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D&E Communications Reports Third Quarter 2005 Results8 November 2005
D&E Communications, Inc. ("D&E") (NASDAQ: DECC), a leading provider of broadband integrated communications services
in central and eastern Pennsylvania, today announced the results of its
operations for the third quarter ended September 30, 2005.
For the third quarter of 2005, the company reported total operating revenue
of $44.3 million, as compared to $43.7 million in the third quarter of
2004. Net income for the third quarter was $2.4 million, or $0.17 per
share, as compared to a net income of $0.7 million, or $0.05 per share, for
the same period last year.
For the nine months ended September 30, 2005, the company reported total
operating revenue of $131.2 million, as compared to $131.6 million in the
same period last year. Net income for the nine months ended September 30,
2005 was $6.6 million, or $0.46 per share, as compared to a net loss of
$0.3 million, or $0.02 per share, for the same period last year.
Included in the 2005 year to date results was a gain on investment of $2.0
million ($1.3 million, or $0.09 per common share, after tax) from the sale
of our interest in PenTeleData. The 2004 year-to-date results included a
loss on early extinguishment of debt amounting to $4.8 million ($3.3
million, or $0.21 per common share, after tax) related to the company's
refinancing of its debt in March 2004. Earnings before these items were
$0.37 per share in the nine months of 2005 compared with $0.19 per share in
the nine months of 2004.
"Highlights of this quarter demonstrate that we continue to make steady
progress in the growth of our Digital Subscriber Lines and Competitive
Local Exchange Carrier access lines," said James W. Morozzi, President and
Chief Executive Officer of D&E Communications. "Our broadband DSL
subscriber count is up 74% and our CLEC lines are up 9%, offsetting the 3%
loss of RLEC lines year over year from September 30, 2004 to September 30,
2005. These results indicate that, in spite of pressure on RLEC access
lines from increasing competition, revenue has increased and operating
income is up in the RLEC segment. Expense reduction in the RLEC has helped
drive operating income up this quarter."
"In our ISP segment," Morozzi continued, "even though operating revenue is
up, operating income is down slightly due to new capacity that has been
added to handle the growth in this business. The start up of VoIP activity
also increased expenses that were not being incurred in the third quarter
of 2004."
Summary Statistics
September 30, 2005 September 30, 2004 Change % Change
------------------ ------------------ ------ --------
RLEC lines 135,457 140,243 (4,786) (3.4%)
CLEC lines 40,703 37,398 3,305 8.8%
DSL Subscribers 17,375 10,008 7,367 73.6%
Dial-up Internet
subscribers 8,957 12,071 (3,114) (25.8%)
Web-hosting
customers 946 901 45 5.0%
Rural Local Exchange Carrier (RLEC)
Third quarter 2005 revenues from the RLEC segment were $27.3 million, as
compared to $27.1 million for third quarter 2004. This increase was due in
part to a 5% to 10% increase in basic telephone rates effective August 1,
2005 and offset by fewer access lines and lower long distance revenue.
RLEC operating expenses for the third quarter were $19.4 million, compared
to $20.7 million during the same period last year. This decrease was
primarily related to lower expenses for contracted billing services,
depreciation, maintenance contracts and operating taxes.
Competitive Local Exchange Carrier (CLEC)
For the third quarter of 2005 CLEC segment revenues were $10.4 million,
compared to $9.6 million for the same period of 2004. This increase was
due to increased dedicated data circuit revenue and a larger number of
access lines, offset by a reduction in long distance service revenues due
to a decline in the average rate per minute of use.
CLEC operating expenses for the third quarter of 2005 were $10.4 million,
compared to $10.4 million for the same period last year. Wages and
benefits, as well as depreciation expense, increased as a result of
supporting a larger customer base. Network access expenses were lower
partially from savings achieved by implementing a new agreement to provide
a least-cost routing service for completion of long distance calls.
Internet Services Segment
Internet services revenues for the third quarter of 2005 were $3.3 million,
as compared to $2.6 million in the third quarter of 2004, due to increased
DSL revenues resulting from new customers and upgrade of dial-up customers
to our DSL service. The company achieved a 27% increase in Internet
services segment revenues over the prior year.
Operating expenses for the third quarter of 2005 were $3.4 million, as
compared to $2.5 million for the same period of 2004, due to an increase in
labor and benefits and other expenses related to the initiation of the new
VoIP phone service. The direct cost of services increased as a result of a
broadband capacity upgrade implemented to accommodate expected continued
DSL subscriber growth. Depreciation expense increased as a result of more
assets being employed, and a larger percentage of corporate overhead was
charged to this segment beginning in 2005.
Systems Integration
Systems integration revenues for the third quarter of 2005 were $5.5
million, as compared to $6.2 million for the same period last year. This
decrease was due mainly to a reduction in communication service revenue of
$1.4 million, offset by increased computer and voice equipment sales of
$0.6 million.
Third quarter 2005 operating expenses were $6.8 million, as compared to
$7.3 million in the third quarter of the previous year. Reductions in labor
and subcontractor services were the primary reason for decreased expenses.
On a segment-by-segment basis, the company reported the following
information (in thousands):
Corp-
Systems orate
Three months Internet Integra- and Elimina- Total
ended RLEC CLEC Services tion Other tions Company
----------- ------- ------- ------- ------- ------- ------- -------
September 30,
2005
Revenues -
External $24,936 $ 9,806 $ 3,256 $ 5,446 $ 844 $ - $44,288
Revenues -
Intercompany 2,391 633 8 6 - (3,038) -
------- ------- ------- ------- ------- ------- -------
Total
Revenues 27,327 10,439 3,264 5,452 844 (3,038) 44,288
------- ------- ------- ------- ------- ------- -------
Depreciation
and
Amortization 7,470 1,324 347 380 293 - 9,814
Other
Operating
Expenses 11,963 9,109 3,003 6,390 1,049 (3,038) 28,476
------- ------- ------- ------- ------- ------- -------
Total
Operating
Expenses 19,433 10,433 3,350 6,770 1,342 (3,038) 38,290
------- ------- ------- ------- ------- ------- -------
Operating
Income
(Loss) $ 7,894 $ 6 $ (86) $(1,318) $ (498) $ - $ 5,998
======= ======= ======= ======= ======= ======= =======
September 30,
2004
Revenues -
External $ 24,691 $ 9,212 $ 2,565 $ 6,223 $ 1,001 $ - $43,692
Revenues -
Intercompany 2,406 389 4 18 - (2,817) -
------- ------- ------- ------- ------- ------- -------
Total
Revenues 27,097 9,601 2,569 6,241 1,001 (2,817) 43,692
------- ------- ------- ------- ------- ------- -------
Depreciation
and
Amortization 7,716 1,041 280 443 244 - 9,724
Other
Operating
Expenses 12,955 9,397 2,192 6,894 887 (2,817) 29,508
------- ------- ------- ------- ------- ------- -------
Total
Operating
Expenses 20,671 10,438 2,472 7,337 1,131 (2,817) 39,232
------- ------- ------- ------- ------- ------- -------
Operating
Income
(Loss) $ 6,426 $ (837) $ 97 $(1,096) $ (130) $ - $ 4,460
======= ======= ======= ======= ======= ======= =======
About D&E Communications
D&E is a regional integrated communications provider offering high-speed
data, Internet access, local and long distance telephone, VoIP phone, voice
and data network installation and maintenance, network performance
management and security, and video services. Based in Lancaster County, D&E
has been serving communities in central Pennsylvania for more than 100
years. For more information, visit www.decommunications.com.
This press release contains
forward-looking statements. These
forward-looking statements are found in various places throughout this
press release and include, without limitation, statements regarding
financial and other information. These statements are based upon the
current beliefs and expectations of D&E's management concerning the
development of our business, are not guarantees of future performance and
involve a number of risks, uncertainties, and other important factors that
could cause actual developments and results to differ materially from our
expectations. Those factors include, but are not limited to, the effect of
the convergence of voice, data, and video technologies on our historical
competitive advantages; the increasingly competitive nature of the
communications industry; the significant indebtedness of the company; and
other key factors that we have indicated could adversely affect our
business and financial performance contained in our past and future filings
and reports, including those filed with the United States Securities and
Exchange Commission. D&E undertakes no obligation to revise or update its
forward-looking statements whether as a result of new information, future
events, or otherwise.
D&E COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, expect per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
OPERATING REVENUES 2005 2004 2005 2004
-------- -------- -------- --------
Communication service revenues $ 39,846 $ 39,877 $120,142 $120,261
Communication products sold 3,648 3,225 8,766 9,210
Other 794 590 2,261 2,121
-------- -------- -------- --------
Total operating revenues 44,288 43,692 131,169 131,592
-------- -------- -------- --------
OPERATING EXPENSES
Communication service expenses
(exclusive of depreciation and
amortization below) 16,000 17,033 49,542 48,884
Cost of communication
products sold 2,836 2,547 6,625 7,372
Depreciation and amortization 9,814 9,724 29,195 29,343
Marketing and customer services 3,875 3,845 11,335 11,992
General and administrative
services 5,765 6,083 19,033 19,336
-------- -------- -------- --------
Total operating expenses 38,290 39,232 115,730 116,927
-------- -------- -------- --------
Operating income 5,998 4,460 15,439 14,665
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Equity in net losses
of affiliates (29) (576) (142) (1,426)
Interest expense, net of
interest capitalized (3,615) (3,456) (10,436) (10,947)
Gain on investment - - 2,043 -
Loss on early extinguishment
of debt - - - (4,841)
Other, net 762 346 2,458 1,339
-------- -------- -------- --------
Total other income (expense) (2,882) (3,686) (6,077) (15,875)
-------- -------- -------- --------
Income (loss) before income
taxes and dividends on
utility preferred stock 3,116 774 9,362 (1,210)
INCOME TAXES AND DIVIDENDS ON
UTILITY PREFERRED STOCK
Income taxes (benefit) 708 39 2,666 (955)
Dividends on utility
preferred stock 16 16 49 49
-------- -------- -------- --------
Total income taxes and
dividends on utility
preferred stock 724 55 2,715 (906)
-------- -------- -------- --------
NET INCOME (LOSS) $ 2,392 $ 719 $ 6,647 $ (304)
======== ======== ======== ========
Weighted average common shares
outstanding (basic) 14,316 14,867 14,295 15,325
Weighted average common shares
outstanding (diluted) 14,342 14,910 14,316 15,325
BASIC AND DILUTED EARNINGS (LOSS)
PER COMMON SHARE
Net income (loss) per
common share $ 0.17 $ 0.05 $ 0.46 $ (0.02)
======== ======== ======== ========
Dividends per common share $ 0.13 $ 0.13 $ 0.38 $ 0.38
======== ======== ======== ========
D&E COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
September 30, December 31,
2005 2004
ASSETS --------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 3,690 $ 8,517
Accounts receivable, net of reserves of
$590 and $1,024 16,187 16,570
Inventories, lower of cost or market,
at average cost 3,767 3,523
Prepaid expenses 4,858 8,466
Other 2,478 2,465
--------- ---------
TOTAL CURRENT ASSETS 30,980 39,541
--------- ---------
INVESTMENTS
Investments in and advances to affiliated companies 25 52
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
In service 354,785 335,883
Under construction 13,189 8,768
--------- ---------
367,974 344,651
Less accumulated depreciation 185,463 162,078
--------- ---------
182,511 182,573
--------- ---------
OTHER ASSETS
Goodwill 149,033 149,032
Intangible assets, net of accumulated amortization 162,950 167,396
Other 8,364 8,191
--------- ---------
320,347 324,619
--------- ---------
TOTAL ASSETS $ 533,863 $ 546,785
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Long-term debt maturing within one year $ 10,000 $ 10,000
Accounts payable and accrued liabilities 21,312 18,701
Accrued taxes 783 1,819
Accrued interest and dividends 1,741 1,683
Advance billings, customer deposits and other 7,101 11,585
--------- ---------
TOTAL CURRENT LIABILITIES 40,937 43,788
--------- ---------
LONG-TERM DEBT 208,000 218,500
--------- ---------
OTHER LIABILITIES
Deferred income taxes 84,971 86,402
Other 19,802 20,530
--------- ---------
104,773 106,932
--------- ---------
PREFERRED STOCK OF UTILITY SUBSIDIARY,
Series A 4 1/2%, par value $100, cumulative,
callable at par at the option of the Company,
authorized 20 shares, outstanding 14 shares 1,446 1,446
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $0.16,
authorized shares 100,000 2,551 2,542
Outstanding shares: 14,327 at September 30,
2005 and 14,268 at December 31, 2004
Additional paid-in capital 160,782 160,255
Accumulated other comprehensive income (loss) (5,817) (6,574)
Retained earnings 39,808 38,513
Treasury stock at cost, 1,640 shares at
September 30, 2005 and December 31, 2004 (18,617) (18,617)
--------- ---------
178,707 176,119
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 533,863 $ 546,785
========= =========
D&E COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES $ 29,323 $ 34,824
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net of proceeds from sales (22,619) (16,554)
Collection of note receivable 1,000 -
Proceeds from sale of investment 2,900 -
Increase in investments and advances to affiliates (115) (446)
Decrease in investments and repayments from
affiliates - 154
--------- ---------
Net Cash Used In Investing Activities (18,834) (16,846)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on common stock (5,116) (5,425)
Payments on long-term debt (10,500) (213,640)
Proceeds from long-term debt financing - 210,000
Payment of debt issuance costs - (1,971)
Proceeds from issuance of common stock 300 346
Purchase of treasury stock - (13,335)
--------- ---------
Net Cash Used In Financing Activities
from Continuing Operations (15,316) (24,025)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (4,827) (6,047)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 8,517 12,446
--------- ---------
END OF PERIOD $ 3,690 $ 6,399
========= =========
CONTACT:
W. Garth Sprecher
Sr. Vice President and Corporate Secretary
(717) 738-8304
SOURCE: D & E Communications, Inc.
Source: Marketwire
All trademarks and copyrighted information contained herein are the property of their respective owners.
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