CTCI CT Communications (MM)

CONCORD, N.C., Oct. 26 /PRNewswire-FirstCall/ -- Announcement Highlights * 20% increase in quarterly common stock dividend to $0.12 per share * Net income increased 8.1% to $5.1 million vs. year ago quarter * DSL subscribers increased 37% vs. year ago quarter * Internet Services operating margin increased to 30% * Operating revenue and income up 3.7% and 5.1% year-to-date, respectively, vs. same period last year CT Communications, Inc. (NASDAQ:CTCI) announced a 20% increase in its regular quarterly common stock dividend to $0.12 per share. The new dividend is payable on December 15, 2006 to all shareholders of record at the close of business on December 1, 2006, and represents the third increase in dividends in the past twenty-four months. Third Quarter 2006 Consolidated Results Consolidated operating revenue for the quarter ended September 30, 2006 increased to $45.0 million compared to $44.9 million reported in the third quarter of 2005. Customer recurring revenue increased $0.9 million, or 3.4% from the third quarter of 2005, but was offset by a reduction in telephone system sales. The third quarter of last year included a record $2.1 million in telephone system sales, or $0.9 million higher than the $1.2 million recorded in the third quarter of 2006. The growth in customer recurring revenue was driven by a 37% increase in DSL customers, a 14% increase in Greenfield access lines and an 8% increase in Wireless subscribers. During the third quarter of 2006, cable company telephone service was introduced in the ILEC service area. In addition, the Company disconnected 384 access lines related to certain transport efficiency initiatives in the Company's Internet and Data business. After adjustment for the Internet and Data business lines, ILEC net line losses increased by 328 lines compared to the same quarter last year. Operating expense in the third quarter of 2006 increased 1.3% to $38.4 million from $37.9 million in the third quarter of 2005. The increase in operating expense was primarily due to a $0.4 million increase in selling expense driven by an increase in marketing expense associated with the entrance of cable telephone competition in the Company's ILEC service territory, as well as commissions related to our Wireless renewal and retention programs. Although operating income decreased 6.1% to $6.6 million in the third quarter of 2006, operating margin improved sequentially from the second quarter of 2006 to 14.8%. Other income in the third quarter of 2006 increased $0.6 million to $1.3 million compared to the same period in 2005. During the third quarter of 2006 the Company recorded $1.2 million of interest income associated with the Company's short-term investments and a $0.8 million gain on the sale of Palmetto MobileNet ("PMN"). The Company received a final cash payment of $4.2 million from the sale of PMN. During the third quarter of 2006 the Company settled certain State of North Carolina tax credits that lowered tax expense $0.2 million for the quarter. Net income for the third quarter of 2006 was $5.1 million, or $0.26 per diluted common share, compared to $4.7 million, or $0.25 per diluted common share in the third quarter of 2005. Year-to-Date Consolidated Results Consolidated operating revenue for the nine months ended September 30, 2006 increased 3.7% to $132.1 million compared to $127.4 million in the same period last year. The increase in operating revenue was primarily driven by a $2.2 million increase in customer recurring revenue, a $0.6 million increase in roaming and settlement revenue and a $1.6 million increase in access and interconnection revenue. Operating expense for the nine months ended September 30, 2006 increased 3.5% to $115.6 million compared to $111.6 million in the same period last year. The increase in operating expense was mainly due to increases in marketing expense, 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 nine months ended September 30, 2006 increased 5.1% to $16.5 million compared to $15.7 million in the same period last year. Net income for the nine months ended September 30, 2006 was $66.5 million, or $3.38 per diluted common share, compared to $10.7 million, or $0.56 per diluted common share for the same period last year. Included in net income for the nine months ended September 30, 2006 was $54.2 million, or $2.76 per diluted common share, related to the sale of PMN's interests in ten wireless partnerships. Excluding the PMN transaction, earnings per share increased 10.7% to $0.62 per diluted common share from the same nine-month period last year. Third Quarter 2006 Results by Business Unit * ILEC - ("Concord Telephone") Concord Telephone's operating revenue in the third quarter of 2006 decreased 3.3% to $24.4 million from $25.2 million in the same quarter last year. The decrease in operating revenue primarily related to a $0.9 million decrease in telephone system sales compared to the prior year period that included record sales levels due to several large system sales. Operating expense for the third quarter of 2006 decreased 1.9% to $17.9 million from $18.2 million in the third quarter of 2005. The reduction in operating expense was mainly due to a decrease in cost of sales expense related to the lower level of telephone system sales. Operating income for the third quarter of 2006 decreased to $6.6 million from $7.0 million in the same period last year. Operating margin on a sequential quarter basis improved to 26.8% in the third quarter of 2006, which is also an improvement over the year to date 2006 operating margin of 23.7%. Concord Telephone ended the third quarter of 2006 with 107,920 access lines in service. * Wireless Service - ("Wireless") Wireless operating revenue of $9.5 million in the third quarter of 2006 was relatively flat compared to the same period in 2005. Customer recurring revenue increased $0.2 million, but was offset by a decrease in roaming and settlement revenue related to certain rate reductions. Operating expense in the third quarter of 2006 increased $0.7 million to $9.1 million compared to the third quarter of 2005. The increase in operating expense was primarily attributable to a $0.4 million increase in network expense driven by higher network usage, as well as a $0.2 million increase in commission expense associated with retention and contract renewal programs targeted to reduce customer churn. Operating income in the third quarter of 2006 decreased to $0.4 million from $1.1 million in the same period last year. Wireless ended the third quarter of 2006 with 48,706 subscribers, an 8% increase in customers compared to the third quarter of 2005. Customer churn in the third quarter of 2006 improved to 1.6% from 1.7% in the third quarter of 2005. * CLEC CLEC operating revenue in the third quarter of 2006 increased $0.2 million to $5.0 million compared to the third quarter of 2005. The increase in operating revenue was mainly due to a $0.2 million increase in access and interconnection revenue related to the growth in CLEC lines. The operating loss for the third quarter of 2006 was $0.1 million compared to $0.3 million in the same period last year. CLEC ended the third quarter of 2006 with 34,868 access lines compared to 31,853 access lines at the end of the same quarter last year. * Greenfield Greenfield's operating revenue in the third quarter of 2006 increased 9.1% to $2.7 million compared to the third quarter of 2005. The increase in operating revenue was attributable to growth in customer recurring revenue driven by a 14% increase in access lines. Operating expense in the third quarter of 2006 increased $0.2 million to $3.3 million compared to the same period last year, due primarily to a $0.2 million increase in depreciation expense. Operating loss was $0.6 million for the third quarter of 2006 and 2005. Greenfield ended the third quarter of 2006 with 16,361 access lines compared to 14,387 access lines in the third quarter of 2005. As of September 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 third quarter of 2006 increased 18.4% to $3.5 million from $2.9 million in the same period last year, while operating expense decreased 2.3% to $2.4 million from the same quarter last year. DSL revenue increased $0.6 million, or 29.8% to $2.5 million. Operating income in the third quarter of 2006 increased to $1.0 million from $0.4 million in the same quarter last year. CTC Internet Services ended the third quarter of 2006 with 24,544 DSL customers, an increase of 6,623 customers compared to the third quarter of 2005. Dial-up customers declined to 5,132, while high-speed customers increased to 812 at September 30, 2006. Future Period Guidance We currently expect operating results to approximate the following during these future periods: * 4th Quarter 2006 - Revenue of $43.0 to $44.0 million - Operating income of $6.0 to $6.5 million - Depreciation expense of $8.0 to $8.1 million - Diluted earnings per share of $0.20 to $0.22 - Capital expenditures of approximately $13 to $15 million * Full Year 2006 - Revenue of $175.0 to $176.0 million - Operating income of $22.5 to $23.0 million - Depreciation expense of $32.0 to $32.2 million - Diluted earnings per share of $0.82 to $0.84, excluding $2.73 related to the estimated full-year impact of the PMN transaction, based on projected full-year diluted weighted average shares outstanding - Capital expenditures of approximately $37 to $39 million CT Communications will host a conference call to discuss the results of the third quarter on Friday, October 27, 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 November 30, 2006. Additionally, a replay of the call will be available until 5:00 PM ET on Friday, November 3, 2006 at 800-633-8284. Enter access number 21307434. CT Communications, Inc., headquartered in Concord, N.C., 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 broadband high-speed data services, local and long- distance telephone services, and digital wireless voice and data 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 September 30, % 2006 2005 Change Operating Revenue ILEC $24,406 $25,237 (3.3%) Wireless 9,459 9,521 (0.7%) CLEC 4,977 4,785 4.0% Greenfield 2,686 2,463 9.1% Internet & Data 3,478 2,937 18.4% Total Operating Revenue 45,006 44,943 0.1% Operating Expense ILEC 17,854 18,194 (1.9%) Wireless 9,077 8,391 8.2% CLEC 5,074 5,113 (0.8%) Greenfield 3,273 3,075 6.4% Internet & Data 2,434 2,492 (2.3%) Other 648 600 8.0% Total Operating Expense 38,360 37,865 1.3% Operating Income 6,646 7,078 (6.1%) Other Income (Expense) Investment, Equity Method - 1,434 Gains, Interest, Dividends 2,020 396 Other Expenses, Principally Interest (721) (1,162) Total Other Income (Expense) 1,299 668 Pre-Tax Income 7,945 7,746 Income Tax Expense 2,825 3,010 Net Income $5,120 $4,736 Diluted Weighted Average Shares 20,046 18,975 Diluted Earnings Per Share $0.26 $0.25 CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Nine Months Ended September 30, % 2006 2005 Change Operating Revenue ILEC $71,551 $69,912 2.3% Wireless 28,231 26,976 4.7% CLEC 14,370 14,641 (1.9%) Greenfield 7,756 7,181 8.0% Internet & Data 10,194 8,663 17.7% Total Operating Revenue 132,102 127,373 3.7% Operating Expense ILEC 54,612 53,349 2.4% Wireless 26,553 24,632 7.8% CLEC 15,330 15,356 (0.2%) Greenfield 9,901 9,052 9.4% Internet & Data 7,334 7,606 (3.6%) Other 1,843 1,652 11.6% Total Operating Expense 115,573 111,647 3.5% Operating Income 16,529 15,726 5.1% Other Income (Expense) Investment, Equity Method 90,103 3,982 Gains, Interest, Dividends 4,778 2,073 Impairment on Investments (876) (529) Other Expenses, Principally Interest (2,593) (3,693) Total Other Income (Expense) 91,412 1,833 Pre-Tax Income 107,941 17,559 Income Tax Expense 41,439 6,881 Net Income $66,502 $10,678 Diluted Weighted Average Shares 19,652 18,986 Diluted Earnings Per Share $3.38 $0.56 CT Communications, Inc. Consolidated Balance Sheets (Unaudited, in thousands) September 30, December 31, 2006 2005 ASSETS Cash and Cash Equivalents $22,280 $23,011 Short-term Investments 94,567 - Accounts Receivable and Unbilled Revenue, Net 15,722 16,336 Wireless Spectrum Held-for-Sale - 15,646 Other Assets 9,361 7,220 Current Assets 141,930 62,213 Investment Securities 5,345 5,845 Investments in Unconsolidated Companies 3,823 15,618 Property, Plant and Equipment, Net 199,994 200,179 Other Assets 38,497 37,565 TOTAL ASSETS $389,589 $321,420 LIABILITIES AND STOCKHOLDERS' EQUITY Current Portion of Long-Term Debt $6,250 $15,000 Accounts Payable 8,164 8,482 Customer Deposits and Advance Billings 2,283 2,538 Income Taxes Payable 7,754 2,107 Other Accrued Liabilities 12,208 11,814 Current Liabilities 36,659 39,941 Long-Term Debt 36,250 40,000 Deferred Credits and Other Liabilities 43,937 45,599 Stockholders' Equity 272,743 195,880 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $389,589 $321,420 CT Communications, Inc. Customer Information September 30, September 30, % 2006 2005 Change ILEC Access Lines Business Lines 28,164 28,532 (1.3%) Residential Lines 79,756 82,511 (3.3%) Total ILEC Access Lines 107,920 111,043 (2.8%) CLEC Access Lines 34,868 31,853 9.5% Greenfield Access Lines 16,361 14,387 13.7% Total Wired Access Lines 159,149 157,283 1.2% Wireless Subscribers 48,706 45,285 7.6% Long Distance Lines In ILEC 86,279 84,723 1.8% In CLEC 23,503 24,723 (4.9%) In Greenfield 10,158 8,080 25.7% Total Long Distance Lines 119,940 117,526 2.1% Internet Access Customers Dial-Up 5,132 7,197 (28.7%) DSL 24,544 17,921 37.0% High Speed 812 649 25.1% Total Internet Access Customers 30,488 25,767 18.3% Greenfield Projects Projected Lines in Marketable Total Service Lines Projects By Year Signed Previous Years 14,155 40,000 75 2003 1,097 5,000 18 2004 853 4,000 12 2005 129 4,500 13 2006 127 1,000 6 Total 16,361 54,500 124 By Type Mall 2,608 3,000 3 Single Family Homes 9,738 38,500 69 Multi-Dwelling Units 2,877 11,500 41 Business 1,138 1,500 11 Total 16,361 54,500 124 CT Communications, Inc. Other Selected Financial Data (Unaudited, in thousands) Capital Expenditures Three Months Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 ILEC $5,732 $3,921 $12,367 $12,128 Wireless 444 225 1,131 1,692 CLEC 658 348 2,341 1,008 Greenfield 1,371 1,055 4,305 4,058 Internet 348 352 905 950 Other 2,545 326 3,100 739 Total $11,098 $6,227 $24,149 $20,575 % of Revenue 24.7% 13.9% 18.3% 16.2% Depreciation Three Months Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 ILEC $5,058 $5,040 $15,365 $15,278 Wireless 651 601 1,927 1,681 CLEC 681 635 2,016 1,898 Greenfield 1,034 868 3,003 2,518 Internet 302 431 1,005 1,365 Other 226 334 729 1,008 Total $7,952 $7,909 $24,045 $23,748 Reconciliation of Reported Results to Normalized Results For the nine months ended September 30, 2006 Palmetto GAAP MobileNet* Normalized Operating Revenue $132,102 $- $132,102 Operating Expense 115,573 - 115,573 Operating Income 16,529 - 16,529 Other Income (Expense) 91,412 (89,164) 2,248 Pre-Tax Income 107,941 (89,164) 18,777 Income Tax Expense 41,439 (34,943) 6,496 Net Income $66,502 $(54,221) $12,281 Diluted EPS $3.38 $(2.76) $0.62 * Equity income related to the March 2006 sale of PMN's ownership interests in ten wireless partnerships. 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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