CTCI CT Communications (MM)

CONCORD, N.C., Aug. 2 /PRNewswire-FirstCall/ -- Second Quarter 2007 Highlights * CT Communications, Inc. announces plan to merge with Windstream Corporation and schedules a special meeting on August 23, 2007 for its shareholders to vote on the proposal to approve the merger agreement * Operating revenue increased 5% to $46.3 million vs. year ago quarter * 25% increase in broadband customers from second quarter last year Second Quarter 2007 Results CT Communications, Inc. (NASDAQ:CTCI) announces operating revenue of $46.3 million for the second quarter of 2007, an increase of 5.2% compared to the second quarter of 2006. The increase in operating revenue was driven by a $0.7 million increase in customer recurring revenue due to strong customer growth in several of the Company's businesses. Broadband customers increased 25%, Wireless subscribers increased 5% and Greenfield access lines increased 6% compared to the end of the second quarter of 2006. In addition, universal service revenue increased $1.2 million compared to the second quarter last year due to a true-up of the 2006 cost study and higher 2007 recoveries based on current cost study projections. Operating income was $4.7 million in the second quarter of 2007 compared to $4.8 million in the second quarter of 2006. Operating expense in the second quarter of 2007 increased $2.4 million, or 6.0%, to $41.6 million compared to the same period last year. The increase in operating expense was primarily attributable to $1.7 million in expenses related to the proposed Windstream merger and a loss of $0.3 million related to the replacement of certain wireless cell site equipment. Included in the second quarter 2007 merger expenses was $0.8 million in stock compensation expense related to market value adjustments for stock units held in the Company's deferred compensation plan. Other income was $1.5 million for the second quarter of 2007 compared to $1.4 million for the same period in 2006. The second quarter of 2007 and 2006 include an approximate $1.0 million and $0.8 million gain on the sale of an investment security, respectively. Net income for the second quarter of 2007 and 2006 was $4.0 million and $3.9 million, respectively. Diluted earnings per share were $0.20 in the second quarter of 2007 and 2006. Expenses related to the proposed Windstream merger transaction were $0.05 per diluted share in the second quarter of 2007. Consolidated operating revenue for the six months ended June 30, 2007 increased to $91.7 million compared to $87.1 million for the prior year. The increase in revenue was largely attributable to a $2.0 million increase in customer recurring revenue, a $1.5 million increase in universal service revenue and a $0.6 million increase in other revenue. The increase in customer recurring revenue was driven by customer growth in the Company's broadband and Wireless operations, as well as an increase in the average revenue per Wireless subscriber. Operating expense for the six months ended June 30, 2007 increased $3.6 million, or 4.7%, to $80.9 million compared to the six months ended June 30, 2006. The increase in operating expense was attributable to $1.8 million in Windstream merger related expenses, a $1.1 million increase in cost of service, a $0.4 million increase in benefits expense and a $0.3 million increase in selling expense. Operating income for the six months ended June 30, 2007 increased 9.7% to $10.9 million compared to $9.9 million in the same period last year. Other income in the six months ended June 30, 2006 included the Company's income from the operations of Palmetto MobileNet ("PMN") and an $89.2 million gain from the sale of PMN's interests in ten wireless partnerships. Excluding the effect of these items, other income increased approximately $1.3 million from the same period last year mainly due to an increase in investment income and a decrease in interest expense. Net income for the six months ended June 30, 2007 was $8.6 million, or $0.42 per diluted share, compared to $61.3 million, or $3.17 per diluted share. The six months ended June 30, 2007 and 2006 includes merger transaction related expenses of $1.8 million or approximately $0.06 per diluted share and $54.2 million, or $2.80 per diluted share, related to the PMN sale, respectively. Results by Business Unit Effective for the quarter ending March 31, 2007 the following presentation was modified to reflect the Company's change in its business unit reporting. The Company made these changes to report operating results based on the complete product and service relationship with customers in each business unit. As a result, the former Internet and Data Services business unit results have been included in the ILEC, CLEC and Greenfield business unit results for all periods presented. * ILEC - ("Concord Telephone") Concord Telephone's operating revenue increased $1.1 million to $27.2 million in the second quarter of 2007 compared to the same quarter in 2006. The increase in operating revenue was mainly due to a $1.2 million increase in universal service revenue, which was partially offset by a $0.2 million decrease in access and interconnection revenue and a $0.1 million decrease in customer recurring revenue. Broadband revenue increased $0.4 million driven by a 24% increase in customers, but was offset by a decrease in wireline customer revenue associated with a decline in access lines. Operating expense increased $1.1 million to $21.6 million primarily due to transaction related costs in the second quarter of 2007 compared to the same quarter in 2006. Operating income was flat at $5.6 million in the second quarter of 2007 compared to the same period last year. Operating margin for the second quarter of 2007 was 20.5% compared to 21.4% for the second quarter of 2006. ILEC average monthly customer churn during the second quarter of 2007 was 1.6%, which was up from the 1.1% rate in the same quarter last year. Broadband accounts increased to 24,775, an increase of 24% from the second quarter of 2006. Concord Telephone ended the second quarter of 2007 with 102,641 access lines in service. * Wireless Wireless operating revenue increased 9.2% to $10.6 million in the second quarter of 2007 compared to the same period in 2006. Customer recurring revenue increased $0.7 million driven by a 5% growth in subscribers and an increase in average revenue per subscriber. Operating expense increased $0.4 million, or 4.6%, from the same period last year. The increase in operating expense was driven primarily by the increase in wireless subscribers. Included in the second quarter of 2007 operating expense was a $0.5 million credit from Cingular associated with the annual true-up of switching expenses, which was partially offset by a $0.3 million loss related to the replacement of certain wireless cell site equipment. Operating income in the second quarter of 2007 was $1.3 million compared to $0.8 million in the same period last year. Wireless ended the second quarter of 2007 with 50,297 subscribers, an increase of 5% compared to the end of the second quarter of 2006. * CLEC CLEC operating revenue in the second quarter of 2007 was $5.4 million, which was relatively flat compared to the same quarter last year. Operating expense increased 1.2% to $5.8 million in the second quarter of 2007 compared to the same period last year. The increase in operating expense was due to an increase in cost of service primarily attributable to an increase in the number of CLEC access lines. Operating loss for the second quarter of 2007 was flat at $0.4 million compared to the second quarter of 2006. CLEC ended the second quarter of 2007 with 36,811 access lines, an increase of 7% compared to 34,372 access lines at the end of the second quarter last year. In addition, CLEC ended the second quarter with 817 broadband customers, an increase of 20% from the 679 at the end of the second quarter of 2006. * Greenfield Greenfield's operating revenue increased 10.2% to $3.2 million in the second quarter of 2007 compared to the same period last year. The increase in operating revenue was driven by an increase in customer recurring revenue that related to a 35% increase in Greenfield broadband customers and a 6% increase in access lines. Operating expense was relatively flat at $3.6 million in the second quarter of 2007. Operating loss for the second quarter of 2007 improved to $0.5 million from a $0.7 million operating loss in the second quarter of 2006. Greenfield ended the second quarter of 2007 with 16,818 access lines and 3,955 broadband customers, which represent increases of 6% and 35%, respectively, from the end of the second quarter of 2006. As of June 30, 2007, the Company had 130 Greenfield projects, which in total represent approximately 58,000 marketable access lines at the completion of the projects. The Company is not providing future period guidance due to the proposed transaction with Windstream Corporation. 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 ability to obtain necessary regulatory and shareholder approvals for the proposed transaction with Windstream, 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, 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, 2006. CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Three Months Ended June 30, % 2007 2006 Change Operating Revenue ILEC Services $27,182 $26,105 4.1% Wireless Services 10,572 9,683 9.2% CLEC Services 5,377 5,354 0.4% Greenfield Services 3,175 2,882 10.2% Total Operating Revenue 46,306 44,024 5.2% Operating Expense ILEC Services 21,607 20,521 5.3% Wireless Services 9,276 8,870 4.6% CLEC Services 5,783 5,716 1.2% Greenfield Services 3,640 3,575 1.8% Other 1,258 511 146.2% Total Operating Expense 41,564 39,193 6.0% Operating Income 4,742 4,831 (1.8%) Other Income (Expense) Investment, Equity Method 2 263 Gains, Interest, Dividends 2,178 1,945 Impairment on Investments - - Other Expenses, Principally Interest (664) (838) Total Other Income (Expense) 1,516 1,370 Pre-Tax Income 6,258 6,201 Income Tax Expense 2,286 2,258 Net Income $3,972 $3,943 Diluted Weighted Average Shares 20,251 19,452 Diluted Earnings Per Share $0.20 $0.20 CT Communications, Inc. Consolidated Statements of Income (Unaudited, in thousands, except per share amounts) Six Months Ended June 30, % 2007 2006 Change Operating Revenue ILEC Services $54,304 $52,028 4.4% Wireless Services 20,333 18,840 7.9% CLEC Services 10,742 10,573 1.6% Greenfield Services 6,339 5,678 11.6% Total Operating Revenue 91,718 87,119 5.3% Operating Expense ILEC Services 42,331 39,884 6.1% Wireless Services 18,371 17,476 5.1% CLEC Services 11,433 11,577 (1.2%) Greenfield Services 7,117 7,081 0.5% Other 1,601 1,195 34.0% Total Operating Expense 80,853 77,213 4.7% Operating Income 10,865 9,906 9.7% Other Income (Expense) Investment, Equity Method 13 90,103 Gains, Interest, Dividends 3,529 2,758 Impairment on Investments - (876) Other Expenses, Principally Interest (1,317) (1,872) Total Other Income (Expense) 2,225 90,113 Pre-Tax Income 13,090 100,019 Income Tax Expense 4,492 38,710 Net Income $8,598 $61,309 Diluted Weighted Average Shares 20,240 19,359 Diluted Earnings Per Share $0.42 $3.17 CT Communications, Inc. Consolidated Balance Sheets (Unaudited, in thousands) June 30, December 31, 2007 2006 ASSETS Cash and Cash Equivalents $7,459 $14,063 Short-Term Investments 92,619 86,741 Accounts Receivable and Unbilled Revenue, Net 16,168 16,419 Other Assets 11,540 11,775 Current Assets 127,786 128,998 Investments 7,464 10,960 Property, Plant and Equipment, Net 214,852 209,908 Other Assets 37,906 37,492 TOTAL ASSETS $388,008 $387,358 LIABILITIES AND STOCKHOLDERS' EQUITY Current Portion of Long-Term Debt $5,000 $5,000 Accounts Payable 6,949 12,553 Customer Deposits and Advance Billings 4,754 4,618 Other Accrued Liabilities 15,235 12,714 Current Liabilities 31,938 34,885 Long-Term Debt 32,500 35,000 Deferred Credits and Other Liabilities 39,005 38,095 Stockholders' Equity 284,565 279,378 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $388,008 $387,358 CT Communications, Inc. Customer Information June 30, June 30, % 2007 2006 Change Wired Access Lines ILEC Access Lines 102,641 109,356 (6.1%) CLEC Access Lines 36,811 34,372 7.1% Greenfield Access Lines 16,818 15,895 5.8% Total Wired Access Lines 156,270 159,623 (2.1%) Broadband Customers* 29,547 23,661 24.9% Wireless Subscribers 50,297 47,932 4.9% Revenue Generating Units ILEC Residential Access Lines 74,512 80,952 (8.0%) Business Access Lines 28,129 28,404 (1.0%) Broadband Customers 24,775 20,053 23.5% Total ILEC 127,416 129,409 (1.5%) CLEC Business Access Lines 36,811 34,372 7.1% Broadband Customers 817 679 20.3% Total CLEC 37,628 35,051 7.4% Greenfield Residential Access Lines 10,950 10,633 3.0% Business Access Lines 5,868 5,262 11.5% Broadband Customers 3,955 2,929 35.0% Total Greenfield 20,773 18,824 10.4% Wireless Subscribers 50,297 47,932 4.9% Total Revenue Generating Units 236,114 231,216 2.1% * - Broadband customers include DSL and High Speed customers previously reported separately. CT Communications, Inc. Other Selected Financial Data (Unaudited, in thousands, except per share amounts) Capital Expenditures Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 ILEC $5,858 $3,298 $13,410 $7,041 Wireless 2,363 491 2,627 687 CLEC 423 493 768 1,773 Greenfield 1,222 1,376 2,357 2,995 Other 713 406 1,920 555 Total $10,579 $6,064 $21,082 $13,051 Depreciation Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 ILEC $5,145 $5,347 $10,300 $10,825 Wireless 693 641 1,386 1,276 CLEC 700 728 1,421 1,443 Greenfield 1,129 1,032 2,243 2,046 Other 226 225 451 503 Total $7,893 $7,973 $15,801 $16,093 Reconciliation of Prior Period Reported Results to Normalized Results For the six months ended June 30, 2006 Palmetto GAAP MobileNet* Normalized Operating Revenue $87,119 $ - $87,119 Operating Expense 77,213 - 77,213 Operating Income 9,906 - 9,906 Other Income (Expense) 90,113 (89,164) 949 Pre-Tax Income 100,019 (89,164) 10,855 Income Tax Expense 38,710 (34,943) 3,767 Net Income $61,309 $(54,221) $7,088 Diluted EPS $3.17 $(2.80) $0.37 * 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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