Science & Technology
Science and Technology
Science and Technology
Mon, May 11, 2009
Fri, May 8, 2009
Thu, May 7, 2009 D & E Communications, Inc.: D&E Communications Reports First Quarter 2009 Results
EPHRATA, PA--(Marketwire - May 7, 2009) - D&E Communications, Inc. ("D&E" or the "Company") (
-- Operating income of $8.7 million -- Net income attributable to common shareholders of $4.0 million and earnings per share of $0.28
D&E Communications, Inc. ("D&E" or the "Company") (
For the first quarter of 2009, the Company reported a net income attributable to common shareholders of $4.0 million, or $0.28 per share, compared to $5.1 million, or $0.35 per share, for the same period last year. Operating income for the first quarter of 2009 was $8.7 million, compared to $8.1 million in the first quarter of 2008. Total operating revenue for the first quarter of 2009 was $35.9 million, compared to $37.8 million in the first quarter of 2008.
Operating income increased $0.6 million due to a reduction in operating expenses of $2.5 million, partially offset by a decline in operating revenue of $1.9 million. Operating expenses declined as a result of a pension curtailment gain of $1.0 million, of which $0.9 million ($0.5 million, or $0.03 per share, after tax) was recorded as a reduction of operating expenses and the remaining $0.1 million was capitalized. Wireline depreciation expense decreased $0.8 million ($0.5 million, or $0.04 per share, after tax) due to certain fixed assets becoming fully depreciated in June and July 2008 and other operating expenses decreased $0.8 million. In the first quarter of 2009, the Company offered a one-time payment to non-union employees who were eligible and elected to retire by December 31, 2009. The Company recorded an expense of $0.2 million ($0.1 million, or $0.01 per share, after tax) in the first quarter of 2009 for those employees who elected to retire. The revenue decrease of $1.9 million for the first quarter of 2009 was the result of decreases in Wireline and Systems Integration segment revenues of $1.7 million and $0.2 million, respectively.
The first quarter 2008 results included income of $2.9 million ($1.7 million, or $0.12 per common share, after tax) from the termination of a lease guarantee and a reserve of $0.2 million ($0.1 million, or $0.01 per share, after tax) recognized on a note receivable from the sale of assets in 2006. Adjusted net income attributable to common shareholders for the first quarter of 2009 before the items described above was $3.1 million, or $0.22 per share. Adjusted net income attributable to common shareholders for the first quarter of 2008 before the items described above was $3.5 million, or $0.24 per share.
"Even in light of the current economic conditions, we continue to see growth in both our DSL/High-Speed Internet subscribers and our CLEC access lines, albeit at a slower rate than this time last year. We're especially pleased to see our total revenue from private line circuits, dedicated circuits, Ethernet and IP VPN services grow by $0.4 million, or 10.7%, over the first quarter of 2008. This is a reflection of our business customers continuing to place high value on D&E's advanced data networking services," stated James W. Morozzi, D&E's President and Chief Executive Officer. "During the first quarter of 2009, D&E's operating income increased $0.6 million, mainly due to a pension curtailment gain of $0.9 million as a result of a hard freeze to our non-union pension plan and a reduction in depreciation expense of $0.8 million. Net income decreased $1.1 million in comparison to the 2008 period primarily due to a one-time after-tax gain of $1.7 million in the first quarter of 2008."
Mr. Morozzi continued, "On April 23, 2009, the D&E board of directors declared a quarterly dividend of $0.125 per common share, continuing our long-standing practice of paying quarterly dividends from operating cash flows of the business."
The following table provides a reconciliation of reported and adjusted net income attributable to common shareholders and earnings per share:
Three Months Ended (Dollar amounts in millions, except March 31, per-share amounts) 2009 2008 ---------------- ---------------- Per- Per- Amount Share Amount Share ------- ------- ------- ------- Reported net income attributable to common shareholders $ 4.0 $ 0.28 $ 5.1 $ 0.35 Items impacting comparability: Retirement payments, net of tax 0.1 0.01 -- -- Decrease in depreciation, net of tax, compared to 2008 (0.5) (0.04) -- -- Pension curtailment gain, net of tax (0.5) (0.03) -- -- Note receivable reserve, net of tax -- -- 0.1 0.01 Lease guarantee termination, net of tax -- -- (1.7) (0.12) ------- ------- ------- ------- Adjusted net income attributable to common shareholders $ 3.1 $ 0.22 $ 3.5 $ 0.24 ======= ======= ======= ======= Summary Statistics March 31, 2009 March 31, 2008 Change % Change -------------- -------------- ------- -------- RLEC access lines 117,872 123,563 (5,691) (4.6%) CLEC access lines 46,747 46,021 726 1.6% DSL/High-Speed Internet Subscribers 44,216 39,970 4,246 10.6% Dial-up Internet subscribers 1,986 2,984 (998) (33.4%) Video subscribers 8,528 8,099 429 5.3% Web-hosting customers 985 1,013 (28) (2.8%) -------------- -------------- ------- Total customer connections 220,334 221,650 (1,316) (0.6%) ============== ============== =======
On a segment by segment basis, the Company reported the following information:
Wireline
First quarter 2009 Wireline segment revenues were $34.8 million compared to $36.5 million for the first quarter of 2008. The decrease was due in large part to lower network access revenue of $1.4 million primarily due to a decline in NECA revenue and minutes of use. Local telephone service revenue decreased $0.3 million primarily due to a decrease in RLEC access lines. Long distance revenue declined $0.2 million primarily due to a decline in the average rate per minute of use. Communication services revenue increased $0.2 million primarily due to increased DSL/high-speed Internet subscribers.
Wireline operating expenses for the first quarter of 2009 were $25.7 million compared to $27.9 million during the same period last year. Depreciation expense decreased $0.8 million primarily due to certain fixed assets that became fully depreciated in June and July of 2008. Employee benefits expense decreased $0.9 million primarily due to a pension plan curtailment gain as a result of the amendment to one of the Company's pension plans to discontinue future benefit accruals to all active participants effective January 2010. Corporate overhead expenses decreased $0.3 million.
Operating income was $9.1 million for the first quarter of 2009 compared to operating income of $8.6 million for the first quarter of 2008.
Systems Integration
System Integration revenue for the first quarter of 2009 was $0.7 million compared to $0.9 million for the same period last year. The primary reason for the decline was lower communication services revenue.
First quarter 2009 operating expenses were $0.8 million compared to $1.1 million in the first quarter of 2008. Labor and benefits costs declined approximately $0.2 million primarily due to a reduction in the number of employees.
The operating loss for the first quarter of 2009 was $0.1 million compared to an operating loss of $0.2 million in the first quarter of 2008.
Adjusted EBITDA
We present the non-GAAP (generally accepted accounting principles) measure Adjusted EBITDA (as defined herein) below and anticipate referring to this measure in the conference call referenced below. Presentation of Adjusted EBITDA is consistent with how we evaluate performance of our business segments and Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Adjusted EBITDA is a non-GAAP operating measure under Regulation G of the Securities and Exchange Commission. We compute Adjusted EBITDA by adding depreciation, amortization and goodwill and intangible asset impairments to operating income. Each of these GAAP financial measures is a line item in our income statement and thus Adjusted EBITDA can be reconciled to net income attributable to common shareholders, the most comparable GAAP financial measure to it. However, other companies in our industry may calculate Adjusted EBITDA differently than we do. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as a substitute for cash flow from operating activities as a measure of liquidity or a substitute for net income as an indicator of operating performance or any other measure of performance derived in accordance with GAAP. Net income attributable to common shareholders is reconciled to consolidated Adjusted EBITDA for the three months ended March 31, 2009 and 2008, respectively, in the following table:
Three months ended (Dollar amounts in thousands) March 31, ------------------ 2009 2008 -------- -------- Consolidated Adjusted EBITDA $ 15,764 $ 15,970 Depreciation and amortization (7,058) (7,848) -------- -------- Operating income 8,706 8,122 Interest expense, net of interest capitalized (2,902) (3,349) Other income (expense), net 593 3,418 Income taxes (2,345) (3,043) Dividends on utility preferred stock (16) (16) -------- -------- Net income attributable to common shareholders $ 4,036 $ 5,132 ======== ========
Operating income is reconciled to segment and consolidated Adjusted EBITDA for the quarters ended March 31, 2009 and 2008, respectively, in the following table:
(Dollar amounts in Systems Corporate thousands) Wireline Integration & Other Consolidated -------- ----------- --------- ------------ Quarter ended March 31, 2009 ---------------------------- Adjusted EBITDA $ 15,914 $ (55) $ (95) $ 15,764 Depreciation and amortization (6,809) (24) (225) (7,058) -------- ----------- --------- ------------ Operating income (loss) $ 9,105 $ (79) $ (320) $ 8,706 ======== =========== ========= ============ Quarter ended March 31, 2008 ---------------------------- Adjusted EBITDA $ 16,246 $ (116) $ (160) $ 15,970 Depreciation and amortization (7,614) (45) (189) (7,848) -------- ----------- --------- ------------ Operating income (loss) $ 8,632 $ (161) $ (349) $ 8,122 ======== =========== ========= ============
Conference Call
The Company will host a conference call and live webcast Friday, May 8, 2009 at 11:00 a.m. Eastern Time. Parties in the United States and Canada can call 877-852-6581 to access the conference call. Parties outside the United States and Canada can access the call at 719-325-4784. The live webcast of the conference call will be accessible from the "Investors" section of the Company's website ([ www.decommunications.com ]). The webcast will be archived for a period of 90 days.
About D&E Communications
D&E is a leading integrated communications provider offering high-speed data, Internet access, local and long distance telephone, business continuity and co-location services, data and professional IT services, network monitoring, security solutions and video services. Based in Lancaster County, D&E has been serving communities in central and eastern 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: changes in the competitive and technological environment in which we operate; our ability to further penetrate our markets and the related cost of that effort; reductions in rates or call volume that generate network access revenues; government and regulatory policies at both the federal and state levels, including potential intercarrier compensation reform; current economic conditions; a decline in value of our pension fund assets; our current level of debt financing; potential future goodwill or intangible asset impairment charges; and our ability to fund necessary investment in plant and equipment 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 INCOME (In thousands, expect per share amounts) (Unaudited) Three Months Ended ------------------ March 31, ------------------ OPERATING REVENUES 2009 2008 -------- -------- Communication service revenues $ 34,773 $ 36,613 Communication products sold 344 459 Other 822 725 -------- -------- Total operating revenues 35,939 37,797 -------- -------- OPERATING EXPENSES Communication service expenses (exclusive of depreciation and amortization below) 11,268 12,256 Cost of communication products sold 260 372 Depreciation and amortization 7,058 7,848 Marketing and customer services 3,273 3,540 General and administrative services 5,374 5,659 -------- -------- Total operating expenses 27,233 29,675 -------- -------- Operating income 8,706 8,122 -------- -------- OTHER INCOME (EXPENSE) Interest expense, net of interest capitalized (2,902) (3,349) Other, net 593 3,418 -------- -------- Total other income (expense) (2,309) 69 -------- -------- Income before income taxes 6,397 8,191 INCOME TAXES 2,345 3,043 -------- -------- NET INCOME 4,052 5,148 NONCONTROLLING INTERESTS Dividends on utility preferred stock 16 16 -------- -------- NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 4,036 $ 5,132 ======== ======== Weighted average common shares outstanding (basic) 14,403 14,462 Weighted average common shares outstanding (diluted) 14,418 14,514 BASIC AND DILUTED EARNINGS PER COMMON SHARE Earnings per common share $ 0.28 $ 0.35 ======== ======== Dividends per common share $ 0.13 $ 0.13 ======== ======== D&E COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited) March 31, December 31, ASSETS 2009 2008 ----------- ------------ CURRENT ASSETS Cash and cash equivalents $ 15,052 $ 18,280 Accounts receivable, net of reserves of $507 and $466 12,492 13,086 Inventories-materials and supplies 2,536 2,651 Prepaid expenses 5,206 9,367 Other 2,177 2,500 ----------- ------------ TOTAL CURRENT ASSETS 37,463 45,884 ----------- ------------ PROPERTY, PLANT AND EQUIPMENT In service 419,292 417,209 Under construction 7,307 5,235 ----------- ------------ 426,599 422,444 Less accumulated depreciation 263,073 258,642 ----------- ------------ 163,526 163,802 ----------- ------------ OTHER ASSETS Goodwill 138,441 138,441 Intangible assets, net of accumulated amortization 96,018 97,344 Other 7,898 7,449 ----------- ------------ 242,357 243,234 ----------- ------------ TOTAL ASSETS $ 443,346 $ 452,920 =========== ============ LIABILITIES AND EQUITY CURRENT LIABILITIES Long-term debt maturing within one year $ 7,077 $ 7,076 Accounts payable and accrued liabilities 12,213 10,690 Accrued taxes 393 543 Accrued interest and dividends 1,082 1,178 Advance billings, customer deposits and other 4,023 4,706 Derivative financial instruments 2,505 3,091 ----------- ------------ TOTAL CURRENT LIABILITIES 27,293 27,284 ----------- ------------ LONG-TERM DEBT 177,284 179,054 ----------- ------------ OTHER LIABILITIES Deferred income taxes 50,794 50,071 Defined benefit plans 22,925 34,749 Other 5,648 5,181 ----------- ------------ 79,367 90,001 ----------- ------------ COMMITMENTS AND CONTINGENCIES EQUITY Common shareholders’ equity: Common stock, par value $0.16, authorized shares-100,000; issued shares-16,285 at March 31, 2009 and 16,187 at December 31, 2008; outstanding shares-14,412 at March 31, 2009 and 14,410 at December 31, 2008 2,605 2,590 Additional paid-in capital 164,684 164,526 Accumulated other comprehensive loss (20,875) (21,908) Retained earnings 32,143 29,917 Treasury stock at cost, 1,873 shares at March 31, 2009 and 1,777 shares at December 31, 2008 (20,601) (19,990) ----------- ------------ Total common shareholders’ equity 157,956 155,135 Noncontrolling interests: Preferred stock of utility subsidiary, Series A 4 1/2%, par value $100, cumulative, callable at par at the option of the Company, authorized 20,000 shares, outstanding 14 shares 1,446 1,446 ----------- ------------ TOTAL EQUITY 159,402 156,581 ----------- ------------ TOTAL LIABILITIES AND EQUITY $ 443,346 $ 452,920 =========== ============ D&E COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Three Months Ended March 31, 2009 2008 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,052 $ 5,148 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,058 7,848 Bad debt expense 126 38 Deferred income taxes 83 456 Stock-based compensation expense 142 106 Gain on retirement of property, plant and equipment -- (11) Termination of lease guarantee -- (2,904) Note receivable reserve -- 200 Changes in operating assets and liabilities: Accounts receivable 468 1,213 Inventories 115 134 Prepaid expenses 4,119 (2,608) Accounts payable and accrued liabilities 865 (1,586) Accrued taxes and accrued interest (246) 958 Advance billings, customer deposits and other (683) (145) Defined benefit plans (10,724) (928) Other, net 297 (403) -------- -------- Net Cash Provided by Operating Activities 5,672 7,516 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (4,957) (7,599) Proceeds from sales of property, plant and equipment 158 288 Collection of note receivable -- 34 -------- -------- Net Cash Used In Investing Activities (4,799) (7,277) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Dividends on common stock (1,726) (1,736) Preferred dividends on noncontrolling interests (16) (16) Payments on long-term debt (1,768) (2,517) Proceeds from issuance of common stock and stock options exercised 20 22 Excess tax benefits from stock compensation plans -- 37 Purchase of treasury stock (611) -- -------- -------- Net Cash Used In Financing Activities (4,101) (4,210) -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS (3,228) (3,971) CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 18,280 17,845 -------- -------- END OF PERIOD $ 15,052 $ 13,874 ======== ========
