<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 1998
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- or -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 IRS 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: 4,542,940 shares of no par
common stock as of March 31, 1998.
<PAGE>
HICKORY TECH CORPORATION
March 31, 1998
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
In Thousands For Three Months Ended
------------------------
3/31/98 3/31/97
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<S> <C> <C>
OPERATING REVENUES
Telephone $ 11,670 $ 9,016
Billing / Data Services 2,158 2,304
Communications Products and Services 6,850 6,170
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TOTAL OPERATING REVENUES 20,678 17,490
COSTS AND EXPENSES
Cost of Sales 5,137 4,320
Operating Expenses 7,869 7,204
Depreciation 1,858 1,423
Amortization of Intangibles 202 198
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TOTAL COSTS AND EXPENSES 15,066 13,145
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OPERATING INCOME 5,612 4,345
OTHER INCOME 347 332
INTEREST EXPENSE 772 56
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INCOME BEFORE INCOME TAXES 5,187 4,621
INCOME TAXES 2,145 1,899
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CONSOLIDATED NET INCOME $ 3,042 $ 2,722
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EARNINGS PER SHARE $ 0.67 $ 0.58
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EARNINGS PER SHARE ASSUMING DILUTION $ 0.67 $ 0.58
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DIVIDENDS PER SHARE $ 0.33 $ 0.30
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</TABLE>
The accompany notes are an integral part of the financial statements.
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<PAGE>
HICKORY TECH CORPORATION
March 31, 1998
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
In Thousands 3/31/98 12/31/97
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,633 $ 1,219
Receivables, Net of Allowances of $517 in 1998 14,337 12,609
and $271 in 1997
Inventories 3,147 3,131
Deferred Tax Benefit and Other 1,534 1,314
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TOTAL CURRENT ASSETS 22,651 18,273
INVESTMENTS 3,771 3,657
PROPERTY, PLANT & EQUIPMENT
Telecommunications Plant 111,071 110,229
Other Property and Equipment 11,223 11,000
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TOTAL 122,294 121,229
Less Accumulated Depreciation 65,277 63,460
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NET PROPERTY, PLANT & EQUIPMENT 57,017 57,769
INTANGIBLE ASSETS 31,985 32,135
OTHER 636 550
TOTAL ASSETS $ 116,060 $ 112,384
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----------- ------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 5,429 $ 6,765
Accrued Interest 1,456 735
Accrued Taxes 1,861 191
Advanced Billings & Deposits 2,686 1,878
Current Maturities of Long-Term Debt 439 439
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TOTAL CURRENT LIABILITIES 11,871 10,008
LONG-TERM DEBT, NET OF CURRENT MATURITIES 41,531 41,525
DEFERRED INCOME TAXES 2,474 2,496
DEFERRED COMPENSATION AND OTHER 3,147 3,178
SHAREHOLDERS' EQUITY:
Common Stock 454 454
Additional Paid-In Capital 2,307 1,990
Reinvested Earnings 54,276 52,733
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TOTAL SHAREHOLDERS' EQUITY 57,037 55,177
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 116,060 $ 112,384
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
HICKORY TECH CORPORATION
March 31, 1998
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For Three Months Ended
--------------------------
In Thousands 3/31/98 3/31/97
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,042 $ 2,722
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 2,060 1,665
Equity in income of non-consolidated affiliates (254) (148)
Provision for Losses on Notes Rec. and Investments - 175
Gain resulting from disposition of assets (12) (326)
Changes in Operating Assets and Liabilities:
Receivables (1,728) (345)
Inventories (16) 157
Accounts Payable and Accrued Liabilities 1,372 (1,733)
Advance Billings & Deposits 808 (613)
Deferred Income Taxes (242) (16)
Other (111) 167
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NET CASH PROVIDED BY OPERATING ACTIVITIES 4,919 1,705
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (1,087) (1,452)
Increase in Notes Receivable and Investments (43) (138)
Distributions from non-consolidated affiliates 183 77
Proceeds from sale of assets 13 397
Other (72) (64)
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NET CASH USED IN INVESTING ACTIVITIES (1,006) (1,180)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt - 2,170
Repayments of debt - (52)
Retirement of common stock - (3,699)
Dividends Paid (1,499) (1,420)
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NET CASH USED IN FINANCING ACTIVITIES (1,499) (3,001)
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NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 2,414 (2,476)
CASH AND CASH EQUIVALENTS At Beginning of Year 1,219 2,954
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CASH AND CASH EQUIVALENTS At End of Period $ 3,633 $ 478
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
HICKORY TECH CORPORATION
MARCH 31, 1998
PART 1. FINANCIAL INFORMATION
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
The preceding, unaudited, Consolidated Statements of Income, Balance
Sheets and Statements of Cash Flows contain all adjustments representing
normal recurring items 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 nine
wholly-owned operating subsidiaries. The companies and operations of the
Registrant are grouped into three 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. 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. 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. These five
subsidiaries comprise the Registrant's Telephone Sector.
NATIONAL INDEPENDENT BILLING, INC.(NIBI) 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. The operations of NIBI constitute the Registrant's Billing/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.
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. CRYSTAL
COMMUNICATIONS, INC. (Crystal), beginning operations in January 1998,
currently markets resale long distance service to the Registrant's Telephone
Sector's southern Minnesota and northwestern Iowa subscribers. In addition,
Crystal is exploring opportunities to become an alternative choice for
telecommunications service on a local service basis to customers in towns in
southern Minnesota and Iowa not currently in the Registrant's Telephone
Sector's service area. These three subsidiaries comprise the Registrant's
Communications Products and Services Sector.
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<PAGE>
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. All intercompany transactions have been
eliminated from the consolidated financial statements. Certain balances for
1997 have been reclassified to conform with the 1998 presentation.
NOTE 2. EARNINGS AND CASH DIVIDENDS PER COMMON SHARE
Basic earnings per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
year. Shares used in the earnings per share assuming dilution calculation
are based on the weighted average number of shares of common stock
outstanding during the year increased by dilutive potential common shares.
Dilutive potential common shares include stock options and stock subscribed
under the employee stock purchase plan (ESPP).
<TABLE>
<CAPTION>
3/31/98 3/31/97
------- -------
<S> <C> <C>
Weighted average shares outstanding 4,538,586 4,712,448
Stock options 7,870 -
Stock subscribed (ESPP) 3,768 4,352
----- -----
Total dilutive shares outstanding 4,550,224 4,716,800
--------- ---------
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</TABLE>
Options to purchase 42,328 shares were not included in the period ending
March 31, 1997 computation of earnings per share assuming dilution because
including them would have been anti-dilutive.
Cash dividends are based on the number of common shares outstanding at
the respective record dates. The number of shares outstanding as of the
record date for the quarter ended March 31, 1998 was 4,542,672. The number
of shares outstanding as of the record date for the quarter ended March 31,
1997 was 4,733,981.
NOTE 3. INVENTORIES
Inventories are stated at the lower of average cost or market and
consist of the following:
<TABLE>
<CAPTION>
(In Thousands) 3/31/98 12/31/97
------- --------
<S> <C> <C>
Finished Goods $ 346 $ 264
Work in Process 153 210
Materials and Supplies 2,648 2,657
----- -----
Total $ 3,147 $ 3,131
------- -------
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</TABLE>
NOTE 4. COMMON STOCK
The Registrant's common stock has no par value. The common stock has a
stated value of $0.10 per share. There are 25,000,000 shares authorized. There
were 4,542,940 shares outstanding on March 31, 1998, and 4,534,119 shares
outstanding on December 31, 1997.
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<PAGE>
Pursuant to the Retainer Stock Plan for Directors, 268 shares of common
stock were issued in lieu of retainers to four members of the Registrant's
Board of Directors on March 31, 1998. Pursuant to a long-term incentive award
plan for officers, 6,041 shares of common stock were issued to officers of
the Registrant. Also pursuant to the long-term incentive award plan, 2,512
shares of common stock were issued to HTC Rabbi Trust based on the election
of four officers for funding of their long-term incentive award. Shares
issued to directors and officers were issued at 100% of fair market value on
the date of issue. The noncash activities related to the above items were
$317,000 in 1998. In 1997, the comparable noncash activities for issuance of
common stock was $93,000.
In 1997, the Board of Directors of the Registrant adopted a new share
repurchase program authorizing the Registrant to repurchase up to 500,000
additional shares, which represents 10.8% of its outstanding common stock.
This new repurchase program follows the repurchase program which the
Registrant announced on April 8, 1996. Due to the successful completion of
the initial repurchase program in February 1997, the Registrant began the new
repurchase program effective February 17, 1997. This program was reported on
Form 8-K dated February 17, 1997. Through March 31, 1998, 120,738 shares of
common stock have been repurchased under the February 17,1997, repurchase
program. No common stock was purchased during the first three months of 1998.
NOTE 5. CORPORATE DEVELOPMENT
On January 31, 1997, the Registrant sold the assets associated with its
cable television operations to Woodstock LLC. The Registrant recorded a gain
on the sale of the assets of $326,000.
On April 10, 1997, the Registrant acquired the assets of eleven rural
telephone exchanges in northwest 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 and included in the Telephone Sector. 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.
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 pre-tax gain on the sale
of the assets of $6,345,000. The sale was reported on Form 8-K dated July
15, 1997.
On October 30, 1997, the Registrant acquired the assets of Datacomm
Products (Datacomm). Datacomm is a data networking business based in Brooklyn
Park, Minnesota with a customer base spanning the Midwest. The operations of
the acquisition are reported as a division of Collins Communications Systems
Co. and included in the Communications Products and Services Sector. The
purchase price of $2,573,000 is scheduled to be paid over three years with
$1,600,000 paid in 1997. A final contingent payment is possible on November
1, 2000. This acquisition was reported on Form 8-K dated November 17, 1997.
-6-
<PAGE>
On December 18, 1997, Registrant announced that it had entered into an
agreement to purchase the stock of Frontier Corporation's Minnesota RSA 10
cellular property in a cash transaction. The property, marketed as
CellularOne, comprises seven counties of southern Minnesota serving a
population of 230,000. The acquisition was completed on May 1,1998 and will
be accounted for under the purchase method of accounting. The Registrant
utilized new long-term debt instruments to fund the majority of the
$40,000,000 acquisition price.
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, 1997
Form 10-K.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Consolidated net income for the quarter ended March 31, 1998, was 11.8%
higher than the same period in 1997, as illustrated by the following table.
This increase is due primarily to the benefits of new telephone property
acquired in April 1997.
<TABLE>
<CAPTION>
NET INCOME (thousands) 1998 1997
---- ----
<S> <C> <C>
1st Quarter $3,042 $2,722
</TABLE>
Operating Revenues were 18.2% higher for the quarter ended March 31,
1998, than for the quarter ended March 31, 1997, as illustrated by the
following table. Again, the primary reason for this increase was the new
telephone property acquired in April 1997.
<TABLE>
<CAPTION>
OPERATING REVENUES (thousands) 1998 1997
---- ----
<S> <C> <C>
1st Quarter $20,678 $17,490
</TABLE>
A. Material changes in results of operations:
Operating Revenues and Net Profits described in the following discussions are
shown prior to intercompany eliminations.
1. TELEPHONE - Operating Revenues for the first quarter of 1998
increased $2,654,000 or 29.4% compared with the same period in 1997. 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 1997 addition of Heartland
Telecommunications Company of Iowa, Operating Revenues would have increased
$100,000 or 1.1% for the first quarter of 1998 compared to the same period in
1997. Net profits from this line of business follow a similar pattern with a
first quarter of 1998 increase of 31.6% as compared to the same period of
1997 and 8.4% increase without the impact of Heartland Telecommunications
Company of Iowa for the same three month period. Profits have grown to a
greater degree than revenues since the majority in revenue growth in 1998 was
from high margin business (i.e. toll transport revenue).
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<PAGE>
2. BILLING/DATA SERVICES - Operating Revenues for the first quarter of
1998 decreased $146,000 or 6.3% compared with the same period in 1997. This
decline was due to less contract programming services 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 an increase in profitability for this sector. The net
profit for the first quarter of 1998 increased $44,000 or 12.4% as compared with
the same period in 1997.
3. COMMUNICATIONS PRODUCTS AND SERVICES - This Sector has $4,966,000 in
revenues from Collins in 1998 (72.5% of Sector total), $1,709,000 from DTI
(24.9% of Sector total) and $175,000 from Crystal (2.6% of Sector total).
Operating Revenues for this sector for the first quarter of 1998 increased
$680,000 or 11.0% compared with the same period in 1997. The primary
contributors to the revenue growth include the addition of Datacomm Products
to Collins and the January 1998 addition of Crystal's new resale long
distance service. Without the addition of Datacomm and Crystal, Operating
Revenues would have decreased $509,000 or 8.2% for the first quarter of 1998
compared to the same period in 1997. This decrease is due primarily to
lagging sales in the Collin's equipment sales division. DTI's Operating
Revenues as well as net profits for the first three months of 1998 were
comparable to the same period in 1997.
Net profits from this sector for the first quarter of 1998 decreased
65.0% as compared to the same period of 1997. Without the impact of the
start-up subsidiary, Crystal, and Datacomm Products, the sector reflected a
decrease in net profits of 3.6% for the same three month period.
4. COST OF SALES - Consolidated Cost of Sales increased $817,000 or 18.9%
for the quarter ended March 31, 1998, compared with the same period in 1997
due to volume and to lower profit margins. Through the first three months of
1998, Operating Revenues for Registrant's subsidiaries' DTI and Collins of
the Communications Products and Services sector, which generated most of the
Cost of Sales, increased $505,000 or 8.2% compared with Operating Revenues
during the three months ended March 31, 1997. In terms of percentage of
Operating Revenues from these two subsidiaries, Cost of Sales was 64.3% for
the three months ended March 31, 1998, compared to 62.7% for the same period
in 1997. The lower profit margins are viewed as temporary and the Registrant
is still projecting profit margins similar to prior periods.
5. OPERATING EXPENSES - Operating Expenses for the quarter ended March
31, 1998, increased $665,000 or 9.2% compared with the same period in 1997.
Without the addition of Heartland, Datacomm and Crystal, Operating Expenses
would have decreased $545,000 or 7.6%. This decrease is a result of various
cost control measures implemented corporate-wide over the last two years. As
employee staffing position vacancies are filled, the operating expense
advantage may decline or reverse in the future quarters of 1998.
6. DEPRECIATION - Depreciation expense for the quarter ended March 31,
1998 was $435,000 or 30.6% higher than for the same period in 1997. The
increase is due to the new operations of Heartland Telecommunications Company
of Iowa that incurred $442,000 in Depreciation expense for the quarter ended
March 31, 1998.
7. INTEREST EXPENSE - Interest Expense increased $716,000 for the quarter
ended March 31, 1998, compared to the same period last year. The increase in
Interest Expense was due to the new $40,000,000 in senior indebtedness
initiated in April 1997. The proceeds of the debt were for the Heartland
Telecommunications Company of Iowa acquisition and for working capital uses.
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<PAGE>
B. Material changes in financial condition:
1. CASH FLOWS - Cash and Cash Equivalents increased $2,414,000 for the
three months ended March 31, 1998, compared with a decrease of $2,476,000 for
the same period in 1997. The primary source of cash in 1998 was from internal
operations. The primary uses of cash in the first three months of 1998 were
the Additions to Property, Plant and Equipment of $1,087,000 and Dividends
Paid of $1,499,000. In quarter ended March 31, 1997, Additions to Property,
Plant and Equipment were $1,452,000 and Dividends Paid equaled $1,420,000.
The net change in cash flows from a decrease of $2,476,000 during the first
three months of 1997 to an increase of $2,414,000 in 1998 is mainly due to
$3,699,000 of common stock retired under the Registrant's Stock Repurchase
Plan during the first three months of 1997 as compared to no common stock
repurchased in 1998.
2. WORKING CAPITAL - Current Assets exceeded Current Liabilities by
$10,780,000 as of March 31, 1998, compared to a working capital surplus of
$8,265,000 as of December 31, 1997. The primary source of working capital
was internal operations. The ratio of current assets to current liabilities
was 1.9:1.0 as of March 31, 1998.
3. USES OF WORKING CAPITAL - The largest use of internal capital during
the quarter ended March 31, 1998 was the common stock dividends paid by the
Registrant. Dividends paid used $1,499,000 of capital during the quarter.
Additions to Property, Plant and Equipment, excluding acquisitions, have
historically been the Registrant's largest investing activity, using
$20,900,000 for the two years ended December 31, 1997. During the first
three months of 1998, $1,087,000 of working capital was used to purchase
fixed assets and as usual, the first quarter is one of the lower capital
expenditure periods in the Registrant's business cycle.
4. LONG-TERM DEBT - The Registrant's Long-Term Debt as of March 31,1998,
was $41,531,000.
In April 1997, the Registrant obtained $40,000,000 senior unsecured
notes with 15 year maturities to fund the $35,271,000 acquisition of the US
West telephone exchanges in Iowa. The notes accrue interest at 7.11%. No
principal payments are due during the first four years. Provisions of the
notes contain covenants relating to liens, consolidated net worth and cash
flow coverage. The Registrant is in compliance with all financial debt
covenants.
In October 1997, the Registrant acquired the assets of Datacomm
Products. The terms of the purchase agreement require the Registrant to make
annual payments in 1998 and 1999 on an unsecured note. On March 31, 1998,
$473,000 is included in Long-Term Debt.
As of March 31, 1998, the Registrant has $1,058,000 of outstanding debt
remaining with the Rural Utilities Service and the Rural Telephone Bank for
the financing of telephone property, plant and equipment of
Mid-Communications, Inc.
In July, 1997, the Registrant obtained a $10,000,000 unsecured line of
credit arrangement. This line of credit will be used for general corporate
purposes including interim financing for acquisitions. The line of credit
provides for borrowing at a variable annual rate of LIBOR plus 1.5%. There
are no material compensating balance or commitment fee requirements under
this arrangement. On March 31, 1998, the Registrant had no advances against
this line of credit.
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<PAGE>
5. 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. The May 1998 cellular property acquisition from Frontier
Corporation will utilize a portion of a new $45,000,000 senior unsecured
revolving credit facility which was implemented on April 30, 1998. 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 management
believes through its strong relationship with its financial capital sources,
that no funding difficulty will 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 any future stock repurchases.
6. ACCOUNTING PRONOUNCEMENTS In 1997, the Financial Accounting Standards
Board (FASB) issued Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (FAS 130). FAS 130 establishes standards for reporting
and display of comprehensive income and its components in the financial
statements. FAS 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The adoption of this standard
had no impact on the Registrant's results of operations, financial position
or cash flows.
In 1997, the FASB issued Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (FAS
131). FAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. FAS 131 is effective for
financial statements for fiscal years beginning after December 15, 1997.
Adoption of FAS 131 is not required on interim financial statements in 1998.
The Registrant is currently evaluating the requirements of FAS 131, and upon
adoption, disclosure changes may be made.
7. YEAR 2000 COMPLIANCE The Year 2000 Compliance issue concerns the
inability of computerized information systems to properly recognize and
process date-sensitive information as the year 2000 approaches. The
Registrant has taken actions to understand the nature and extent of the work
required to make its systems, products and infrastructure, in those
situations in which the Registrant is required to do so, Year 2000 compliant.
The Registrant continues to evaluate the estimated costs associated with
these efforts based on actual experience. The most vital facets of the
Registrant's data processing are the telephone network (central office
switching), the backbone customer record system of the telephone operation
and the basic software platforms of the Billing/Data Services Sector. The
Registrant believes, based on available information, that the costs of
measuring and achieving Year 2000 compliance will not have a materially
adverse effect on its results of operations, financial position or cash flows.
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<PAGE>
8. FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis
of Results of Operations and Financial Condition, and other sections of this
Form 10-Q filing contain forward-looking statements that are based on current
expectations, estimates and projections about the industry in which the
Registrant operates, management's beliefs, and assumptions made by Registrant
management. Words such as "expects", "anticipates", "intends", "plans",
"believes", "seeks", "estimates", variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain
risks, uncertainties and probabilities which are difficult to predict.
Therefore, actual outcomes and results may differ materially from what is
expressed or forecasted in such forward-looking statements, whether as a
result of new information, future events or otherwise.
PART II. OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS.
From time to time, the Registrant or a subsidiary of the Registrant is
involved in litigation incidental to its business, including administrative
hearings of state public utility commissions, actions relating to employee
claims and miscellaneous routine lawsuits. Based on the information currently
available, the Registrant believes that none of such current proceedings,
individually or in the aggregate, will have a material adverse effect on their
financial positions, results of operations or cash flows.
Item 2.CHANGES IN SECURITIES.
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 March 11, 1998, the Registrant filed a Form 8-K. Item 4 (Changes in
Registrant's Certifying Accountant) was reported on the Form 8-K. The Form
8-K reported that on March 5, 1998, the Company notified Olsen, Thielen &
Co., Ltd. of their dismissal as the Company's certifying accountants
effective April 13, 1998. There were no disagreements with the accountants
nor reportable events (as described in Regulation S-K Item 304 (a)(1)(v)).
The Company had provided a copy of the disclosure to the accountants and was
furnished with a letter addressed to the Securities and Exchange Commission
stating their agreement with the statements concerning their firm in the Form
8-K disclosure.
On April 14, 1998, the Registrant filed a Form 8-K. Item 4 (Changes in
Registrant's Certifying Accountant) was reported on the Form 8-K. The Form
8-K reported that on April 13,1998, the shareowners of the Registrant
confirmed the Board of Directors' selection of Coopers & Lybrand L.L.P. as
the Registrant's auditors for 1998.
-11-
<PAGE>
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: MAY 13, 1998 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
-12-
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