EX-99.1 2 g05787exv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1

(CTC LOGO)

CT COMMUNICATIONS PRESS RELEASE
For Immediate Release
March 1, 2007
Concord, NC
Contact:
Jim Hausman
704.722.2410
Ron Marino
704.722.2212
CT Communications Announces
Fourth Quarter and Full Year 2006 Results
 
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

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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 programs.
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

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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

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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

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  °  
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 www.ctc.net. If you are unable to listen during the live webcast, the call will be archived on the Web site at 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

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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.

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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          

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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          

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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  
 
            

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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  
 
                  

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CT Communications, Inc.
Other Selected Financial Data
(Unaudited, in thousands)
Capital Expenditures
                                 
    Three Months Ended December 31,     Twelve Months Ended 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 Ended December 31,     Twelve Months Ended 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.

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