CTCI CT Communications (MM)

CONCORD, N.C., July 27 /PRNewswire-FirstCall/ -- Second Quarter 2006 Highlights - Company received $16.0 million from Clearwire wireless spectrum transaction - Operating revenue increased 7.1% to $44.0 million vs. year ago quarter - Operating income increased 34.3% to $4.8 million vs. year ago quarter - Net income increased 31.8% to $3.9 million vs. year ago quarter - DSL subscribers increased 40% vs. year ago quarter - Wireless customer churn improved to 1.3% while subscribers increased 7% Second Quarter 2006 Consolidated Results CT Communications, Inc. (NASDAQ:CTCI) announces consolidated operating revenue for the quarter ended June 30, 2006 increased 7.1% to $44.0 million from $41.0 million in the second quarter of 2005. The increase resulted primarily from a $0.8 million increase in customer recurring revenue, a $0.4 million increase in Wireless roaming revenue and a $1.1 million increase in access and interconnection revenue. The growth in customer recurring revenue was driven by a 40% increase in DSL customers, a 15% increase in Greenfield access lines and a 7% increase in Wireless subscribers. The increase in Wireless roaming revenue was driven by higher roaming minutes of use on the Company's wireless network. Operating expense in the second quarter of 2006 increased 4.6% to $39.2 million from $37.5 million in the second quarter of 2005. The increase in operating expense was primarily attributable to a $0.9 million increase in marketing expense and to $0.7 million in non-cash compensation expense related to fair value adjustments for CTC stock units held in the Company's nonqualified deferred compensation plan. The increase in marketing expense was related to additional advertising and promotional efforts, as well as proactive retention programs in preparation for the entrance of cable telephone competition in the Company's ILEC service territory. Operating income increased 34.3% to $4.8 million in the second quarter of 2006, compared to $3.5 million in the second quarter of 2005. Other income was $1.4 million in the second quarter of 2006 and 2005. Net income for the second quarter of 2006 was $3.9 million, or $0.20 per diluted common share, compared to $3.0 million, or $0.15 per diluted common share in the second quarter of 2005. Consolidated operating revenue for the six months ended June 30, 2006 increased 5.7% to $87.1 million compared to $82.4 million in the same period last year. The increase in operating revenue was mainly driven by a $1.3 million increase in customer recurring revenue, a $0.8 million increase in roaming and settlement revenue and a $1.6 million increase in access and interconnection revenue. Operating expense for the six months ended June 30, 2006 increased 4.7% to $77.2 million compared to $73.8 million in the same period last year. The increase in operating expense was mainly due to an increase in administrative expense related to marketing, professional fees and a charge for non-cash compensation expense related to fair value adjustments for CTC stock units held in the Company's nonqualified deferred compensation plan. Operating income for the six months ended June 30, 2006 increased 14.3% to $9.9 million compared to $8.6 million in the same period last year. Net income for the six months ended June 30, 2006 was $61.4 million, or $3.17 per diluted common share, compared to $5.9 million, or $0.31 per diluted common share. Included in net income for the six months ended June 30, 2006 was $54.2 million, or $2.80 per diluted common share, related to the sale of Palmetto MobileNet's ("PMN") interests in several wireless partnerships to Alltel. Excluding the PMN transaction, diluted earnings per share increased 19.4% from the same six-month period last year. Second Quarter 2006 Results by Business Unit * ILEC - ("Concord Telephone") Concord Telephone's operating revenue in the second quarter of 2006 increased 7.1% to $23.6 million from $22.0 million in the same quarter last year. The $1.6 million increase in operating revenue was driven by a $0.9 million increase in access and interconnection revenue, a $0.4 million increase in telephone system sales and a $0.3 million increase in universal service revenue. Operating expense for the second quarter of 2006 increased 6.1% to $19.0 million from $17.9 million in the second quarter of 2005. The increase in operating expense was due to a $1.3 million increase in selling, general and administrative expense that was primarily attributable to a $0.7 million increase in personnel expense largely due to a non-cash charge for compensation expense related to fair value adjustments for CTC stock units held in the Company's nonqualified deferred compensation plan and to a $0.5 million increase in marketing expense. Operating income for the second quarter of 2006 increased to $4.6 million from $4.1 million in the same period last year. Operating margin for the second quarter of 2006 was 19.4% compared to 18.6% for the second quarter of 2005. Concord Telephone ended the second quarter of 2006 with 109,356 access lines in service, a 2.2% decrease from the second quarter of 2005. * Wireless Service - ("Wireless") Wireless operating revenue in the second quarter of 2006 increased 7.6% to $9.6 million from $9.0 million in the second quarter of 2005. The increase was attributable to a $0.3 million increase in customer recurring revenue driven by a 7% increase in Wireless subscribers, as well as a $0.4 million increase in roaming and settlement revenue. Operating expense in the second quarter of 2006 increased $0.3 million to $8.9 million compared to the second quarter of 2005. The increase in operating expense was primarily attributable to a $0.3 million increase in marketing expense and a $0.2 million increase in Wireless handset and accessories expense associated with retention and contract renewal programs targeted to reduce customer churn. Partially offsetting these expense increases was a $0.2 million reduction in roaming and settlement expense. Operating income in the second quarter of 2006 increased to $0.8 million from $0.4 million in the same period last year. Wireless ended the second quarter of 2006 with 47,932 subscribers, a 7% increase in customers compared to the second quarter of 2005. Customer churn in the second quarter of 2006 improved to 1.3% from 1.7% in the second quarter of 2005. * CLEC CLEC operating revenue in the second quarter of 2006 was $4.8 million, which was relatively flat in comparison to the same period last year. Operating revenue in the second quarter of 2006 included a $0.2 million increase in access and interconnection revenue from the recovery of previously disputed billings, but was offset by a $0.1 million decrease in customer recurring revenue. The operating loss for the second quarter of 2006 and 2005 was $0.3 million. CLEC ended the second quarter of 2006 with 34,372 access lines compared to 31,644 access lines for the same quarter last year. * Greenfield Greenfield's operating revenue in the second quarter of 2006 increased $0.1 million to $2.6 million compared to the second quarter of 2005. The increase in operating revenue was attributable to growth in customer recurring revenue driven by a 15% increase in access lines. Operating expense in the second quarter of 2006 increased $0.3 million to $3.4 million compared to the same period last year, due primarily to a $0.2 million increase in depreciation expense. Operating loss for the second quarter of 2006 was $0.8 million compared to $0.6 million in the second quarter of 2005. Greenfield ended the second quarter of 2006 with 15,895 access lines compared to 13,864 access lines in the second quarter of 2005. As of June 30, 2006 the Company had 124 Greenfield projects, which represent a potential of more than 54,500 marketable lines upon completion of the projects. * Internet & Data - ("CTC Internet Services") CTC Internet Services operating revenue in the second quarter of 2006 increased 17.3% to $3.4 million from $2.9 million in the same period last year. DSL revenue increased $0.6 million, or 32.0% to $2.5 million, while operating expense decreased 3.2% to $2.4 million from the same quarter last year. Operating income in the second quarter of 2006 increased to $1.0 million from $0.4 million in the same quarter last year. CTC Internet Services ended the second quarter of 2006 with 22,907 DSL customers, an increase of 6,573 customers compared to the second quarter of 2005. Dial-up customers declined to 5,594, while high-speed customers increased to 754 at June 30, 2006. Future Period Guidance We currently expect operating results to approximate the following during these future periods: * 3rd Quarter 2006 -- Revenue of $43.0 to $44.0 million -- Operating income of $5.5 to $6.5 million -- Depreciation expense of $8.1 to $8.3 million -- Diluted earnings per share of $0.20 to $0.22 -- Capital expenditures of $10.0 to $12.0 million * Full Year 2006 -- Revenue of $173.0 to $175.0 million -- Operating income of $21.0 to $23.0 million -- Depreciation expense of $32.5 to $33.5 million -- Diluted earnings per share of $0.71 to $0.75, excluding $2.77 related to the estimated full-year impact of the PMN transaction -- Capital expenditures of $35.5 to $39.5 million CT Communications will host a conference call to discuss the results of the second quarter on Friday, July 28, 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 August 31, 2006. Additionally, a replay of the call will be available until 5:00 PM ET on Friday, August 4, 2006 at 800-633-8284. Enter access number 21299818. 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 for the year ended December 31, 2005. CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Three Months Ended June 30, % 2006 2005 Change Operating Revenue ILEC Services $23,558 $21,996 7.1% Wireless Services 9,645 8,963 7.6% CLEC Services 4,763 4,721 0.9% Greenfield Services 2,559 2,427 5.4% Internet & Data Services 3,432 2,926 17.3% Total Operating Revenue 43,957 41,033 7.1% Operating Expense ILEC Services 18,981 17,894 6.1% Wireless Services 8,870 8,554 3.7% CLEC Services 5,049 4,992 1.1% Greenfield Services 3,351 3,014 11.2% Internet & Data Services 2,431 2,511 (3.2%) Other 511 520 (1.7%) Total Operating Expense 39,193 37,485 4.6% Operating Income 4,764 3,548 34.3% Other Income (Expense) Investment, Equity Method 263 1,305 Gains, Interest, Dividends 1,945 1,529 Impairment on Investments - (111) Other Expenses, Principally Interest (838) (1,356) Total Other Income (Expense) 1,370 1,367 Pre-Tax Income 6,134 4,915 Income Tax Expense 2,241 1,962 Net Income $3,893 $2,953 Diluted Weighted Average Shares 19,452 19,090 Diluted Earnings Per Share $0.20 $0.15 CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Six Months Ended June 30, % 2006 2005 Change Operating Revenue ILEC Services $47,145 $44,675 5.5% Wireless Services 18,772 17,455 7.5% CLEC Services 9,393 9,856 (4.7%) Greenfield Services 5,070 4,718 7.5% Internet & Data Services 6,716 5,726 17.3% Total Operating Revenue 87,096 82,430 5.7% Operating Expense ILEC Services 36,758 35,155 4.6% Wireless Services 17,476 16,241 7.6% CLEC Services 10,256 10,243 0.1% Greenfield Services 6,628 5,977 10.9% Internet & Data Services 4,900 5,114 (4.2%) Other 1,195 1,052 13.6% Total Operating Expense 77,213 73,782 4.7% Operating Income 9,883 8,648 14.3% Other Income (Expense) Investment, Equity Method 90,103 2,548 Gains, Interest, Dividends 2,758 1,677 Impairment on Investments (876) (529) Other Expenses, Principally Interest (1,872) (2,531) Total Other Income (Expense) 90,113 1,165 Pre-Tax Income 99,996 9,813 Income Tax Expense 38,614 3,871 Net Income $61,382 $5,942 Diluted Weighted Average Shares 19,359 19,035 Diluted Earnings Per Share $3.17 $0.31 CT Communications, Inc. Consolidated Balance Sheets (Unaudited, in thousands) June 30, December 31, 2006 2005 ASSETS Cash and Cash Equivalents $16,882 $23,011 Short-term Investments 94,869 - Accounts Receivable and Unbilled Revenue, Net 15,563 16,336 Wireless Spectrum Held-for-Sale - 15,646 Other Assets 8,479 7,220 Current Assets 135,793 62,213 Investment Securities 5,270 5,845 Investments in Unconsolidated Companies 7,145 15,618 Property, Plant and Equipment, Net 196,897 200,179 Other Assets 38,365 37,565 TOTAL ASSETS $383,470 $321,420 LIABILITIES AND STOCKHOLDERS' EQUITY Current Portion of Long-Term Debt $5,000 $15,000 Accounts Payable 7,877 8,482 Customer Deposits and Advance Billings 2,307 2,538 Income Taxes Payable 15,887 2,107 Other Accrued Liabilities 9,240 11,814 Current Liabilities 40,311 39,941 Long-Term Debt 37,500 40,000 Deferred Credits and Other Liabilities 45,055 45,599 Stockholders' Equity 260,604 195,880 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $383,470 $321,420 CT Communications, Inc. Customer Information June 30, June 30, % 2006 2005 Change ILEC Access Lines Business Lines 28,404 28,560 (0.5%) Residential Lines 80,952 83,207 (2.7%) Total ILEC Access Lines 109,356 111,767 (2.2%) CLEC Access Lines 34,372 31,644 8.6% Greenfield Access Lines 15,895 13,864 14.6% Total Wired Access Lines 159,623 157,275 1.5% Wireless Subscribers 47,932 44,723 7.2% Long Distance Lines In ILEC 86,422 84,774 1.9% In CLEC 23,605 24,739 (4.6%) In Greenfield 9,633 7,631 26.2% Total Long Distance Lines 119,660 117,144 2.1% Internet Access Customers Dial-Up 5,594 7,774 (28.0%) DSL 22,907 16,334 40.2% High Speed 754 632 19.3% Total Internet Access Customers 29,255 24,740 18.2% Greenfield Projects Projected Lines in Marketable Total Service Lines Projects By Year Signed Previous Years 13,918 40,000 75 2003 1,070 5,000 18 2004 743 4,000 12 2005 100 4,500 13 2006 64 1,000 6 Total 15,895 54,500 124 By Type Mall 2,591 3,000 3 Single Family Homes 9,412 38,500 69 Multi-Dwelling Units 2,844 11,500 41 Business 1,048 1,500 11 Total 15,895 54,500 124 CT Communications, Inc. Other Selected Financial Data (Unaudited, in thousands) Three Months Six Months Capital Expenditures Ended June 30, Ended June 30, 2006 2005 2006 2005 ILEC $3,077 $3,748 $6,635 $8,207 Wireless 491 374 687 1,467 CLEC 441 437 1,683 660 Greenfield 1,342 1,655 2,934 3,003 Internet 307 170 557 598 Other 406 206 555 413 Total $6,064 $6,590 $13,051 $14,348 % of Revenue 13.8% 16.1% 15.0% 17.4% Depreciation Three Months Six Months Ended June 30, Ended June 30, 2006 2005 2006 2005 ILEC $5,105 $5,129 $10,307 $10,238 Wireless 641 576 1,276 1,080 CLEC 677 634 1,335 1,263 Greenfield 996 840 1,969 1,650 Internet 329 455 703 934 Other 225 339 503 674 Total $7,973 $7,973 $16,093 $15,839 Reconciliation of Reported Results to Normalized Results For the six months ended June 30, 2006 Palmetto GAAP MobileNet Normalized Operating Revenue $87,096 $- $87,096 Operating Expense 77,213 - 77,213 Operating Income 9,883 - 9,883 Other Income (Expense) 90,113 (89,164) 949 Pre-Tax Income 99,996 (89,164) 10,832 Income Tax Expense 38,614 (34,943) 3,671 Net Income $61,382 $(54,221) $7,161 Diluted EPS $3.17 $(2.80) $0.37 DATASOURCE: CT Communications, Inc. CONTACT: Jim Hausman, +1-704-722-2410, or Ron Marino, +1-704-722-2212, both of CT Communications, Inc. Web site: http://www.ctc.net/

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