D&E Communications Reports Fourth Quarter and Year End 2004 Results.EPHRATA Ephrata (ĕf`rətə), borough (1990 pop. 12,133), Lancaster co., SE Pa., in a prosperous farm area; inc. 1891. There is varied manufacturing. A noted semimonastic religious community was founded (c. , Pa. -- D&E Communications, Inc. ("D&E") (Nasdaq:DECC DECC Duluth Entertainment Convention Center (Duluth, MN) DECC Defense Enterprise Computing Centers DECC Distance Education Coordinating Council DECC Danish-Estonian Chamber of Commerce (Tallinn, Estonia) ), a leading provider of integrated communications services in central and eastern Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York , today announced the results of its operations for the fourth quarter and year ended December December: see month. 31, 2004. For the fourth quarter of 2004 the company reported total operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of $44.7 million, as compared to $44.7 million in the fourth quarter of 2003. Net loss for the fourth quarter was $2.4 million, or ($0.17) per share, as compared to net income of $2.5 million or $0.16 per share, for the same period last year. Total operating revenue for the full year 2004 was $176.3 million, as compared to $173.1 million for the previous year. Net loss for the year was $2.7 million, or ($0.18) per share, as compared to a net income of $4.1 million, or $0.26 per share, for 2003. Included in the 2004 results is a loss of $5.3 million ($3.6 million, or ($0.24) per common share, after tax) on early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt related to the company's refinancing Refinancing An extension and/or increase in amount of existing debt. of its debt in March and November November: see month. 2004. The refinancing activities are estimated to achieve annual interest expense savings of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.7 million, based on market interest rates at the time of the refinancing, until the maturity of the debt in 2011. Results for 2004 also included a loss of $2.1 million ($2.1 million, or ($0.14) per common share after tax) for our share of an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of assets at Pilicka and an impairment of our investment in EuroTel Eurotel is former name for Slovak (T-Mobile) and Czech (O2) mobile network. Eurotel, was founded in 1990 as a joint venture between SPT Telecom (51%) and the American joint venture Atlantic West (between US WEST International, Inc. . "The results of the year reflect our continued efforts to improve our balance sheet, provide long term cost savings for the company, and eliminate certain debt covenants to ease restrictions on our use of cash flow," commented G. William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack Ruhl, Chairman, President and Chief Executive Officer of D&E Communications. "We are pleased with the general progress we have made throughout the year as we achieved many of the milestones we set out to manage our strategic plan. These goals include increasing top line growth while favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. refinancing our debt twice, continuing to create greater efficiencies resulting from our acquisition of Conestoga Enterprises, and upgrading our systems and infrastructure to more efficiently deliver increased services and technology to our customers." "We still have a lot of work ahead of us," Ruhl added. "Over the years we have built a strong foundation of loyal customers based substantially on our ability to deliver excellent customer service and our ability to acquire organizations that advance our integrated communications provider strategy. Going forward we will look to continue this trend by beginning to transition D&E for the future. A key component of our success in this endeavor See Endevor. will rest in our ability to be the leading integrated communications provider in the region, a one-stop-shop for all our customers' communications needs including high speed data, voice, and, in some of our markets, video services. In doing so, we will seek to increase our base of satisfied customers and our revenue per customer. We look forward to reporting our progress in these and other areas as we move forward." On a segment by segment basis, the company reported the following information: Rural Local Exchange Carrier (RLEC RLEC Rural Local Exchange Carrier RLEC Report Log Exception Condition ) Fourth quarter 2004 revenues from the RLEC segment were $28.0 million, as compared to $28.5 million for fourth quarter 2003. This decrease was due in large part to fewer access lines, rate reductions to wireless carriers for use of our network and a reduction in NECA NECA National Electrical Contractors Association NECA National Exchange Carrier Association NECA National Electrical and Communications Association (Australia) NECA National Electricity Code Administrator (Australia) settlement revenues, offset by an increase in directory revenue and dedicated circuit revenue. Full-year 2004 revenue for the RLEC segment was approximately $111 million, as compared to $113 million for 2003. The decrease was due mainly to reductions in network access revenues and long distance revenues, offset by increases in directory revenue and dedicated data circuit revenue. For 2004, RLEC line count decreased 2.2% to 139,607, as compared to 142,799 at the end of 2003. Some of this line loss was due to customers canceling second lines used for dial-up Refers to using the regular "dial-up" telephone network to send data from a computer to a remote network or to a remote device. The computer's digital data are converted to analog signals in the same frequency range as human voice by a modem. Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the service as they switched to D&E's Digital Subscriber Line See DSL. (communications, protocol) Digital Subscriber Line - (DSL, or Digital Subscriber Loop, xDSL - see below) A family of digital telecommunications protocols designed to allow high speed data communication over the existing copper telephone lines between end-users and (DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary ) service. RLEC operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the fourth quarter were $20.1 million, compared to $19.6 million during the same period last year, with the increase caused primarily by an increase of $0.8 million in directory expense. RLEC operating expenses for the year increased $2.2 million, or 2.7%, to $81.8 million in 2004 due in large part to an increase in directory expense and an increase in professional fees in connection with the cost of complying with the provisions of the Sarbanes-Oxley Act See SOX. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc internal controls over financial reporting. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the quarter was $8.0 million, down from $8.9 million in fourth quarter 2003. As a result of the decreased revenue and increased expenses described above, operating income for 2004 decreased 13.4% to $29.2 million, compared to $33.7 million in 2003. Competitive Local Exchange Carrier (CLEC (Competitive Local Exchange Carrier) An organization offering local telephone service that is not one of the traditional telephone companies. The Telecommunications Act of 1996 allowed competition to the incumbent telcos (ILECs), enabling new companies (CLECs) ) For the fourth quarter of 2004 CLEC segment revenues were $9.6 million, compared to $9.4 million for the same period of 2003. 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 rate reductions and fewer minutes of use. CLEC segment revenues for 2004 increased $1.8 million, or 5.1%, to $37.6 million. The increase was related to the addition of access lines for new customers and a growth in dedicated data circuits partially offset by a $1.3 million decrease in long distance revenues due to rate reductions and decreased minutes of use. During 2004, the CLEC line count increased 9.5% to 38,461, compared to 35,140 at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2003. CLEC operating expenses for the fourth quarter of 2004 were $9.8 million, down from $10.2 million for the same period last year. This decrease was due to reductions in long distance costs due to fewer minutes of use and rate reductions from carriers, reduced subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. billing costs as a result of efficiencies achieved in the billing conversion, offset by an increase in cost of leased facilities to provide services to our additional customers and an increase in labor and benefits. Full year 2004 CLEC segment operating expenses increased $0.7 million, or 1.8%, to $40.3 million, with the increase primarily related to an increase in cost of leased facilities to provide services to our additional customers, increased depreciation expense, increased labor and benefits and an increase in other operating taxes, offset by a decrease in long distance costs due to fewer minutes of use and rate reductions from carriers and a reduction in subscriber billing costs. For the fourth quarter of 2004 operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. were $0.2 million, an improvement over an operating loss of $0.8 million in fourth quarter 2003. For the year the CLEC segment reported a smaller operating loss of $2.7 million, down 29.8% from an operating loss of $3.8 million during 2003. Internet Services Segment Internet services revenues for the fourth quarter of 2004 were $2.7 million as compared to $2.3 million in the fourth quarter of 2003, due to increased DSL revenues. For the year the company achieved a 41% increase in internet services segment revenues to $10.4 million in 2004, as compared to $7.3 million for 2003 primarily due to a $2.7 million increase in DSL revenues At year-end 2004, the number of DSL subscribers was 11,052, compared to 7,303 at year-end 2003. There were 11,535 dial-up subscribers at the end of 2004, compared to 12,859 at year-end 2003. Operating expenses for the fourth quarter of 2004 were $2.6 million, as compared to $2.2 million for the same period of 2003, due to an increase in labor and benefits and an increase in the costs of providing additional broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). capacity. Operating expenses for the year were $10 million, as compared to $7.5 million in 2003, also due to increased labor and benefits and an increase in the costs of providing additional broadband capacity. For the fourth quarter, Internet Services had operating income of $0.13 million, compared to $0.08 million during the same period in 2003. For the year, operating income was $0.3 million in 2004, compared to a loss of $0.1 million in 2003. Systems Integration System integration revenues for the quarter were $6.2 million, as compared to $6.5 million for the same period last year. This decrease was due mainly to a reduction in voice equipment sales. For the year, systems integration segment revenues increased $1.4 million, or 6%, to $24.8 million compared to $23.4 million in systems integration revenue in 2003. The increase is primarily due to a $1.3 million increase in data services revenue. Fourth quarter 2004 operating expenses were $7.4 million, almost unchanged from the same quarter in the previous year. For the year, operating expenses increased $1.7 million, or 6%, to $29.4 million. Increased labor and benefits costs accounted for more than 80% of the increased expenses associated with the segment. Systems integration operating losses for the quarter ended December 31, 2004 were $1.2 million, as compared to $0.9 million in the fourth quarter of 2003. Operating losses for the year increased $0.3 million, to $4.6 million, as compared to $4.3 million in 2003. About D&E Communications D&E is an integrated communications provider offering high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. data, Internet access See how to access the Internet. , local and long distance telephone, voice and data networking, network management and security, and video services. Based in Lancaster County Lancaster County is the name of four counties in the United States:
This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . 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 convergence Mathematical property of infinite series, integrals on unbounded regions, and certain sequences of numbers. An infinite series is convergent if the sum of its terms is finite. of voice, data, and video technologies on our historical competitive advantages; the increasingly competitive nature of the communications industry communications industry, broadly defined, the business of conveying information. Although communication by means of symbols and gestures dates to the beginning of human history, the term generally refers to mass communications. ; the significant indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, expect per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
(unaudited)
-------------------
2004 2003 2004 2003
--------- --------- --------- ---------
OPERATING REVENUES
Communication service
revenues $40,558 $40,890 $160,820 $158,486
Communication products sold 3,445 3,134 12,656 12,255
Other 676 698 2,795 2,384
--------- --------- --------- ---------
Total operating revenues 44,679 44,722 176,271 173,125
--------- --------- --------- ---------
OPERATING EXPENSES
Communication service
expenses (exclusive of
depreciation and
amortization below) 16,165 15,596 65,049 60,846
Cost of communication
products sold 2,728 2,322 10,100 9,317
Depreciation and amortization 9,776 9,854 39,119 38,626
Marketing and customer
services 3,984 3,994 15,977 16,073
Merger-related costs -- -- -- --
General and administrative
services 5,744 6,157 25,079 24,496
--------- --------- --------- ---------
Total operating expenses 38,397 37,923 155,324 149,358
--------- --------- --------- ---------
Operating income 6,282 6,799 20,947 23,767
OTHER INCOME (EXPENSE)
Equity in net losses of
affiliates (1,746) (664) (3,172) (2,537)
Interest expense (3,441) (4,385) (14,389) (18,074)
Gain (loss) on investments (1,057) 790 (1,057) 790
Loss on early extinguishment
of debt (411) -- (5,252) --
Other, net 339 1,042 1,679 1,964
--------- --------- --------- ---------
Total other income
(expense) (6,316) (3,217) (22,191) (17,857)
--------- --------- --------- ---------
Income (loss) from
continuing operations
before income taxes and
dividends on utility
preferred stock (34) 3,582 (1,244) 5,910
INCOME TAXES AND DIVIDENDS ON
UTILITY PREFERRED STOCK
Income taxes 2,386 1,109 1,430 1,968
Dividends on utility
preferred stock 16 16 65 65
--------- --------- --------- ---------
Total income taxes and
dividends on utility
preferred stock 2,402 1,125 1,495 2,033
--------- --------- --------- ---------
Income (loss) from
continuing operations (2,436) 2,457 (2,739) 3,877
Discontinued operations:
Loss from operations of
Paging business, net of
income tax benefit of $27 -- -- -- (53)
--------- --------- --------- ---------
Income (loss) before
cumulative effect of
change in accounting
principle (2,436) 2,457 (2,739) 3,824
Cumulative effect of change in
accounting principle, net of
income taxes of $177 -- -- -- 260
--------- --------- --------- ---------
NET INCOME (LOSS) $(2,436) $2,457 $(2,739) $4,084
========= ========= ========= =========
Weighted average common
shares outstanding (basic) 14,257 15,538 15,057 15,484
Weighted average common
shares outstanding (diluted) 14,257 15,612 15,057 15,541
BASIC AND DILUTED EARNINGS
(LOSS) PER COMMON SHARE
Income (loss) from continuing
operations $(0.17) $0.16 $(0.18) $0.25
Income (loss) from
discontinued operations -- -- -- --
Cumulative effect of
accounting change -- -- -- 0.01
--------- --------- --------- ---------
Net income (loss) per
common share $(0.17) $0.16 $(0.18) $0.26
========= ========= ========= =========
Dividends per common share $0.13 $0.13 $0.50 $0.50
========= ========= ========= =========
D&E COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------
2004 2003
--------- ---------
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $8,517 $12,446
Accounts receivable, net of reserves of $1,024
and $1,410 16,570 20,956
Inventories, lower of cost or market, at average
cost 3,523 3,552
Prepaid expenses 8,466 8,914
Other 2,465 2,804
--------- ---------
TOTAL CURRENT ASSETS 39,541 48,672
--------- ---------
INVESTMENTS
Investments in and advances to affiliated
companies 52 3,611
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
In service 335,883 320,720
Under construction 8,768 5,964
--------- ---------
344,651 326,684
Less accumulated depreciation 162,078 137,533
--------- ---------
182,573 189,151
--------- ---------
OTHER ASSETS
Goodwill 149,032 149,127
Intangible assets, net of accumulated
amortization 167,396 173,594
Other 8,191 11,756
--------- ---------
324,619 334,477
--------- ---------
TOTAL ASSETS $546,785 $575,911
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Long-term debt maturing within one year $10,000 $11,001
Accounts payable and accrued liabilities 18,701 18,507
Accrued taxes 1,819 2,120
Accrued interest and dividends 1,683 1,949
Advance billings, customer deposits and other 11,585 10,323
--------- ---------
TOTAL CURRENT LIABILITIES 43,788 43,900
--------- ---------
LONG-TERM DEBT 218,500 222,765
--------- ---------
OTHER LIABILITIES
Deferred income taxes 86,402 89,958
Other 20,530 17,248
--------- ---------
106,932 107,206
--------- ---------
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
SHAREHOLDERS' EQUITY
Common stock, par value $0.16, authorized
shares: 100,000 at December 31, 2004 and
30,000 at December 31, 2003, Outstanding
shares: 14,268 at December 31, 2004 and
15,547 at December 31, 2003 2,542 2,533
Additional paid-in capital 160,255 159,515
Accumulated other comprehensive income (loss) (6,574) (4,865)
Retained earnings 38,513 48,693
Treasury stock at cost, 1,640 shares at
December 31, 2004 and 307 shares at December
31, 2003 (18,617) (5,282)
--------- ---------
176,119 200,594
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $546,785 $575,911
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