CTCI CT Communications (MM)

CONCORD, N.C., March 1 /PRNewswire-FirstCall/ -- Fourth Quarter 2006 Highlights - Net income increased 33.3% to $5.2 million, or $0.26 per diluted share - Operating income increased 23.9% to $7.7 million - Operating revenue of $44.8 million - 32% increase in Digital Subscriber Line "DSL" customers - Over 9,000 ILEC homes passed with fiber facilities - 11% increase in Greenfield access lines Total Year 2006 Highlights - Record profits with net income of $71.7 million - Revenue increases to $176.9 million with operating income up 10.5% Fourth Quarter 2006 Results CT Communications, Inc. (NASDAQ:CTCI) announces net income of $5.2 million for the fourth quarter of 2006, a 33.3% increase over the same period last year. Diluted earnings per common share increased to $0.26 per share in the fourth quarter of 2006 from $0.20 per share in the same quarter last year. Operating revenue for the fourth quarter of 2006 was $44.8 million, an increase of $0.5 million when compared to the fourth quarter of 2005. The increase in operating revenue was driven by a $1.5 million increase in customer recurring revenue due to strong customer growth in several of the Company's businesses. DSL customers increased 32%, Wireless subscribers increased 7% and Greenfield access lines increased 11% compared to the end of 2005. In addition to the growth in customer recurring revenue, revenue associated with telephone system sales and universal service each increased $0.3 million compared to the prior year quarter. Access and interconnection revenue declined from the fourth quarter of 2005, which included the recognition of $1.4 million related to previously disputed carrier access and interconnection billings. The fourth quarter of 2006 represented the second quarter of cable company telephone service competition in the Company's ILEC service territory. ILEC average monthly churn during the fourth quarter was 1.3% compared to 1.1% in the same period last year. ILEC access lines decreased 3.4% from the end of the fourth quarter last year. Operating expense in the fourth quarter of 2006 was $37.0 million, a decrease of $1.0 million, or 2.7%, compared to the fourth quarter of 2005. The decrease in operating expense was attributable to a $0.4 million increase in capitalized personnel costs associated with the Company's video initiative, a $0.3 million decrease in personnel and benefits expense, a $0.3 million decrease in access and interconnection expense and a $0.3 million favorable settlement of disputed franchise taxes. Partially offsetting these expense reductions was a $0.3 million increase in selling expenses related to customer retention and contract renewal efforts. Operating income increased $1.5 million to $7.7 million in the fourth quarter of 2006, a 23.9% increase compared to the fourth quarter of 2005. Operating margin was 17.3% for the fourth quarter of 2006 and 14.1% for the fourth quarter of 2005. Other income in the fourth quarter of 2006 increased to $0.6 million primarily due to a $0.3 million increase in investment income and a $0.3 million decrease in interest expense. Full Year 2006 Results Operating revenue for the year ended December 31, 2006 increased 3.0% to $176.9 million compared to $171.7 million for the year ended December 31, 2005. The $5.2 million increase in operating revenue was mainly due to a $3.8 million increase in customer recurring revenue, a $0.8 million increase in universal service revenue and a $0.4 million increase in Wireless roaming and settlement revenue. Operating expense increased $2.9 million to $152.6 million for the year ended December 31, 2006, compared to 2005. The increase in operating expense was mainly attributable to a $1.6 million increase in selling expense and a $0.6 million increase in Wireless handset and accessory expense. The increase in selling expense was driven by an increase in marketing expense associated with the Company's plans to address cable telephone competition in the Company's ILEC service territory, as well as commissions related to our Wireless renewal and retention programs. The increase in Wireless handset and accessory expense was primarily due to the Company's contract renewal program. Operating income increased 10.5% to $24.3 million for the year ended December 31, 2006, compared to the year ended December 31, 2005. The increase in operating income was primarily related to the growth in the Company's Internet and Data Services segment, which recorded a 160% or $2.6 million increase in operating income for 2006. Net income for the year ended December 31, 2006 was $71.7 million, or $3.62 per diluted common share, compared to $14.5 million, or $0.77 per diluted common share for the same period last year. Included in net income for the year ending December 31, 2006 was $54.2 million, or $2.74 per diluted common share, related to the sale of Palmetto MobileNet's ("PMN") interests in ten wireless partnerships. Excluding the PMN transaction, earnings per share increased 14.3% to $0.88 per diluted common share from the same period last year. Fourth Quarter 2006 Results by Business Unit - ILEC -- ("Concord Telephone") Concord Telephone's operating revenue decreased $0.9 million to $23.7 million in the fourth quarter of 2006 compared to the same quarter in 2005. The decrease in operating revenue was mainly due to a $1.4 million decrease in access and interconnection revenue that was partially offset by a $0.3 million increase in both telephone system sales and universal service revenue. In the fourth quarter last year the ILEC recorded revenue of $1.4 million from the settlement and recovery of previously disputed carrier access and interconnection billings. Operating expense decreased 1.9% to $17.3 million in the fourth quarter of 2006 compared to the same quarter in 2005. The $0.3 million decrease in operating expense was primarily attributable to a $0.7 million decrease in cost of service that was partially offset by a $0.5 million increase in selling, general and administrative expense. The decrease in cost of service was largely due to a $0.4 million decrease in personnel expense and a $0.2 million decrease in access and interconnection expense. Operating income decreased 8.7% to $6.4 million in the fourth quarter of 2006 compared to the same period last year. This resulted in an operating margin of 26.8% for the fourth quarter of 2006 compared to 28.2% for the fourth quarter of 2005. Concord Telephone ended 2006 with 106,420 access lines in service, a 3.4% decrease from the end of 2005. The Company is making final preparations for the launch of a video trial to select customers in the ILEC service territory during the first quarter of 2007. The video service offered to customers participating in this trial will include a fully competitive channel line-up, including high definition programming and digital video recording ("DVR") capabilities. The trial participants will have video, data and voice services delivered through fiber optic facilities, which are part of the fiber initiative that passed 9,000 ILEC homes at the end of 2006. Initial broadband service download speeds for customers in this trial will be up to 15 Mbps, but future product capabilities will likely move well beyond this rate. - Wireless Service -- ("Wireless") Wireless operating revenue increased 6.1% to $10.0 million in the fourth quarter of 2006 compared to the same period in 2005. The $0.6 million increase in operating revenue was driven by a $0.8 million increase in customer recurring revenue associated with a 7% growth in subscribers, but was partially offset by a decrease in settlement and roaming revenue. Operating expense increased $0.3 million, or 3.6%, from the same period last year primarily due to a $0.2 million increase in network operations expense related to higher minutes of use on the Company's wireless network. Operating income increased $0.3 million to $1.2 million in the fourth quarter of 2006 compared to the same period last year. Wireless ended 2006 with 49,157 subscribers, an increase of 3,019, or 7%, compared to the end of 2005. - CLEC -- ("CTC Exchange Services") CTC Exchange Services' operating revenue increased 1.9% to $4.7 million in the fourth quarter of 2006 compared to the same quarter last year. The increase in operating revenue was due to a $0.1 million increase in access and interconnection revenue related to the growth in access lines. Operating expense decreased 5.5% to $4.9 million in the fourth quarter of 2006 compared to the same period last year. The decrease in operating expense was largely due to a $0.4 million decrease in cost of service, which was attributable to network efficiency initiatives and a decrease in personnel expense. Operating loss for the fourth quarter of 2006 was $0.2 million compared to an operating loss of $0.6 million for the fourth quarter of 2005. CTC Exchange Services ended 2006 with 35,615 access lines compared to 32,546 access lines at the end of last year. - Greenfield Greenfield's operating revenue increased 9.0% to $2.7 million in the fourth quarter of 2006 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 an 11% increase in access lines. Operating expense decreased 2.0% to $3.3 million in the fourth quarter of 2006 compared to the same period last year. Operating loss for the fourth quarter of 2006 declined to $0.6 million, a 31.5% improvement from the $0.9 million operating loss for the fourth quarter of 2005. Greenfield ended 2006 with 16,619 access lines, which represented an increase of 11% from the end of 2005. The Company continues to focus on Greenfield opportunities that leverage Company- owned network infrastructure to minimize the cost to serve additional customers. As of December 31, 2006, the Company had 126 Greenfield projects, which in total represent approximately 55,000 marketable lines at the completion of the projects. - Internet & Data -- ("CTC Internet Services") CTC Internet Services' operating revenue increased 17.4% to $3.6 million in the fourth quarter of 2006 compared to the same period last year. DSL and High-Speed revenue increased $0.6 million from the same quarter last year, driven by the 32% and 21% growth in DSL and High-Speed customers, respectively, and was partially offset by lower dial-up customer revenue. In the fourth quarter of 2006, the Company continued to experience strong demand for broadband services with over 1,100 net DSL customers added in the quarter. CTC Internet Services ended the year with 25,704 DSL customers, an increase of 6,197 customers compared to the end of 2005. Operating expense decreased 8.4% to $2.3 million in the fourth quarter of 2006 compared to the same period last year. Operating income for the fourth quarter increased $0.8 million, or 138.4%, to $1.3 million, compared to the same period in 2005. Future Period Guidance We currently expect operating results to approximate the following during these future periods: - 1st Quarter 2007 - Revenue of $44.0 to $45.0 million - Operating income of $6.3 to $6.7 million - Depreciation expense of $7.9 to $8.1 million - Diluted earnings per share of $0.21 to $0.23 - Capital expenditures of $9.5 to $11.5 million - Full Year 2007 - Revenue of $176.0 to $180.0 million - Operating income of $22.0 to $26.0 million - Depreciation expense of $31.5 to $33.5 million - Diluted earnings per share of $0.79 to $0.83 - Capital expenditures of $32 to $35 million CT Communications will host a conference call to discuss the results of the fourth quarter and full year 2006 on Friday, March 2, 2007 at 10:00 AM ET. You are invited to listen live to the conference call 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, 2007. Additionally, a replay of the call will be available until 5:00 PM ET on Friday, March 9, 2007 at 800-633-8284. Enter access number 21330760. 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 Internet 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, 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, 2006. 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 December 31, % 2006 2005 Change Operating Revenue ILEC Services $23,700 $24,649 (3.9%) Wireless Services 10,024 9,450 6.1% CLEC Services 4,721 4,631 1.9% Greenfield Services 2,677 2,455 9.0% Internet & Data Services 3,647 3,107 17.4% Total Operating Revenue 44,769 44,292 1.1% Operating Expense ILEC Services 17,347 17,690 (1.9%) Wireless Services 8,871 8,562 3.6% CLEC Services 4,897 5,182 (5.5%) Greenfield Services 3,299 3,365 (2.0%) Internet & Data Services 2,344 2,561 (8.5%) Other 279 694 (59.8%) Total Operating Expense 37,037 38,054 (2.7%) Operating Income 7,732 6,238 23.9% Other Income (Expense) Investment, Equity Method (1) 293 Gains, Interest, Dividends 1,483 916 Impairment on Investments - (17) Other Expenses, Principally Interest (856) (1,132) Total Other Income (Expense) 626 60 Pre-Tax Income 8,358 6,298 Income Tax Expense 3,199 2,427 Net Income $5,159 $3,871 Diluted Weighted Average Shares 20,208 18,967 Diluted Earnings Per Share $0.26 $0.20 CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Twelve Months Ended December 31, % 2006 2005 Change Operating Revenue ILEC Services $95,251 $94,561 0.7% Wireless Services 38,255 36,426 5.0% CLEC Services 19,091 19,272 (0.9%) Greenfield Services 10,433 9,636 8.3% Internet & Data Services 13,841 11,770 17.6% Total Operating Revenue 176,871 171,665 3.0% Operating Expense ILEC Services 71,959 71,039 1.3% Wireless Services 35,424 33,194 6.7% CLEC Services 20,227 20,538 (1.5%) Greenfield Services 13,200 12,417 6.3% Internet & Data Services 9,678 10,167 (4.8%) Other 2,122 2,346 (9.5%) Total Operating Expense 152,610 149,701 1.9% Operating Income 24,261 21,964 10.5% Other Income (Expense) Investment, Equity Method 90,102 4,275 Gains, Interest, Dividends 6,261 2,989 Impairment on Investments (876) (546) Other Expenses, Principally Interest (3,449) (4,825) Total Other Income 92,038 1,893 Pre-Tax Income 116,299 23,857 Income Tax Expense 44,638 9,308 Net Income $71,661 $14,549 Diluted Weighted Average Shares 19,818 18,947 Diluted Earnings Per Share $3.62 $0.77 CT Communications, Inc. Consolidated Balance Sheets (Unaudited, in thousands) December 31, December 31, 2006 2005 ASSETS Cash and Cash Equivalents $14,063 $23,011 Short-term Investments 86,741 - Accounts Receivable and Unbilled Revenue, Net 16,419 16,336 Wireless Spectrum Held-for-Sale - 15,646 Other Assets 11,775 7,220 Current Assets 128,998 62,213 Investment Securities 5,381 5,845 Investments in Unconsolidated Companies 3,670 15,618 Property, Plant and Equipment, Net 209,908 200,179 Other Assets 39,401 37,565 TOTAL ASSETS $387,358 $321,420 LIABILITIES AND STOCKHOLDERS' EQUITY Current Portion of Long-Term Debt $5,000 $15,000 Accounts Payable 12,553 8,482 Customer Deposits and Advance Billings 4,618 2,538 Other Accrued Liabilities 12,714 13,921 Current Liabilities 34,885 39,941 Long-Term Debt 35,000 40,000 Deferred Credits and Other Liabilities 38,095 45,599 Stockholders' Equity 279,378 195,880 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $387,358 $321,420 CT Communications, Inc. Customer Information December 31, December 31, % 2006 2005 Change ILEC Access Lines Business Lines 28,122 28,263 (0.5%) Residential Lines 78,298 81,854 (4.3%) Total ILEC Access Lines 106,420 110,117 (3.4%) CLEC Access Lines 35,615 32,546 9.4% Greenfield Access Lines 16,619 14,929 11.3% Total Wired Access Lines 158,654 157,592 0.7% Wireless Subscribers 49,157 46,138 6.5% Long Distance Lines In ILEC 85,803 84,933 1.0% In CLEC 24,213 24,937 (2.9%) In Greenfield 10,424 8,603 21.2% Total Long Distance Lines 120,440 118,473 1.7% Internet Access Customers Dial-Up 4,717 6,522 (27.7%) DSL 25,704 19,507 31.8% High Speed 835 693 20.5% Total Internet Access Customers 31,256 26,722 17.0% Greenfield Projects Projected Lines in Marketable Total Service Lines Projects By Year Signed Previous Years 14,247 40,000 75 2003 1,113 5,000 18 2004 920 4,000 12 2005 160 4,000 13 2006 179 2,000 8 Total 16,619 55,000 126 By Type Mall 2,637 2,800 3 Single Family Homes 9,889 38,600 69 Multi-Dwelling Units 2,849 11,900 42 Business 1,244 1,700 12 Total 16,619 55,000 126 CT Communications, Inc. Other Selected Financial Data (Unaudited, in thousands) Capital Expenditures Three Months Twelve Months Ended Ended December 31, December 31, 2006 2005 2006 2005 ILEC $12,932 $2,815 $25,299 $14,943 Wireless 658 518 1,789 2,210 CLEC 311 491 2,652 1,499 Greenfield 1,734 2,156 6,039 6,214 Internet 351 279 1,256 1,229 Other 1,899 260 4,999 999 Total $17,885 $6,519 $42,034 $27,094 % of Revenue 39.9% 14.7% 23.8% 15.8% Depreciation Three Months Twelve Months Ended Ended December 31, December 31, 2006 2005 2006 2005 ILEC $4,988 $5,151 $20,353 $20,429 Wireless 669 697 2,596 2,378 CLEC 693 648 2,709 2,546 Greenfield 1,042 909 4,045 3,427 Internet 285 396 1,290 1,761 Other 225 334 954 1,342 Total $7,902 $8,135 $31,947 $31,883 Reconciliation of Reported Results to Normalized Results For the year ended December 31, 2006 Palmetto GAAP MobileNet* Normalized Operating Revenue $176,871 $- $176,871 Operating Expense 152,610 - 152,610 Operating Income 24,261 - 24,261 Other Income (Expense) 92,038 (89,164) 2,874 Pre-Tax Income 116,299 (89,164) 27,135 Income Tax Expense 44,638 (34,943) 9,695 Net Income $71,661 $(54,221) $17,440 Diluted EPS $3.62 $(2.74) $0.88 * 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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