Press Release
11-07-06 - D&E COMMUNICATIONS REPORTS THIRD QUARTER 2006 RESULTS
D&E COMMUNICATIONS, INC. FOR IMMEDIATE RELEASE November 07, 2006 | FOR IMMEDIATE RELEASE CONTACT PERSON: |
EPHRATA, Pa. (November 7, 2006) - D&E Communications, Inc. ("D&E" or "Company") (Nasdaq: DECC), a leading provider of integrated communications services in central and eastern Pennsylvania, today announced the results of its operations for the third quarter and nine months ended September 30, 2006.
For the third quarter of 2006, the Company reported total operating revenue of $40.6 million, as compared to $41.1 million in the third quarter of 2005. Net income for the third quarter was $0.7 million, or $0.05 per share, as compared to $2.4 million, or $0.17 per share, for the same period last year. The primary reasons for the decrease in net income were the loss on the early extinguishment of debt of $1.1 million ($0.6 million, or $0.04 per share, after tax) and the loss on the sale of assets of the commercial voice equipment and service operations of the Systems Integration segment ("Voice Systems Business") of $0.9 million, net of tax, or $0.06 per share incurred during the third quarter of 2006. Included in the third quarter 2005 results was a reduction of income tax expense of $0.4 million, or $0.02 per share, due to adjusting federal and state tax provisions for 2004 to the actual tax returns filed in 2005. Net income before these items was $2.2 million, or $0.15 per share, for the quarter ended September 30, 2006, compared to $2.0 million, or $0.15 per share, for the quarter ended September 30, 2005.
On September 19, 2006, D&E completed an amendment to its syndicated senior secured debt financing. The amendment reduces the interest rates on the indebtedness, provides greater flexibility in its financial covenants, extends the scheduled amortization of principal, eliminates the $10 million permanent reduction on the revolving line of credit previously scheduled for December 31, 2006 and eliminates the requirement to maintain interest rate protection. D&E anticipates that the reduction in interest rates will result in an average annual cash savings of approximately $0.6 million assuming the margin added to the U.S. prime or LIBOR rates in effect prior to the amendment would have been in effect throughout the term of the credit facilities using the amended loan amortization schedules. D&E incurred a loss on early extinguishment of debt of $1.1 million, consisting of a non-cash write-off of $1.05 million of unamortized debt issuance costs of the previous credit facility and the expensing of $0.05 million of debt issuance costs related to the amended credit facility. D&aamp;E capitalized approximately $0.3 million of debt issuance costs related to the amended credit facility, which will be amortized into interest expense over the life of the amended credit facility. In connection with the amendment, interest rate swap agreements with a notional amount of $75 million were terminated. D&E received cash termination payments of $1.1 million, which will be amortized as a reduction of interest expense over the remainder of the respective terms of the interest rate swap agreements. These agreements were due to mature between November 2008 and December 2009.
On September 29, 2006, D&E completed the sale of the Voice Systems Business to eCommunications Systems Corporation ("eComm") The sale did not include the professional data and information technology services, security, design and network monitoring operations of D&E's Systems Integration segment. The fair value of the sale consideration was $3.0 million consisting of cash of $0.25 million, a promissory note for $2.4 million (face value $2.5 million) issued by eComm and a 10% equity interest in eComm of $0.35 million, with a related put right. The results of operations of the Voice Systems Business are reported as discontinued operations in the financial statements for the three and nine months ended September 30, 2006 and 2005.
For the nine months ended September 30, 2006, the Company reported total operating revenue of $122.3 million, as compared to $122.7 million in the same period last year. Net income for the nine months ended September 30, 2006 was $3.3 million, or $0.23 per share, as compared to $6.6 million, or $0.46 per share, for the same period last year. Included in the 2006 results were the loss on early extinguishment of debt of $1.1 million ($0.6 million, or $0.04 per share after tax), the customer relationships intangible asset impairment loss from continuing operations of $1.9 million ($1.1 million, or $0.08 per share, after tax) and the loss on the sale of the Voice Systems Business of $0.9 million, net of tax, or $0.06 per share. Included in the 2005 results was a gain on investment of $2.0 million ($1.3 million, or $0.09 per share, after tax) from the sale of our ownership interest in PenTeleData and a reduction of income tax expense of $0.4 million, or $0.02 per share, due to adjusting federal and state tax provisions for 2004 to the actual tax returns filed in 2005. Net income before these items was $5.9 million, or $0.41 per share, for the nine months ended September 30, 2006, compared to $4.9 million, or $0.35 per share, for the nine months ended September 30, 2005.
James W. Morozzi, D&E's President and CEO stated, "From an operations standpoint, we continue to see strong growth in our broadband Internet Services and CLEC businesses, two of our main objectives for the year. Additionally, we have been able to mitigate some of the pressures facing our RLEC through successful marketing and customer service initiatives as well as continued expense management. With the sale of our Voice Systems Business now behind us, we are able to focus our Systems Integration segment on professional data and information technology services, security, design and network monitoring services, which provide recurring revenue. Systems Integration is poised for improvement in operating results."
Morozzi concluded, "Because of the efforts of our highly skilled and dedicated workforce, we continue to see improvement over our 2005 operating results, while Delivering Excellence to our customers and shareholders."
Summary Statistics
September 30, 2006 | September 30,2005 | Change | % Change | |
RLEC lines | 130,727 | 135,457 | (4,730) | (3.5%) |
CLEC lines | 42,012 | 40,703 | 1,309 | 3.2% |
DSL/High-Speed Internet subscribers | 26,749 | 17,375 | 9,374 | 54.0% |
Dial-up Internet subscribers | 5,905 | 8,957 | (3,052) | (34.1%) |
Video subscribers | 7,307 | 6,469 | 838 | 13.0% |
Web-hosting customers | 944 | 946 | (2) | (0.2%) |
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