<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
-----------------------------------------------
- or -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------------------
Commission file number 0-13721
HICKORY TECH CORPORATION
P.O. Box 3248
221 East Hickory Street
Mankato, Minnesota 56002-3248
(800) 326-5789
Incorporated in Minnesota I.R.S. Employer Identification
41-1524393
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X]
The number of shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date: 4,534,146 shares of no par common
stock as of September 30, 1997.
<PAGE>
HICKORY TECH CORPORATION
SEPTEMBER 30, 1997
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED INCOME STATEMENT
(NOT AUDITED)
In Thousands For Quarter Ended For 9 Months Ended
------------------- --------------------
9-30-97 9-30-96 9-30-97 9-30-96
-------- -------- -------- --------
OPERATING REVENUES
Telephone $11,166 $8,276 $31,414 $25,354
Billing and Data Services 2,284 2,256 6,892 7,052
Equipment Sales 3,805 4,455 11,805 10,774
Telecom. Product Development 2,250 1,652 6,183 4,942
-------- ------- ------- --------
TOTAL OPERATING REVENUES 19,505 16,639 56,294 48,122
COSTS AND EXPENSES
Cost of Sales 4,066 4,260 12,401 10,705
Operating Expenses 8,110 6,507 22,854 20,319
Depreciation 1,780 1,315 4,932 4,063
Amortization of Intangibles 323 310 873 1,494
-------- ------- ------- --------
TOTAL COSTS AND EXPENSES 14,279 12,392 41,060 36,581
-------- ------- ------- --------
OPERATING INCOME 5,226 4,247 15,234 11,541
OTHER INCOME 506 202 1,259 612
GAIN ON SALE OF DIRECTV ASSETS 6,345 - 6,345 -
INTEREST EXPENSE (685) (7) (1,405) (144)
-------- ------- ------- --------
INCOME BEFORE INCOME TAXES 11,392 4,442 21,433 12,009
INCOME TAXES 4,730 1,809 8,893 4,789
-------- ------- ------- --------
CONSOLIDATED NET INCOME $6,662 $2,633 $12,540 $7,220
-------- ------- ------- --------
-------- ------- ------- --------
EARNINGS PER SHARE $1.46 $0.54 $2.71 $1.43
DIVIDENDS PER SHARE $0.30 $0.275 $0.90 $0.825
The accompanying notes are an integral part of the financial statements.
<PAGE>
HICKORY TECH CORPORATION
SEPTEMBER 30, 1997
CONSOLIDATED BALANCE SHEET (NOT AUDITED)
In Thousands 9/30/97 12/31/96
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $2,228 $2,954
Receivables, Net of Allowance 13,847 10,782
Inventories 2,368 2,859
Deferred Tax Benefit and Other 1,271 1,372
---------- ----------
TOTAL CURRENT ASSETS 19,714 17,967
INVESTMENTS 3,379 2,980
PROPERTY, PLANT & EQUIPMENT:
Telecommunications Plant 108,375 78,132
Other Property and Equipment 10,340 9,464
---------- ----------
TOTAL 118,715 87,596
Less Accumulated Depreciation 62,434 46,723
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 56,281 40,873
OTHER ASSETS:
Intangible Assets 30,612 8,735
Note Receivable 65 230
Miscellaneous 480 478
---------- ----------
TOTAL OTHER ASSETS 31,157 9,443
---------- ----------
TOTAL ASSETS $110,531 $71,263
---------- ----------
---------- ----------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Taxes $7,622 $9,396
Advanced Billings & Deposits 2,297 2,080
Current Maturities of Long-Term Debt - 212
---------- ----------
TOTAL CURRENT LIABILITIES 9,919 11,688
LONG-TERM DEBT, NET OF CURRENT MATURITIES 41,038 877
DEFERRED CREDITS:
Income Taxes and Credits 2,872 2,921
Compensation Benefits and Other 3,105 3,150
---------- ----------
TOTAL DEFERRED CREDITS 5,977 6,071
SHAREHOLDERS' EQUITY:
Common Stock 453 479
Additional Paid-In Capital 1,983 1,778
Reinvested Earnings 51,161 50,370
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 53,597 52,627
---------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $110,531 $71,263
---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
HICKORY TECH CORPORATION
SEPTEMBER 30, 1997
CONSOLIDATED STATEMENT OF CASH FLOWS (NOT AUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
In Thousands 9/30/97 9/30/96
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $12,540 $7,220
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Depreciation and Amortization 5,937 5,721
Equity in Subsidiary Income (569) (419)
Provision for Losses on Notes Rec. & Investments 375 195
Gain from Disposition of Assets (6,886) 0
Changes in Assets and Liabilities Net of
Effects of Acquisitions and Dispositions:
(Increase) Decrease in:
Receivables (3,065) (1,598)
Inventories 491 (332)
Increase (Decrease) in:
Accounts Payable and Accrued Taxes (1,774) (1,434)
Advanced Billings & Deposits 217 19
Deferred Income Taxes and Credits (49) 60
Other 54 (401)
--------- ---------
Net Cash Provided by Operating Activities 7,271 9,031
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant & Equipment (21,119) (3,936)
Additions to Intangible Assets (22,750) (1,071)
(Increase) Decrease in Note Receivable and Investments (40) 118
Decrease in Temporary Cash Investments 0 7,176
Proceeds from Sale of Assets 7,533 0
--------- ---------
Net Cash Provided by (Used in) Investing Activities (36,376) 2,287
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of Debt (51) (153)
Increase in Long-Term Debt 40,000 0
Proceeds from Issuance of Common Stock 309 549
Acquisition of Common Stock (7,711) (8,810)
Dividends Paid (4,168) (4,155)
--------- ---------
Net Cash Provided by (Used in) Financing Activities 28,379 (12,569)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (726) (1,251)
CASH AND CASH EQUIVALENTS At Beginning of Year 2,954 4,517
--------- ---------
CASH AND CASH EQUIVALENTS At End of Period $2,228 $3,266
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
HICKORY TECH CORPORATION
SEPTEMBER 30, 1997
PART 1. FINANCIAL INFORMATION
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
The preceding, not audited, Consolidated Statement of Income, Balance
Sheet and Statement of Cash Flows include all adjustments which are, in the
opinion of management, necessary to present a fair statement of the results for
the interim periods being reported.
NOTE 1. BASIS OF CONSOLIDATION
The Registrant is a communications holding company headquartered in
Mankato, Minnesota. The consolidated financial statements of the Registrant
include Hickory Tech Corporation, the parent company, and its eight wholly-owned
operating subsidiaries. The companies and operations of the Registrant are
grouped into four primary lines of business.
MANKATO CITIZENS TELEPHONE COMPANY, MID-COMMUNICATIONS, INC., AMANA
COLONIES TELEPHONE COMPANY and HEARTLAND TELECOMMUNICATIONS COMPANY OF IOWA are
local exchange telephone companies. Mankato Citizens Telephone Company and Mid-
Communications, Inc. provide telephone service in south central Minnesota,
specifically, Mankato (population 42,000) and eleven communities surrounding
Mankato. CABLE NETWORK, INC. owns and operates fiber optic cable facilities in
southern Minnesota which are used to transport interexchange communications as a
service to telephone exchange carriers. It also holds a minority ownership
interest in a rural cellular limited liability company in south central
Minnesota. Amana Colonies Telephone Company provides telephone service for the
seven communities of the Amana Colonies in east central Iowa. Heartland
Telecommunications Company of Iowa provides telephone service for eleven
communities in northwest Iowa. These five subsidiaries comprise the Registrant's
Telephone Sector.
NATIONAL INDEPENDENT BILLING, INC.(NIBI)(formerly COMPUTOSERVICE,
INC.) provides data processing service to local telephone companies,
interexchange long distance companies and enhanced service providers throughout
the United States. NIBI also provides standard batch processing of telephone
billing and rating in large volume applications, as well as specialized contract
data processing services. During the third quarter 1997, NIBI was merged with
its parent Computoservice, Inc. (CSI). CSI's name was then changed to NIBI.
The operations of NIBI constitute the Registrant's Billing and Data Services
Sector.
COLLINS COMMUNICATIONS SYSTEMS CO. (Collins) sells, installs and
services telecommunications equipment in the retail market in the metropolitan
Minneapolis/St. Paul area. Collins primarily installs and maintains Nortel PBX
and key system equipment and integrated software. The Registrant's Equipment
Sales Sector is comprised of this subsidiary.
DIGITAL TECHNIQUES, INC. (DTI) designs, assembles and distributes
unique business telecommunications components for business telephone systems
throughout North America, the United Kingdom and the Pacific Rim. The operations
comprise the Registrant's Telecommunications Product Development Sector.
The accounting policies of the Registrant are in conformity with
generally accepted accounting principles and, where applicable, conform to the
accounting principles as prescribed by federal and state telephone utility
regulatory authorities.
<PAGE>
All intercompany transactions have been eliminated from the
consolidated financial statements.
Certain balances for 1996 have been restated to conform with
presentation of 1997 balances. In the quarter ended September 30, 1996 and
the nine month period ended September 30, 1996, $601,000 and $1,768,000
respectively, of revenues associated with Equipment Sales in southern
Minnesota and Iowa were reclassified from the Equipment Sales Sector to the
Telephone Sector. This reclassification more closely matches the Registrant's
management reporting lines. Total revenues and all other subtotals of the
Consolidated Income Statement remain unchanged.
NOTE 2. EARNINGS AND CASH DIVIDENDS PER COMMON SHARE
Earnings per common share are based on the weighted average number
of shares of common stock outstanding during all periods. For the quarter
ended September 30, 1997, the earnings per common share calculation was based
on 4,558,131 shares. For the nine months ended September 30, 1997, the
calculation was based on 4,627,579 shares. For the quarter ended September
30, 1996, the earnings per common share calculation was based on 4,893,604
shares. For the nine months ended September 30, 1996, the calculation was
based on 5,032,022 shares. Shares outstanding on September 30, 1997 were
4,534,146.
Cash dividends are based on the number of common shares outstanding at the
respective record dates. Shares outstanding as of the record date for the first,
second and third quarters of 1997 and 1996 were as follows:
Shares Outstanding on Record Date 1997 1996
-------------------------------- --------- ---------
1st Quarter (Feb 15) 4,733,981 5,121,873
2nd Quarter (May 15) 4,608,924 5,098,119
3rd Quarter (Aug 15) 4,551,550 4,890,679
NOTE 3. INVENTORIES
Inventories are stated at the lower of average cost or market and
consist of the following:
(In Thousands) 9/30/97 12/31/96
-------------- ------- --------
Finished Goods $ 200 $ 211
Work in Process 112 156
Materials and Supplies 2,056 2,492
------- --------
Total $ 2,368 $ 2,859
------- --------
------- --------
NOTE 4. COMMON STOCK
The Registrant's no par value common stock has a stated value of
$.10 per share. There are 25,000,000 shares authorized. There were 4,534,146
shares outstanding on September 30, 1997, and 4,790,229 shares outstanding on
December 31, 1996.
Pursuant to the Employee Stock Purchase Plan, 9,426 shares of common
stock were issued on September 1, 1997 to the employees who participated in the
plan.
<PAGE>
Pursuant to the Retainer Stock Plan for Directors, 264 shares of
common stock were issued in place of retainers to three members of the
Registrant's Board of Directors on March 31, 1997, 270 shares were issued to
three Directors on June 30, 1997 and 234 shares were issued to three Directors
on September 30, 1997. Pursuant to a long-term incentive award plan for
officers, 3,155 shares of common stock were issued to officers of the
Registrant. Shares issued to directors and officers were issued at 100% of fair
market value on the date of issue.
During the nine months ended September 30, 1997, 269,432 shares of
common stock were retired at a cost of $7,710,698. The common stock repurchases
were conducted under the Registrants ongoing repurchase program. This program
was reported on Form 8-K dated February 17, 1997.
NOTE 5. CORPORATE DEVELOPMENT
On July 15, 1997, the Registrant sold its exclusive DirecTV
distribution rights in seven counties in southern Minnesota, along with related
assets, to Golden Sky Systems, Inc. The Registrant recorded a gain on the sale
of the assets of $6,345,000. The sale was reported on Form 8-K dated July 15,
1997.
On April 10, 1997, the Registrant acquired the assets of eleven rural
telephone exchanges in the State of Iowa from US West Communications, Inc. ("US
West") for $35,271,000. The eleven exchanges contain approximately 12,500 access
lines. The new exchanges are reported as operations of Heartland
Telecommunications Company of Iowa, a wholly-owned subsidiary of the Registrant.
The acquisition was structured as a purchase of telephone assets from US West.
The acquisition was financed by new long-term debt instruments from seven
institutional investors in a private debt placement. A total of $40,000,000 in
senior unsecured notes was funded. This acquisition was reported on Form 8-K
dated April 25, 1997. Approximately six months of operations of newly acquired
telephone property are included in the financial statements for the period
ending September 30, 1997.
NOTE 6. OTHER
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested these condensed
financial statements be read in conjunction with the financial statements and
notes thereto included in the Registrant's December 31, 1996 Form 10-K.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Consolidated net income for the quarter ended September 30, 1997, was
153.0% higher than the same period in 1996, as illustrated by the following
table. The same period increase would have been 11.7% without the $3,720,000
after-tax gain on sale of DirecTV assets in the third quarter 1997.
NET INCOME (thousands) 1997 1996 1995 1994
---------------------- ---- ---- ---- ----
1st Quarter $2,722 $2,416 $2,221 $2,121
2nd Quarter $3,156 $2,171 $2,505 $2,255
3rd Quarter $6,662 $2,633 $2,376 $2,223
Operating Revenues were 17.2% higher for the quarter ended September 30,
1997, than for the quarter ended September 30, 1996, as illustrated by the
following table:
OPERATING REVENUES (thousands) 1997 1996 1995 1994
------------------------------ ---- ---- ---- ----
1st Quarter $17,490 $15,541 $14,647 $14,095
2nd Quarter $19,299 $15,942 $15,573 $14,589
3rd Quarter $19,505 $16,639 $15,871 $14,604
A. Material changes in results of operations:
1. TELEPHONE - Operating Revenues for the third quarter of 1997
increased $2,890,000 or 34.9% compared with the same period in 1996. For the
nine months ended September 30, 1997, Operating Revenues were $6,060,000 or
23.9% higher than the same period in 1996. The primary contributors to the
revenue growth include the April 1997 addition of Heartland
Telecommunications Company of Iowa, new fiber optic cable networks providing
additional toll transport revenue, access line growth and minutes of use
growth. Without the April addition of Heartland Telecommunications Company of
Iowa, Operating Revenues would have increased $1,876,000 or 7.4% for the
first nine months of 1997 compared to the same period in 1996. Net profits
from this line of business follows a similar pattern with a first nine month
period of 1997 increase of 20.5% as compared to the same period of 1996 and
8.2% increase without the impact of Heartland Telecommunications Company of
Iowa for the same nine month period.
2. BILLING AND DATA SERVICES - Operating Revenues for the third
quarter of 1997 increased $28,000 or 1.2% compared with the same period in 1996.
For the nine months ended September 30, 1997, Operating Revenues were $160,000
or 2.3% lower than the nine months ended September 30, 1996. The increase in the
third quarter can be attributed to increased messages processed for an
international long distance carrier, now in the local exchange telephone
business, and an increase in the long distance reseller business. The decline in
Operating Revenues for the nine month period ending September 30, 1997 was
mostly due to activities in the first quarter of 1997. During first quarter
1997, revenues attributed to contract programming services were $302,000 lower
as compared to the same period in the prior year. Although the revenues were
lower, the higher margins associated with processing the sector's growing volume
of service bureau transactions resulted in a significant increase in
profitability for this sector. The Billing and Data Services net profit was
$720,000 for the nine months ended September 30, 1997 as compared to $99,000
for the same period in 1996.
<PAGE>
3. EQUIPMENT SALES - Operating Revenues for this sector for the
quarter ended September 30, 1997 decreased $650,000 or 14.6% compared with the
quarter ended September 30, 1996. For the nine months ended September 30, 1997,
Operating Revenues were $1,031,000 or 9.6% higher than the same period in 1996.
The decrease in the third quarter is the result of one large ($1 million) new
phone system installation contract with a metropolitan school district in 1996
versus 1997. The nine month period increase in Operating Revenues was a result
of a $202,000 increase in new phone system installations and $761,000 increase
in phone system moves, adds and changes (MAC) over the first nine months of
1996. The Equipment Sales Sector experienced considerable customer base growth
in 1996 that has assisted in the higher margin MAC activity in the first nine
months of 1997. Equipment Sales had a net profit 2.8% higher for the nine
months ended September 30, 1997 as compared to the same period in 1996.
4. TELECOMMUNICATIONS PRODUCT DEVELOPMENT - Operating Revenues for
the quarter ended September 30, 1997 increased $598,000 or 36.2% compared with
the third quarter of 1996. For the nine months ended September 30, 1997,
Operating Revenues were $1,241,000 or 25.1% higher than the nine months ended
September 30, 1996. Standard Product Sales increased $723,000 as compared to
1996's first nine months. Standard Product Sales are sold at a higher margin
than Original Equipment Manufacturer (OEM) Sales. The OEM Sales increased
$589,000 as compared to the same period in 1996. The sector generated a net
profit of $332,000 for the first nine months of 1997, compared to a net loss of
$205,000 for the same period in 1996.
5. COST OF SALES - Cost of Sales decreased $194,000 or 4.6% for the
quarter ended September 30, 1997, compared with the same period in 1996. For the
nine months ended September 30, 1997, Cost of Sales were $1,696,000 or 15.8%
higher than the nine months ended September 30, 1996. Through the first nine
months of 1997, Operating Revenues for the two sectors (Equipment Sales and
Telecommunications Product Development) which generated most of the Cost of
Sales increased $2,272,000 or 14.5% compared with Operating Revenues during the
nine months ended September 30, 1996. In terms of percentage of Operating
Revenues from these two sectors, Cost of Sales was 60.0% for the nine months
ended September 30, 1997, compared to 61.1% for the same period in 1996.
6. OPERATING EXPENSES - Operating Expenses for the quarter ended
September 30, 1997, increased $1,603,000 or 24.6% compared with the same period
in 1996. For the nine months ended September 30, 1997, Operating Expenses were
$2,535,000 or 12.5% higher than the nine months ended September 30, 1996.
Heartland Telecommunications Company of Iowa's Operating Expenses were
$1,553,000 for the period of April 10, 1997 through September 30, 1997. The
Billing and Data Services Sector had a nonrecurring expenditure of $750,000 in
third quarter 1997 as a result of establishing a relationship with SePRO Telecom
International Limited of Dublin, Ireland, for a new software product platform.
Without the addition of Heartland Telecommunications Company of Iowa's Operating
Expense and the Billing and Data Services Sector's nonrecurring expenditure, the
first nine months would have increased $232,000 or 1.1%. This minimal increase
is a result of various cost control measures implemented in 1996. Operating
Expense curtailment has been particularly effective in the Billing and Data
Services and the Telecommunications Product Development Sectors.
<PAGE>
7. DEPRECIATION - Depreciation expense for the quarter ended
September 30, 1997 was $465,000 or 35.4% higher than for the same period ended
September 30, 1996. For the nine months ended September 30, 1997, Depreciation
expense was $869,000 or 21.4% higher than for the same period in 1996. The
increase is due to the new operations of Heartland Telecommunications Company of
Iowa that incurred $676,000 in Depreciation expense for the period of April 10,
1997 through September 30, 1997.
8. AMORTIZATION OF INTANGIBLES - Amortization for the quarter ended
September 30, 1997, was $13,000 higher than for the quarter ended September 30,
1996. For the nine months ended September 30, 1997, Amortization was $621,000
lower than for the same period in 1996. In the second quarter 1996, the
Registrant accelerated the amortization of capitalized software costs in its
Billing and Data Services Sector, which resulted in a nonrecurring expense of
$573,000.
9. OTHER INCOME - Other Income increased $304,000 or 150.5% for
the quarter ended September 30, 1997, compared to the same period last year.
For the nine months ended September 30, 1997, Other Income was $647,000 or
105.7% higher than for the same period in 1996. These increases are primarily
due to increases in partnership income (equity basis) from cellular
operations and gains on sales of assets in the ordinary course of business.
10. GAIN ON SALE OF DIRECTV ASSETS - Gain on sale of DirecTV assets
includes the gain from the sale of the DirecTV distribution rights of $6,345,000
from proceeds totaling $7,136,000.
11. INTEREST EXPENSE - Interest Expense increased $678,000 for the
quarter ended September 30, 1997, compared to the same period last year. For the
nine months ended September 30, 1997, Interest Expense was $1,261,000 higher
than for the same period in 1996. The increase in Interest Expense was due to
the Registrant securing $40,000,000 long-term debt instruments in April 1997 for
the acquisition of the US West telephone exchanges in Iowa which are operated as
Heartland Telecommunications Company of Iowa.
B. Material changes in financial condition:
1. CASH FLOWS - Cash and Cash Equivalents decreased $726,000 for
the nine months ended September 30, 1997, compared with a decrease of
$1,251,000 for the same period in 1996. The primary sources of cash in 1997
were the securing of long-term debt instruments of $40,000,000, sale of
DirecTV distribution rights of $7,136,000 and the Registrant's internal
operations. The primary uses of cash in the first nine months of 1997 were
the acquisition of the US West telephone exchanges in Iowa for $35,271,00 and
the Registrant's stock repurchase program which required $7,711,000.
Additions to Property, Plant and Equipment required $8,170,000 in 1997 and
$3,936,000 in 1996. Dividends paid for the first nine months were $4,168,000
in 1997 compared to $4,155,000 for the same period in 1996. The 0.3% increase
was due to a combination of a $0.075 or 9.1% per share increase in dividends
paid, offset by a 1,216,216 or an average of 8.0% decrease in the number of
shares outstanding on the respective record dates.
2. WORKING CAPITAL - Current Assets exceeded Current Liabilities by
$9,795,000 as of September 30, 1997, compared to a working capital surplus of
$6,279,000 as of December 31, 1996. The ratio of current assets to current
liabilities was 2.0:1.0 as of September 30, 1997.
<PAGE>
3. LONG-TERM DEBT - The Registrant's Long-Term Debt as of September
30, 1997, was $41,038,000.
On April 8, 1997, the Registrant secured new $40,000,000 long-term
debt instruments with 15 year maturities to fund the $35,271,000 acquisition of
the Iowa - US West telephone exchanges. The new long-term debt will accrue
interest at 7.11%. No principal payments are due during the first four years.
In addition, the Registrant has $1,038,000 of outstanding long-term
debt that was secured in the 1970's with Rural Utilities Service (RUS) for the
financing of telephone property, plant and equipment of Mid-Communications, Inc.
Due to accumulated principal prepayment credits with RUS, the Registrant has not
recorded current maturities on the long-term debt. The accumulated prepayment
credits will be applied to the long-term debt payments over the next twelve
months. This debt has final maturities at various times in 2003 through 2007
with interim sinking fund payments. Currently debt service is being funded out
of operations. No material liquidity problems are anticipated from the long-term
funding of the debts maturing in 2003 through 2007.
In July 1997, the Registrant renewed a $10,000,000 line of credit
arrangement. This line of credit will be used for general corporate purposes
and as bridge financing for future acquisition activity. The line of credit
provides for borrowing at a variable daily rate equal to 100 basis points
over eurodollar benchmark (similar to LIBOR). On September 30, 1997, the
Registrant had no advances against this line of credit.
4. CAPITAL FROM OPERATIONS - Management believes the Registrant will
be able to generate sufficient working capital internally from operations to
meet its immediate operating needs, and sustain its historical dividend levels.
The Registrant has completed several acquisitions in the previous six years
which were funded out of existing cash balances. The April 1997 acquisition of
Iowa rural telephone assets from US West required external debt financing.
Growth plans and acquisitions in the future will require additional debt
financing. Should the Registrant have a need to secure additional senior debt
financing as a result of pursuing additional corporate acquisitions, the
Registrant has been assured by its financial capital sources that no difficulty
should be anticipated.
The Registrant's stock repurchase program has been funded with
internal cash and advances on the line of credit to date. It is anticipated the
same sources will be utilized for financing future stock repurchases.
<PAGE>
HICKORY TECH CORPORATION
September 30, 1997
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
Item 3. DEFAULT UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS AND REPORTS OF FORM 8-K.
On July 30, 1997, the Registrant filed a Form 8-K. Items 2
(Acquisition or Disposition of Assets) and 7 (Financial Statements and Exhibits)
were reported on the Form 8-K. The Form 8-K reported that on July 15, 1997, the
Company sold its exclusive DirecTV distribution rights in seven counties in
southern Minnesota to Golden Sky Systems, Inc. of Kansas City, Missouri in
exchange for approximately $7.2 million in cash. The DirecTV distribution rights
were acquired by the Registrant in 1993 and had a net asset value of
approximately $900,000 as of July 15, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereto duly authorized.
Dated: November 12, 1997 HICKORY TECH CORPORATION
------------------
By /s/ Robert D. Alton, Jr.
----------------------------------------------------------------
Robert D. Alton, Jr., Chief Executive Officer
By /s/ David A. Christensen
----------------------------------------------------------------
David A. Christensen, Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,228
<SECURITIES> 0
<RECEIVABLES> 14,046
<ALLOWANCES> (199)
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0
0
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</TABLE>
