004 related to the successful resolution of certain tower lease contingencies. Operating income decreased $0.3 million to $0.9 million in the fourth quarter of 2005 compared to the same period last year. Wireless ended the fourth quarter of 2005 with 46,138 subscribers, an increase of 2,925, or 7%, compared to the fourth quarter of 2004. The Company will likely incur capital expenditures during 2006 related to the swap-out of certain cell site equipment to comply with Cingular's decision to migrate its North Carolina cell site equipment to another vendor. Although the timing and financial impact to the Company have not been finalized, approximately $5.0 million has been reserved in the 2006 capital budget to fund this upgrade. - CLEC - ("CTC Exchange Services") CTC Exchange Services' operating revenue increased 2.0% to $4.6 million in the fourth quarter of 2005 compared to the same quarter last year. The increase in operating revenue was driven by a $0.3 million increase in access and interconnection revenue, but was substantially offset by a decrease in customer recurring revenue. The increase in access and interconnection revenue was largely due to the recovery of previously disputed carrier billings, while the decrease in customer recurring revenue was attributable to lower pricing associated with customer contract renewals. Operating expense increased $0.5 million to $5.2 million in the fourth quarter of 2005 compared to the same period last year. The increase in operating expense was largely due to a $0.2 million increase in cost of service and a $0.2 million increase in depreciation expense. The increase in cost of service was attributable to an increase in line related expenses for leased facilities and transport. Operating loss for the fourth quarter of 2005 was $0.6 million compared to an operating loss of $0.2 million for the fourth quarter of 2004. CTC Exchange Services ended the fourth quarter of 2005 with 32,546 access lines compared to 31,718 access lines for the same quarter last year. - Greenfield Greenfield's operating revenue increased 9.6% to $2.5 million in the fourth quarter of 2005 compared to the same period last year. The increase in operating revenue was driven by a $0.2 million increase in customer recurring revenue associated with a 15% increase in access lines and a $0.1 million increase in access and interconnection revenue. Operating expense increased 4.2% to $3.4 million in the fourth quarter of 2005 compared to the same period last year. The increase in operating expense was attributable to a $0.4 million increase in cost of service that was partially offset by a $0.1 million decrease in selling and administrative expense. The increase in cost of service was attributable to a $0.2 million increase in line related transport expense and a $0.1 million increase in personnel expense. Operating loss for the fourth quarter of 2005 declined to $0.9 million, an 8.0% improvement from the $1.0 million operating loss for the fourth quarter of 2004. Greenfield ended the fourth quarter of 2005 with 14,929 access lines, which represented an increase of 15% from the end of 2004. The Company continues to focus on Greenfield opportunities that leverage Company-owned network infrastructure to minimize the cost to add additional customers. As of December 31, 2005, the Company had 118 Greenfield projects, which in total represent approximately 53,000 marketable lines at the completion of the projects. - Internet & Data - ("CTC Internet Services") CTC Internet Services' operating revenue increased 14.1% to $3.1 million in the fourth quarter of 2005 compared to the same period last year. DSL revenue increased $0.5 million, but was partially offset by decreases in revenue from the decline in dial-up customers as these customers continue to migrate to higher bandwidth broadband offerings. In comparison to the fourth quarter of 2004, DSL customers increased 41%, while DSL customer revenue increased 32.5%. Operating expense increased 2.1% to $2.6 million in the fourth quarter of 2005 compared to the same period last year. Operating income for the fourth quarter increased 153.7% to $0.5 million, compared to the same period in 2004. In the fourth quarter of 2005, the Company continued to experience strong demand for broadband services with over 1,500 net DSL customers added in the quarter. CTC Internet Services ended the year with 19,507 DSL customers, an increase of 5,620 customers compared to the end of 2004. Dial-up accounts decreased 28% to 6,522, while high-speed accounts increased 14% to 693 at December 31, 2005 compared to December 31, 2004. Future Period Guidance Results for 2006 will be impacted by the product, service and network plan that is currently under development. The 2006 capital plan has approximately $8.0 million reserved to support this initiative and will be finalized upon completion of the plan. The Company also has approximately $5.0 million in the 2006 capital plan to comply with Cingular's requirement to swap-out certain cell site equipment. In addition, although the Company has prepared for the introduction of cable telephony competition in the ILEC service area, the timing and ultimate impact are difficult to predict. We currently expect operating results to approximate the following during these future periods: - 1st Quarter 2006 - Revenue of $41.5 to $43.5 million - Operating income of $5.0 to $5.4 million - Depreciation expense of $8.1 to $8.3 million - Diluted earnings per share of $0.18 to $0.20 - Capital expenditures of $6.0 to $8.0 million - Full Year 2006 - Revenue of $168.0 to $172.0 million - Operating income of $17.0 to $21.0 million - Depreciation expense of $32.0 to $34.0 million - Diluted earnings per share of $0.66 to $0.70 - Capital expenditures of $38.0 to $42.0 million CT Communications will host a conference call to discuss the results of the fourth quarter and full year 2005 on Friday, March 3, 2006 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 March 31, 2006. Additionally, a replay of the call will be available until 5:00 PM ET on Friday, March 10, 2006 at 800-633-8284. Enter access number 21283101. 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, the performance of our investments, rapid changes in technology, our ability to manage capital expenditures related to changes in technology, actions of our competitors, the impact of economic and political events on our business, operating regions and customers, including terrorist attacks and the finalization and completion of the audit of the Company's financial statements and the assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2005. 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 for the year ended December 31, 2004. CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Three Months Ended December 31, % 2005 2004 Change Operating Revenue ILEC Services $24,649 $23,061 6.9% Wireless Services 9,450 8,957 5.5% CLEC Services 4,631 4,538 2.0% Greenfield Services 2,455 2,239 9.6% Internet & Data Services 3,107 2,724 14.1% Total Operating Revenue 44,292 41,519 6.7% Operating Expense ILEC Services 17,690 16,784 5.4% Wireless Services 8,562 7,749 10.5% CLEC Services 5,182 4,716 9.9% Greenfield Services 3,365 3,229 4.2% Internet & Data Services 2,561 2,508 2.1% Other 694 620 11.9% Total Operating Expense 38,054 35,606 6.9% Operating Income 6,238 5,913 5.5% Other Income (Expense) Investment, Equity Method 293 1,222 (76.0%) Gains, Interest, Dividends 916 529 73.2% Impairment on Investments (17) (340) NMF Other Expenses, Principally Interest (1,132) (1,149) (1.5%) Total Other Income (Expense) 60 262 (77.1%) Pre-Tax Income 6,298 6,175 2.0% Income Tax Expense 2,427 2,120 14.5% Net Income $3,871 $4,055 (4.5%) Diluted Weighted Average Shares 18,967 19,054 Diluted Earnings Per Share $0.20 $0.21 CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Twelve Months Ended December 31, % 2005 2004 Change Operating Revenue ILEC Services $94,561 $93,016 1.7% Wireless Services 36,426 32,548 11.9% CLEC Services 19,272 19,123 0.8% Greenfield Services 9,636 8,108 18.8% Internet & Data Services 11,770 10,885 8.1% Total Operating Revenue 171,665 163,680 4.9% Operating Expense ILEC Services 71,039 65,856 7.9% Wireless Services 33,194 28,561 16.2% CLEC Services 20,538 19,969 2.8% Greenfield Services 12,417 12,004 3.4% Internet & Data Services 10,167 11,288 (9.9%) Other 2,346 2,448 (4.2%) Total Operating Expense 149,701 140,126 6.8% Operating Income 21,964 23,554 (6.8%) Other Income (Expense) Investment, Equity Method 4,275 5,771 (25.9%) Gains, Interest, Dividends 2,989 1,463 104.3% Impairment on Investments (546) (1,834) (70.2%) Other Expenses, Principally Interest (4,825) (4,806) 0.4% Total Other Income 1,893 594 218.7% Pre-Tax Income 23,857 24,148 (1.2%) Income Tax Expense 9,308 9,445 (1.5%) Net Income $14,549 $14,703 (1.0%) Diluted Weighted Average Shares 18,947 19,007 Diluted Earnings Per Share $0.77 $0.77 CT Communications, Inc. Consolidated Balance Sheets (Unaudited, in thousands) December 31, December 31, 2005 2004 ASSETS Cash and Cash Equivalents $23,011 $28,358 Accounts Receivable and Unbilled Revenue, Net 16,336 17,371 Wireless Spectrum Held-for-Sale 15,646 - Other Assets 7,220 6,244 Current Assets 62,213 51,973 Investment Securities 5,845 5,190 Investments in Unconsolidated Companies 15,618 16,002 Property, Plant and Equipment, Net 200,179 207,072 Other Assets 37,565 50,395 TOTAL ASSETS $321,420 $330,632 LIABILITIES AND STOCKHOLDERS' EQUITY Current Portion of Long-Term Debt $15,000 $5,000 Accounts Payable 8,482 6,822 Customer Deposits and Advance Billings 2,538 3,307 Other Accrued Liabilities 13,957 18,475 Liabilities of Discontinued Operations 122 604 Current Liabilities 40,099 34,208 Long-Term Debt 40,000 65,000 Deferred Credits and Other Liabilities 45,441 43,196 Stockholders' Equity 195,880 188,228 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $321,420 $330,632 CT Communications, Inc. Customer Information December 31, December 31, % 2005 2004 Change ILEC Access Lines Business Lines 28,263 28,710 (1.6%) Residential Lines 81,854 84,206 (2.8%) Total ILEC Access Lines 110,117 112,916 (2.5%) CLEC Access Lines 32,546 31,718 2.6% Greenfield Access Lines 14,929 12,975 15.1% Total Wired Access Lines 157,592 157,609 (0.0%) Wireless Subscribers 46,138 43,213 6.8% Long Distance Lines In ILEC 84,933 84,773 - In CLEC 24,937 23,723 5.1% In Greenfield 8,603 6,877 25.1% Total Long Distance Lines 118,473 115,373 2.7% Internet Access Customers Dial-Up 6,522 9,041 (27.9%) DSL 19,507 13,887 40.5% High Speed 693 606 14.4% Total Internet Access Customers 26,722 23,534 13.5% Greenfield Projects Projected Lines in Marketable Total Service Lines Projects By Year Signed Previous Years 9,470 27,000 51 2002 3,951 13,000 24 2003 948 5,000 18 2004 514 4,000 12 2005 46 4,000 13 Total 14,929 53,000 118 By Type Mall 2,631 3,000 3 Single Family Homes 8,615 37,000 65 Multi-Dwelling Units 2,915 12,000 41 Business 768 1,000 9 Total 14,929 53,000 118 CT Communications, Inc. Other Selected Financial Data (Unaudited, in thousands) Capital Expenditures Three Months Twelve Months Ended Dec. 31, Ended Dec. 31, 2005 2004 2005 2004 ILEC $2,815 $6,431 $14,943 $16,204 Wireless 518 325 2,210 2,229 CLEC 491 244 1,499 784 Greenfield 2,156 2,174 6,214 5,315 Internet 279 296 1,229 1,380 Other 260 433 999 1,285 Total $6,519 $9,903 $27,094 $27,197 % of Revenue 14.7% 23.9% 15.8% 16.6% Depreciation Three Months Twelve Months Ended Dec. 31, Ended Dec. 31, 2005 2004 2005 2004 ILEC $5,151 $4,766 $20,429 $18,925 Wireless 697 494 2,378 1,930 CLEC 648 421 2,546 2,309 Greenfield 909 1,035 3,427 3,274 Internet 396 617 1,761 2,954 Other 334 339 1,342 1,378 Total $8,135 $7,672 $31,883 $30,770 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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