SureWest Reports Third Quarter 2004 Results; Consolidated Revenues up 9%, Broadband Revenues Reach $10 Million.ROSEVILLE Roseville. 1 City (1990 pop. 44,685), Placer co., N central Calif., a suburb of Sacramento in the foothills of the Sierras; inc. 1909. Marked by rapid growth in the late 20th cent. , Calif. -- Integrated communications provider SureWest SureWest is a Roseville, CA based telecommunications company, servicing the Greater Sacramento Valley market. Surewest was founded in 1914 by William Doyle as the Roseville Telephone Company - Surewest became the official name in 2003. Communications (Nasdaq:SURW) announced operating results today for the quarter ended September September: see month. 30, 2004, that illustrate continued strength in its technology initiatives, but cited the incurrence In`cur´rence n. 1. The act of incurring, bringing on, or subjecting one's self to (something troublesome or burdensome); as, the incurrence of guilt, debt, responsibility, etc. s> Noun 1. of compliance-related expenses, an out of period depreciation adjustment and a temporary slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in 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). additions as contributors to a quarterly net loss. Quarter-over-quarter highlights --Broadband segment revenues up 35% --Broadband residential revenues up 84% --Broadband business revenues up 62% --Wireless revenues up 16% --Directory advertising revenues up 9% Revenues for the third quarter of 2004 increased 9% to $53.2 million, from $48.9 million in the third quarter of 2003, and for the nine-month period increased 7% to $156.9 million, up from $146.5 million in the prior year period. Even with the revenue increase, some unusual expenses and special circumstances special circumstances n. in criminal cases, particularly homicides, actions of the accused or the situation under which the crime was committed for which state statutes allow or require imposition of a more severe punishment. in the Broadband segment contributed to a quarterly net loss totaling $1.6 million, or $0.11 per share, compared to net income of $1.5 million, or $0.10 per share in the third quarter of 2003. For the nine months ended September 30, 2004, net income was $340 thousand, or $0.02 per share, compared to $4.9 million, or $.34 per share, in 2003. In the third quarter of 2004, Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before before interest, taxes, depreciation and amortization (defined as Operating EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become and reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. to GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income in the accompanying table) was $11.7 million, compared to $16.6 million in the third quarter of 2003. Operating EBITDA for the nine months ended September 30, 2004, totaled $40.1 million, compared to $48.9 million in the same period of 2003. The company noted the following specific factors that contributed significantly to the loss in the third quarter: --The incurrence of significant Sarbanes-Oxley Act See SOX. compliance costs in the quarter, which increased general and administrative expense by approximately $2.3 million over the 2003 quarter; --An out-of-period adjustment to depreciation expense of approximately $800 thousand. Operationally, Broadband 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. and marketable-homes expansion slowed due to challenges resulting from (i) franchise-required deployment of assets in areas with significantly lower penetration rates, (ii) longer than expected municipal construction guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. implementation, delaying company work, and (iii) actions by competitors that stalled stall 1 n. 1. A compartment for one domestic animal in a barn or shed. 2. a. A booth, cubicle, or stand used by a vendor, as at a market. b. rollouts in areas with potential significant demand for the company's services. "We're we're Contraction of we are. we're we are happy that the market embraces our triple-play digital bundle over IP and we're looking forward to accelerating rollouts in the growth areas north and south of Sacramento Sacramento, city, United States Sacramento (săkrəmĕn`tō), city (1990 pop. 369,365), state capital and seat of Sacramento co., central Calif. over the next couple of quarters," said Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. Strom Strom may refer to the following: Companies
He added, "We believe that our revenue results in the quarter and for the year validate To prove something to be sound or logical. Also to certify conformance to a standard. Contrast with "verify," which means to prove something to be correct. For example, data entry validity checking determines whether the data make sense (numbers fall within a range, numeric data our strategy. Unfortunately, we had high non-core costs this quarter, and because our commitment to Broadband growth currently compresses margins, we recorded a net loss. In Broadband, we passed fewer homes in new housing developments than planned because our competitors were reluctant to meet interconnection in·ter·con·nect v. in·ter·con·nect·ed, in·ter·con·nect·ing, in·ter·con·nects v.intr. To be connected with each other: The two buildings interconnect. v.tr. requirements and one municipality MUNICIPALITY. The body of officers, taken collectively, belonging to a city, who are appointed to manage its affairs and defend its interests. took longer than expected to solidify so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. its build guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. . At the same time, we had to adhere to adhere to verb 1. follow, keep, maintain, respect, observe, be true, fulfil, obey, heed, keep to, abide by, be loyal, mind, be constant, be faithful 2. cable commission requirements to build out some challenging established neighborhoods. "But we've we've Contraction of we have. we've have worked through most of the issues with our competitors, we're negotiating with the cable commission to adapt its requirements to economic realities, and we've trimmed planned capital-expenditures for the full year," Strom continued. "We expect to benefit from a better blend of markets over the next few quarters." As the result of adopting new technologies, SureWest revised its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. network-operating plan in January January: see month. 2004. Subsequent new estimates extended the useful lives of digital switching, circuit and cable equipment, and wireless base stations, towers and network software. The useful lives of some switching and voicemail See voice mail. equipment were also shortened short·en v. short·ened, short·en·ing, short·ens v.tr. 1. To make short or shorter. 2. . These changes are supported by independent, third party evaluation. During the quarter and nine months ended September 30, 2004, the change in estimate decreased consolidated depreciation expense by $2.5 million and $8.4 million, respectively, and increased consolidated net income by $1.5 million, or $0.10 per share, and $4.5 million, or $0.31 per share, respectively. Segment summary At September 30, 2004, the Broadband segment's 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 Protocol-based FTTP (Fiber To The Premises) The installation of optical fiber from the carrier directly into the home or office. Also called "fiber to the home" (FTTH). See PON and FTTC. See also FTP. network served over 34,000 revenue-generating units (primary voice, video and data subscribers), which helped fuel quarterly revenues of $10.0 million. Subscribers to SureWest's market-leading data service, a dedicated 10mbps symmetrical symmetrical equally on both sides. symmetrical multifocal encephalopathy inherited disease in two forms: Limousin form appears at about a month old with blindness, forelimb hypermetria, hyperesthesia, nystagmus, aggression, weight connection, increased by 58% year-over-year to nearly 12,200 in the Sacramento market. Voice RGUs grew by more than 64%. SureWest Broadband also offers fiber service to the small-and-medium-enterprise (SME (1) (Small and Medium-sized Enterprise) See SMB. (2) (Subject Matter Expert) An individual who is well-versed in the policies and procedures of a particular department or division. ) business market, which helped drive a 62% increase in Broadband business revenues. While competition impacted both contract churn churn: see butter. and net contract additions at SureWest Wireless, segment revenues rose 16% compared to the third period last year. In addition, at September 30, 2004, more than 85% percent of SureWest Wireless subscribers were contract customers, up from 78% last year. Further, Operating EBITDA margins showed substantial improvement over the third quarter last year. Telecom segment revenues from local service and network access increased 1.6% year-over-year, but access lines declined by 3.1% in the quarter as substitution Substitution Arsinoë put her own son in place of Orestes; her son was killed and Orestes was saved. [Gk. Myth.: Zimmerman, 32] Barabbas robber freed in Christ’s stead. [N.T.: Matthew 27:15–18; Swed. Lit. , particularly wireless, continues to impact the traditional wireline business. Offsetting these effects were strong increases in both long distance lines in service (up 9.9%) and directory advertising (up over 9%). Additionally, local service revenues benefited from lower estimated shareable earnings obligations. Key items --Active fiber IP network. SureWest's active fiber optic optic /op·tic/ (op´tik) ocular (1). op·tic or op·ti·cal adj. 1. Of or relating to the eye or vision. 2. "network of the future" employs Internet Protocol See Internet and TCP/IP. (networking) Internet Protocol - (IP) The network layer for the TCP/IP protocol suite widely used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless, best-effort packet switching protocol. to deliver packeted voice, video and data service over a Gigabit Ethernet An Ethernet standard that transmits at 1 Gbps. Used mostly to connect high-end workstations and servers as well as for network backbones, Gigabit Ethernet transmits full duplex from point to point using switches and half duplex in a shared environment (CSMA/CD) using a hub. backbone to dedicated, 100mbps fiber-to-the-home connections. By leveraging open systems and standards-based architecture, SureWest is achieving build price points comparable to those in passive optical networks. --High-speed data service. SureWest's FTTP digital triple play customers in the greater Sacramento area receive symmetrical, 10mbps, 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 service, which means upload See download. upload - /uhp'lohd/ To transfer programs or data over a digital communications link from a smaller or peripheral "client" system to a larger or central "host" one. Opposite: download. and download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. speeds are the same. SureWest's data service changes the Internet experience for its customers. --Voice-grade equivalents. ILEC (Incumbent Local Exchange Carrier) A traditional local telephone company such as one of the Regional Bell companies (RBOCs). Contrast with CLEC. See ELEC and TELRIC. voice-grade equivalents (VGEs) showed a modest decrease in the quarter, while 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) ) VGEs were flat. VGEs, which measure the capacity of switched and digital circuits in use, do not reflect either the fiber used by Broadband segment residential customers, or the Ethernet Ethernet Telecommunications networking protocol introduced by Xerox Corp. in 1979. It was developed as an inexpensive way of sending information quickly between office machines connected together in a single room or building, but it rapidly became a standard computer and fiber services used by businesses in both the Telecom and Broadband segments. For example, Ethernet bandwidth bandwidth Measurement of the capacity of a communications signal. For digital signals, the bandwidth is the data speed or rate, measured in bits per second (bps). For analog signals, it is the difference between the highest and lowest frequency components, measured in hertz in use at the CLEC is up nearly 500% in 2004, representing nearly 300,000 VGEs that are not included in standard calculations. Consolidated capital expenditures totaled roughly $16.4 million in the third quarter of 2004, compared to $20.5 million in the third quarter of 2003. Capital expenditures for all of 2004 are expected to approximately $75 million, including roughly $16 million in the remainder of 2004 for residential broadband services See broadband and broadband service provider. . Cash and equivalents at September 30, 2004 totaled $17.7 million, and 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. (excluding the current portion) was $92.8 million. SureWest paid $3.6 million in dividends in the third quarter of 2004, representing a quarterly payment of $0.25 per share. Conference Call and Webcast SureWest Communications will provide details about its results and business strategy on Tuesday Tuesday: see week. , November November: see month. 9, 2004 at 11:00 a.m. Eastern Standard Time. A simultaneous live webcast of the call will be available at www.surw.com and will be archived shortly after the conclusion of the call for replay through the fourth quarter of 2004. Additionally, a telephone replay of the call will be available through Saturday Saturday: see week; Sabbath. , November 13, 2004, by calling 1-888-286-8010 and entering passcode 27816650. About SureWest With 90 years in Northern California Northern California, sometimes referred to as NorCal, is the northern portion of the U.S. state of California. The region contains the San Francisco Bay Area, the state capital, Sacramento; as well as the substantial natural beauty of the redwood forests, the northern , SureWest and its family of companies represent an integrated network A network that supports both data and voice and/or different networking protocols. See converged network and new public network. of highly reliable advanced communications products and services. SureWest provides digital TV, fiber optics fiber optics, transmission of digitized messages or information by light pulses along hair-thin glass fibers. Each fiber is surrounded by a cladding having a high index of refractance so that the light is internally reflected and travels the length of the fiber , PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. wireless, 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 , high-speed Internet See broadband. access, data transport, local and long distance telephone service, and directories with the highest standards of customer care. For more information, visit the SureWest web site at www.surewest.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Statements made in this news release that are not historical facts are 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. and are made pursuant to the safe harbor provisions of the Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Reform Act of 1995. In some cases, these forward-looking statements may be identified by the use of words such as may, will, should, expect, plan, anticipate, or project or the negative of those words or other comparable words. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause the company's actual results to differ from those projected in such forward-looking statements. Important factors that could cause actual results to differ from those set forth in the forward looking statements include, but are not limited to: advances in telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. technology, changes in the telecommunications regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. environment, changes in the financial stability of other telecommunications providers who are customers of the company, changes in competition in markets in which the company operates, adverse circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or affecting the economy in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). in general, and in the Sacramento, California “Sacramento” redirects here. For other uses, see Sacramento (disambiguation). Sacramento is the capital of the State of California and the county seat of Sacramento County. Metropolitan area in particular, the availability of future financing, changes in the demand for services and products, new product and service development and introductions, pending and future litigation, the internal control issues recently identified by the company's independent auditors Independent Auditor An external auditor with a certified public accounting designation that qualifies him or her to provide an auditor's report. Notes: These auditors aren't affiliated with the company being audited. , and unanticipated changes in the growth of the company's emerging businesses, including the wireless, Internet, video and Competitive Local Exchange Carrier operating entities.
SUREWEST COMMUNICATIONS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share amounts)
Quarter Ended Quarter Ended %
September 30, 2004 September 30, 2003 Change
------------------- ------------------- -------
Operating Revenues:
Local service $16,567 $16,021 3.4%
Network access
service 11,940 12,035 -0.8%
Directory advertising 4,151 3,792 9.5%
Long distance service 1,408 1,293 8.9%
Wireless service 8,121 6,995 16.1%
Internet service 4,041 4,068 -0.7%
Residential broadband
service 4,427 2,407 83.9%
Business broadband
service 1,498 927 61.6%
Other 1,086 1,317 -17.5%
------------------- ------------------- -------
Total operating
revenues 53,239 48,855 9.0%
Operating expenses:
Cost of services and
products 21,260 16,507 28.8%
(exclusive of
depreciation
and amortization)
Customer operations
and selling 9,150 8,123 12.6%
General and
administrative 11,154 7,664 45.5%
Depreciation and
amortization 13,192 12,884 2.4%
------------------- ------------------- -------
Total operating
expenses 54,756 45,178 21.2%
------------------- ------------------- -------
Income (loss) from
operations (1,517) 3,677 -141.3%
Other income
(expense):
Interest income 62 104 -40.4%
Interest expense (1,137) (1,242) -8.5%
Other, net (87) 2 nm
------------------- ------------------- -------
Total other
expense, net (1,162) (1,136) 2.3%
------------------- ------------------- -------
Income (loss) before
income taxes (2,679) 2,541 -205.4%
Income tax expense
(benefit) (1,077) 1,039 -203.7%
------------------- ------------------- -------
Net income (loss) $(1,602) $1,502 -206.7%
=================== =================== =======
Basic and diluted
earnings (loss) per
share (1) $(0.11) $0.10 -206.7%
=================== =================== =======
Cash dividends per
share (2) $0.25 $0.25 0.0%
=================== =================== =======
Shares of common stock
used to calculate
earnings (loss) per
share:
Basic 14,531 14,521 0.1%
=================== =================== =======
Diluted 14,531 14,531 0.0%
=================== =================== =======
(1) Shares used in the computation of basic earnings (loss) per share
are based on the weighted average number of common shares
outstanding, excluding unvested restricted common shares. Shares
used in the computation of diluted earnings per share are based on
the weighted average number of common shares and other potentially
dilutive securities outstanding in each period. Shares used in the
computation of diluted loss per share are based on the weighted
average number of common shares and exclude dilutive potential
common shares, as their effect is antidulitive.
(2) Cash dividends per share are based on the actual dividends per
share, as declared by the Company's Board of Directors.
SUREWEST COMMUNICATIONS
YTD CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share amounts)
Nine Months Ended Nine Months Ended %
September 30, 2004 September 30, 2003 Change
------------------ ------------------ -------
Operating Revenues:
Local service $50,400 $47,309 6.5%
Network access service 35,310 39,436 -10.5%
Directory advertising 12,192 11,335 7.6%
Long distance service 3,961 3,803 4.2%
Wireless service 23,170 20,184 14.8%
Internet service 12,461 11,739 6.2%
Residential broadband
service 12,064 6,459 86.8%
Business broadband
service 4,130 2,594 59.2%
Other 3,255 3,623 -10.2%
------------------ ------------------ -------
Total operating
revenues 156,943 146,482 7.1%
------------------ ------------------ -------
Operating expenses:
Cost of services and
products 57,898 47,542 21.8%
(exclusive of depreciation
and amortization)
Customer operations and
selling 26,258 24,675 6.4%
General and
administrative 32,714 25,334 29.1%
Depreciation and
amortization 36,061 37,782 -4.6%
------------------ ------------------ -------
Total operating
expenses 152,931 135,333 13.0%
------------------ ------------------ -------
Income from operations 4,012 11,149 -64.0%
Other income (expense):
Interest income 165 376 -56.1%
Interest expense (3,294) (3,336) -1.3%
Other, net (245) 111 -320.7%
------------------ ------------------ -------
Total other expense,
net (3,374) (2,849) 18.4%
------------------ ------------------ -------
Income before income
taxes 638 8,300 -92.3%
Income tax expense 298 3,410 -91.3%
------------------ ------------------ -------
Net income $340 $4,890 -93.0%
================== ================== =======
Basic and diluted
earnings per share (1) $0.02 $0.34 -94.1%
================== ================== =======
Cash dividends per share
(2) $0.75 $0.75 0.0%
================== ================== =======
Shares of common stock
used to calculate
earnings per share:
Basic 14,535 14,521 0.1%
================== ================== =======
Diluted 14,581 14,535 0.3%
================== ================== =======
(1) Shares used in the computation of basic earnings per share are
based on the weighted average number of common shares outstanding,
excluding unvested restricted common shares. Shares used in the
computation of diluted earnings per share are based on the
weighted average number of common and other potentially dilutive
securities outstanding in each period.
(2) Cash dividends per share are based on the actual dividends per
share, as declared by the Company's Board of Directors.
SUREWEST COMMUNICATIONS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
September 30, December 31,
2004 2003
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $17,705 $39,008
Short-term investments - 2,699
Accounts receivable, net 21,339 18,846
Deferred income tax asset 209 209
Inventories 5,565 5,537
Deferred directory costs 4,632 5,320
Prepaid expenses 3,191 2,544
Prepaid pension benefits 2,056 896
-------------- -------------
Total current assets 54,697 75,059
Property, plant and equipment, net 357,527 342,967
Intangible and other assets:
Wireless spectrum licenses, net 13,566 13,566
Goodwill 2,171 2,171
Intangible asset relating to pension
plans 125 125
Intangible asset relating to favorable
operating leases, net 542 649
Deferred charges and other assets 624 672
-------------- -------------
17,028 17,183
-------------- -------------
$429,252 $435,209
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $3,779 $3,779
Current portion of capital lease
obligations 292 347
Accounts payable 3,830 2,206
Other accrued liabilities 16,595 14,727
Estimated shareable earnings
obligations 12,642 13,389
Advance billings and deferred revenues 9,166 9,882
Accrued income taxes 1,379 1,908
Accrued compensation 5,579 4,860
-------------- -------------
Total current liabilities 53,262 51,098
SUREWEST COMMUNICATIONS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
(Continued)
September 30, December 31,
2004 2003
------------- -------------
Long-term debt 92,763 92,870
Long-term capital lease obligations 62 265
Deferred income taxes 26,368 25,946
Other liabilities and deferred revenues 9,179 7,502
Commitments and contingencies
Shareholders' equity:
Common stock, without par value; 100,000
shares authorized, 14,582 and 14,578
shares issued and outstanding at
September 30, 2004 and December 31,
2003,
respectively 161,015 160,911
Deferred stock-based compensation (840) (1,419)
Accumulated other comprehensive loss (261) (261)
Retained earnings 87,704 98,297
------------- -------------
Total shareholders' equity 247,618 257,528
------------- -------------
$429,252 $435,209
============= =============
OPERATING EBITDA RECONCILIATION TO NET INCOME
(Unaudited)
(Amounts in thousands)
Quarter Ended September 30, 2004
Telecom Broadband Wireless Consol
Net income/(loss) $7,034 ($5,937) ($2,699)($1,602)
Add back : Income Taxes 4,859 (4,062) (1,874) (1,077)
Less : Other Income/(Expense),
Net (48) (539) (575) (1,162)
Add back : Depreciation &
Amortization 6,192 3,981 3,019 13,192
-------- --------- -------- --------
Operating EBITDA (1) $18,133 ($5,479) ($979)$11,675
======== ========= ======== ========
Quarter Ended September 30, 2003
Telecom Broadband Wireless Consol
Net income/(loss) $7,500 ($2,546) ($3,452) $1,502
Add back : Income Taxes 5,197 (1,759) (2,399) 1,039
Less : Other Income/(Expense),
Net (34) (641) (461) (1,136)
Add back : Depreciation &
Amortization 7,811 1,148 3,925 12,884
--------- --------- -------- --------
Operating EBITDA (1) $20,542 ($2,516) ($1,465) $16,561
========= ========= ======== ========
(1) Operating EBITDA represents net income (loss) excluding amounts
for income taxes, depreciation and amortization and all other non-
operating income/expenses, and is a common measure of operating
performance in the telecommunications industry. Operating EBITDA
is not a measure of financial performance under generally accepted
accounting principles and should not be construed as a substitute
for consolidated net income as a measure of performance.
OPERATING EBITDA RECONCILIATION TO NET INCOME
(Unaudited)
(Amounts in thousands)
Nine Months Ended September 30, 2004
Telecom Broadband Wireless Consol
Net income/(loss) $22,872 ($14,446) ($8,086) $340
Add back : Income Taxes 15,819 (9,903) (5,618) 298
Less : Other Income/(Expense),
Net (257) (1,648) (1,469) (3,374)
Add back : Depreciation &
Amortization 18,719 8,270 9,072 36,061
-------- --------- -------- --------
Operating EBITDA (1) $57,667 ($14,431) ($3,163) $40,073
======== ========= ======== ========
Nine Months Ended September 30, 2003
Telecom Broadband Wireless Consol
Net income/(loss) $22,596 ($7,867) ($9,839) $4,890
Add back : Income Taxes 15,659 (5,412) (6,837) 3,410
Less : Other Income/(Expense),
Net 7 (1,521) (1,335) (2,849)
Add back : Depreciation &
Amortization 23,261 2,962 11,559 37,782
-------- --------- -------- --------
Operating EBITDA (1) $61,509 ($8,796) ($3,782) $48,931
======== ========= ======== ========
(1) Operating EBITDA represents net income (loss) excluding amounts
for income taxes, depreciation and amortization and all other non-
operating income/expenses, and is a common measure of operating
performance in the telecommunications industry. Operating EBITDA
is not a measure of financial performance under generally accepted
accounting principles and should not construed as a substitute of
consolidated net income as a measure of performance.
SUREWEST COMMUNICATIONS
Selected Operating Metrics
As of and for the quarter ended
September September %
30, 2004 30, 2003 Change
--------------- --------------- ------
LINE SUMMARY
ILEC access lines 132,981 137,225 -3.1%
Broadband access lines (1) 12,454 7,845 58.8%
Total SureWest access lines 145,435 145,070 0.3%
TELECOM
ILEC access lines 132,981 137,225 -3.1%
ILEC voice-grade equivalents (2) 448,600 451,400 -0.6%
Long distance lines 46,191 42,048 9.9%
Long distance penetration 34.7% 30.6% 13.4%
BROADBAND
CLEC access lines 1,770 1,360 30.1%
CLEC voice-grade equivalents (2) 141,700 141,200 0.4%
DSL data subscribers 21,223 19,164 10.7%
DSL IPTV subscribers 891 - nm
FTTP marketable homes 62,100 40,100 54.9%
FTTP subscribers 14,690 9,437 55.7%
Total FTTP revenue-generating
units (RGUs) (3) 34,306 21,868 56.9%
Voice RGUs 10,684 6,485 64.7%
Video RGUs 11,456 7,666 49.4%
Data RGUs 12,166 7,717 57.7%
FTTP marketable homes
penetration 23.7% 23.5% 0.5%
FTTP churn 1.9% 1.7% -11.8%
FTTP ARPU $100.37 $97.75 2.7%
WIRELESS
Total subscribers 49,072 45,175 8.6%
Contract subscribers 41,897 35,301 18.7%
POPs (4) 3,477,000 3,422,000 1.6%
POPs covered (4) 2,711,000 2,670,000 1.5%
Net contract additions 1,274 2,262 -43.7%
Net non-contract additions -733 -1,577 53.5%
Contract churn (5) 3.4% 3.2% -6.3%
ARPU (6) $51.02 $47.11 8.3%
(1) The sum of CLEC access lines and FTTP voice RGUs.
(2) Voice-grade equivalents are calculated by dividing the capacity of
all circuits in use by 64 kilobits (bandwidth representing a voice
access line), excluding ethernet service and Broadband FTTP data
RGUs. DSL VGEs are counted as two 64 kbps channels.
(3) Revenue-generating units (RGUs) are the sum of all primary digital
video, telephony and high-speed data connections, excluding
additional units.
(4) POPs and POPs Covered were previously reported as 3.3M and 2.8M,
respectively, at September 30, 2003. These have been adjusted for
comparison to 2004 figures, which reflect a more precise
measurement methodology.
(5) Quarterly turnover in contract customers (total contract customer
disconnects divided by sum of monthly average contract
subscribers).
(6) Wireless average monthly revenue per subscriber is monthly revenue
excluding equipment, insurance and collocation revenues. 2003 has
been recalculated to exclude collocation revenues as well.
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