D&E Communications Reports Third Quarter 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 following unaudited operating results:
(Unaudited)
(in thousands, except per share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 Change 2004 2003 Change
-------- -------- -------- --------- --------- --------
Operating
Revenues $43,692 $43,031 $ 661 $131,592 $128,403 $ 3,189
Operating
Income 4,460 5,298 (838) 14,665 16,968 (2,303)
Income (Loss)
from
Continuing
Operations 719 155 564 (304) 1,420 (1,724)
Loss from
Discontinued
Operations --- --- --- --- (53) 53
Change
Accounting
Principle --- --- --- --- 260 (260)
Net Income
(Loss) 719 155 564 (304) 1,627 (1,931)
Basic and
Diluted
Earnings
(Loss) Per
Common Share $ 0.05 $ 0.01 $ 0.04 ($0.02) $ 0.11 ($0.13)
D&E reported quarterly revenues of $43.7 million, up 1.5% from $43.0 million in the third quarter of 2003. The increase was due to growth in sales of dedicated data circuits and leased facilities in our RLEC RLEC Rural Local Exchange Carrier RLEC Report Log Exception Condition and 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) segments of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.7 million and increased directory revenue of $0.3 million offset, by $0.5 million decrease in long distance revenue. 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. in the quarter ended September September: see month. 30, 2004, was $4.5 million, compared to $5.3 million in the third quarter of 2003. The operating income decrease was primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to cost increases, including wage and benefit costs of $1.0 million and directory expenses of $0.2 million, which more than offset the increased revenues described above. Employee costs were lower in the RLEC, but increased in all other segments. The video service trial we have been conducting, which is not part of a segment but is reported as part of the corporate and other amounts, also contributed to the decrease in operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. . Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the was $0.7 million in 2004, compared with an income of $0.2 million in the prior year. Income from continuing operations was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by a decrease in interest expense of $1.0 million due to lower interest rates as a result of our debt refinancing Refinancing An extension and/or increase in amount of existing debt. in March 2004 and the voluntary principal payment on long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. of $10 million in the second quarter of 2004. Net income was $0.7 million, or $0.05 per share, for the third quarter of 2004 compared to net income of $0.2 million, or $0.01 per share, in the comparable period of 2003. For the nine months ended September 30, 2004, revenues were $131.6 million, up 2.5% from $128.4 million in 2003. The sale of assets of Conestoga Wireless in January January: see month. of 2003 resulted in a decrease in revenue of $0.5 million from the prior year. Operating income in the nine months ended September 30, 2004, was $14.7 million, compared to $17.0 million in the prior year. The loss from continuing operations was $0.3 million in 2004, compared with an income of $1.4 million in the prior year. The loss from continuing operations for the nine months ended September 30, 2004 included a $4.8 million ($3.0 million, or $0.19 per common share, after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ) one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. loss 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. Results of Operations The following table is a summary of our operating results by segment for the three months ended September 30, 2004 and 2003:
Dollars in Thousands Internet
RLEC CLEC Services
-------- -------- ---------
September 30, 2004
------------------
Revenues - External $24,691 $ 9,212 $ 2,565
Revenues - Intercompany 2,406 389 4
-------- -------- ---------
Total Revenues 27,097 9,601 2,569
-------- -------- ---------
Depreciation and Amortization 7,716 1,041 280
Other Operating Expenses 12,955 9,397 2,192
-------- -------- ---------
Total Operating Expenses 20,671 10,438 2,472
-------- -------- ---------
Operating Income (Loss) $ 6,426 $ (837) $ 97
======== ======== =========
September 30, 2003
------------------
Revenues - External $26,698 $ 8,761 $ 1,543
Revenues - Intercompany 1,853 219 154
-------- -------- ---------
Total Revenues 28,551 8,980 1,697
-------- -------- ---------
Depreciation and Amortization 7,991 1,011 207
Other Operating Expenses 12,346 9,125 1,657
-------- -------- ---------
Total Operating Expenses 20,337 10,136 1,864
-------- -------- ---------
Operating Income (Loss) $ 8,214 $(1,156) $ (167)
======== ======== =========
Dollars in Thousands Corporate,
Systems Other and Total
Integration Eliminations Company
------------ ------------- --------
September 30, 2004
------------------
Revenues - External $ 6,223 $ 1,001 $43,692
Revenues - Intercompany 18 (2,817) --
------------ ------------- --------
Total Revenues 6,241 (1,816) 43,692
------------ ------------- --------
Depreciation and Amortization 443 244 9,724
Other Operating Expenses 6,894 (1,930) 29,508
------------ ------------- --------
Total Operating Expenses 7,337 (1,686) 39,232
------------ ------------- --------
Operating Income (Loss) $ (1,096) $ (130) $ 4,460
============ ============= ========
September 30, 2003
------------------
Revenues - External $ 5,485 $ 544 $43,031
Revenues - Intercompany 7 (2,233) --
------------ ------------- --------
Total Revenues 5,492 (1,689) 43,031
------------ ------------- --------
Depreciation and Amortization 375 61 9,645
Other Operating Expenses 6,182 (1,222) 28,088
------------ ------------- --------
Total Operating Expenses 6,557 (1,161) 37,733
------------ ------------- --------
Operating Income (Loss) $ (1,065) $ (528) $ 5,298
============ ============= ========
Third Quarter Segment Results Total RLEC revenues decreased 5.1%, to $27.1 million in the third quarter of 2004, from $28.6 million in the same period last year. Local telephone service revenues decreased partially as a result of decreasing access lines and network access revenues decreased from lower settlement rates, from decreased minutes of use and from a revision (programming) revision - A release of a piece of software which is not a major release or a bugfix, but only introduces small changes or new features. to our National Exchange Carrier Association (NECA NECA National Electrical Contractors Association NECA National Exchange Carrier Association NECA National Electrical and Communications Association (Australia) NECA National Electricity Code Administrator (Australia) ) overearnings liability estimate. Both local and network access revenues were affected positively from growth in dedicated data circuits and leased facilities. Other revenue changes include an increase in directory advertising revenue offset by decreases in regional long distance toll service and equipment sales. RLEC operating income decreased 21.8%, to $6.4 million (23.7% of revenue), in the third quarter of 2004 compared to $8.2 million (28.8% of revenue) in the same period last year. Total CLEC revenues grew 6.9% for the third quarter of 2004, to $9.6 million from $9.0 million in the same period last year, driven by new customer additions. The increase was related to the addition of access lines for new customers and growth in dedicated data circuits, which increased local telephone service and network access revenues. Long distance revenues decreased approximately $0.3 million due to rate reductions and decreased minutes of use. The CLEC operating loss 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. decreased 27.6%, to a $0.8 million loss (negative 8.7% of revenue), in the third quarter of 2004 compared to a $1.2 million loss (negative 12.9% of revenue) in the same period last year. The 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 Services segment revenues grew 51.4% for the third quarter of 2004, to $2.6 million from $1.7 million in the same period of last year. The increase resulted from growth in the number of 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 customers and web hosting Making a Web site available on the Internet. Many ISPs host a few personal Web pages for an individual at no additional cost above the monthly service fee, but the address is subordinate to the ISP; for example, www.friendlyisp.com/pat_smith. subscribers. Effective October October: see month. 2003, the Internet segment began selling DSL data transmission services in addition to DSL Internet connection services, which increased revenue by $0.7 million. Operating income for this segment increased to $0.1 million (3.8% of revenue), in the third quarter of 2004 from a $0.2 million operating loss (negative 9.8% revenue) in the same period last year. Systems Integration revenues increased 13.6% for the third quarter of 2004 to $6.2 million from $5.5 million in the third quarter 2003. The increase included $0.4 million in communication services revenue and $0.3 million in telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and computer equipment sales. The Systems Integration operating loss was a $1.1 million loss (negative 17.6% of revenue), in the third quarter of 2004 and in the third quarter of 2003, (negative 19.4% of revenue). Selected Operating Statistics
September 30, 2004 September 30, 2003 Change
------------------ ------------------ ------
RLEC Lines 140,243 143,870 -2.5%
CLEC Lines 37,398 (1) 35,106 +6.5%
DSL Subscribers 10,008 6,734 +48.6%
Dial-up Subscribers 12,071 12,855 -6.1%
Web Hosting Customers 901 795 +13.3%
(1) The number of CLEC lines reported in this report has been
adjusted cumulatively to include 110 lines as of December 31, 2003,
362 as of March 31, 2004, and 700 lines as of June 30, 2004 associated
with one customer which were not included in our CLEC access line
counts for the previous periods, beginning in the fourth quarter of
2003.
Other Matters On October 22, 2004, D&E reported on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. that previously issued financial statements for the first and second quarters of 2004 should not be relied upon and would be restated to make certain necessary accounting adjustments. The financial statements were amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. to restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state the loss on early extinguishment of debt related to a syndicated senior secured debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay completed on March 5, 2004. D&E reported a loss on extinguishment of debt, consisting of a non-cash write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of unamortized debt issuance costs of the previous credit facility and the expensing of debt issuance costs related to the new credit facility. Additionally, D&E capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. certain debt issuance costs related to the new facility. Management of the Company concluded that the loss on extinguishment of debt recorded in connection with such financing was overstated o·ver·state tr.v. o·ver·stat·ed, o·ver·stat·ing, o·ver·states To state in exaggerated terms. See Synonyms at exaggerate. o as a result of the misapplication misapplication, n the use of incorrect or improper procedures while administering treatment; results from inadequacy in experience, training, skills, or knowledge. May also result from impairment or incompetence. of the accounting guidance of EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation 96-19, "Debtor's Accounting for a Modification A change or alteration in existing materials. Modification generally has the same meaning in the law as it does in common parlance. The term has special significance in the law of contracts and the law of sales. or Exchange of Debt Instruments" and EITF 98-14, "Debtor's Accounting for the Changes in Line-of-Credit or Revolving Debt Arrangements." Amended reports on Form 10-Q/A for the quarters ended March 31, 2004 and June June: see month. 30, 2004 have been filed with the Securities and Exchange Commission. 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 risk that the Conestoga and D&E billing systems will not successfully be converted into a single billing system; 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 outcome of our trial of video services; 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. is a leading provider of integrated communications services to residential and business customers in markets throughout central and eastern Pennsylvania. D&E offers its customers a comprehensive package of communications services including local and long distance telephone service, high speed data services and Internet access See how to access the Internet. service. D&E also provides business customers with systems integration services including voice and data network solutions.
D&E Communications, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per-share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------- -------------------
September 30, September 30,
------------------- -------------------
OPERATING REVENUES 2004 2003 2004 2003
--------- --------- --------- ---------
Communication service
revenues $ 39,877 $ 39,764 $120,261 $117,596
Communication products sold 3,225 2,778 9,210 9,121
Other 590 489 2,121 1,686
--------- --------- --------- ---------
Total operating revenues 43,692 43,031 131,592 128,403
--------- --------- --------- ---------
OPERATING EXPENSES
Communication service
expenses (exclusive of
depreciation and
amortization below) 17,033 15,822 48,884 45,250
Cost of communication
products sold 2,547 1,979 7,372 6,995
Depreciation and amortization 9,724 9,645 29,343 28,772
Marketing and customer
services 3,845 4,149 11,992 12,079
General and administrative
services 6,083 6,138 19,336 18,339
--------- --------- --------- ---------
Total operating expenses 39,232 37,733 116,927 111,435
--------- --------- --------- ---------
Operating income 4,460 5,298 14,665 16,968
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Equity in net losses of
affiliates (576) (513) (1,426) (1,873)
Interest expense (3,456) (4,492) (10,947) (13,689)
Loss on early extinguishment
of debt -- -- (4,841) --
Other, net 346 (6) 1,339 922
--------- --------- --------- ---------
Total other income
(expense) (3,686) (5,011) (15,875) (14,640)
--------- --------- --------- ---------
Income (loss) from
continuing operations
before income taxes and
dividends on utility
preferred stock 774 287 (1,210) 2,328
INCOME TAXES AND DIVIDENDS ON
UTILITY PREFERRED STOCK
Income taxes (benefit) 39 116 (955) 859
Dividends on utility
preferred stock 16 16 49 49
--------- --------- --------- ---------
Total income taxes and
dividends on utility
preferred stock 55 132 (906) 908
--------- --------- --------- ---------
Income (loss) from
continuing operations 719 155 (304) 1,420
Discontinued operations:
Loss from operations of
discontinued Paging
business, net of income tax
benefit of $27 -- -- -- (53)
--------- --------- --------- ---------
Income (loss) before
cumulative effect of
change in accounting
principle 719 155 (304) 1,367
Cumulative effect of change in
accounting principle,
net of income taxes of $177 -- -- -- 260
--------- --------- --------- ---------
NET INCOME (LOSS) $ 719 $ 155 $ (304) $ 1,627
========= ========= ========= =========
Weighted average common
shares outstanding (basic) 14,867 15,522 15,325 15,465
Weighted average common
shares outstanding (diluted) 14,910 15,591 15,325 15,526
BASIC AND DILUTED EARNINGS
(LOSS) PER COMMON SHARE
Income (loss) from continuing
operations $ 0.05 $ 0.01 $ (0.02) $ 0.09
Income (loss) from
discontinued operations 0.00 0.00 0.00 0.00
Cumulative effect of
accounting change 0.00 0.00 0.00 0.02
--------- --------- --------- ---------
Net income (loss) per
common share $ 0.05 $ 0.01 $ (0.02) $ 0.11
========= ========= ========= =========
Dividends per common share $ 0.13 $ 0.13 $ 0.38 $ 0.38
========= ========= ========= =========
D&E Communications, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
(Unaudited)
Sept. 30, Dec. 31,
ASSETS 2004 2003
--------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 6,399 $ 12,446
Accounts receivable, net of reserves of $1,205
and $1,410 17,552 20,956
Inventories, lower of cost or market, at average
cost 3,551 3,552
Prepaid expenses 6,082 8,914
Other 1,704 1,141
--------- ---------
TOTAL CURRENT ASSETS 35,288 47,009
--------- ---------
INVESTMENTS
Investments in and advances to affiliated
companies 2,477 3,611
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
In service 327,175 320,720
Under construction 13,078 5,964
--------- ---------
340,253 326,684
Less accumulated depreciation 156,986 137,533
--------- ---------
183,267 189,151
--------- ---------
OTHER ASSETS
Goodwill 149,045 149,127
Intangible assets, net of accumulated
amortization 168,945 173,594
Other 8,392 11,756
--------- ---------
326,382 334,477
--------- ---------
TOTAL ASSETS $547,414 $574,248
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Long-term debt maturing within one year $ 9,125 $ 11,001
Accounts payable and accrued liabilities 20,222 18,507
Accrued taxes 932 2,120
Accrued interest and dividends 1,749 1,949
Advance billings, customer deposits and other 7,406 10,323
--------- ---------
TOTAL CURRENT LIABILITIES 39,434 43,900
--------- ---------
LONG-TERM DEBT 221,000 222,765
--------- ---------
OTHER LIABILITIES
Deferred income taxes 86,478 88,295
Other 16,422 17,248
--------- ---------
102,900 105,543
--------- ---------
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 September 30, 2004 and 30,000 at
December 31, 2003 2,539 2,533
Outstanding shares:
14,254 at September 30, 2004 and
15,547 at December 31, 2003
Additional paid-in capital 160,091 159,515
Accumulated other comprehensive income (loss) (4,107) (4,865)
Retained earnings 42,728 48,693
Treasury stock at cost, 1,640 shares at September
30, 2004 and 307 shares at December 31, 2003 (18,617) (5,282)
--------- ---------
182,634 200,594
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $547,414 $574,248
========= =========
D&E Communications, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
2004 2003
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES OF
CONTINUING OPERATIONS $ 34,824 $32,109
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net of proceeds from sales (16,554) (14,139)
Proceeds from Conestoga Wireless and Paging sales -- 10,176
Increase in investments and advances to affiliates (446) (1,199)
Decrease in investments and repayments from
affiliates 154 189
--------- --------
Net Cash Used In Investing Activities from
Continuing Operations (16,846) (4,973)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on common stock (5,425) (5,546)
Payments on long-term debt (213,640) (12,364)
Proceeds from long-term debt financing 210,000 12,000
Payment of debt issuance costs (1,971) --
Proceeds from issuance of common stock 346 951
Purchase of treasury stock (13,335) --
--------- --------
Net Cash Used In Financing Activities
from Continuing Operations (24,025) (4,959)
--------- --------
CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS (6,047) 22,177
CASH USED IN DISCONTINUED OPERATIONS
Cash Used in Operating Activities of
Discontinued Operations -- (20,553)
--------- --------
Net Cash Used In Discontinued Operations -- (20,553)
--------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,047) 1,624
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 12,446 15,514
--------- --------
END OF PERIOD $ 6,399 $17,138
========= ========
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