Press Release
05-06-08 - D&E COMMUNICATIONS REPORTS FIRST QUARTER 2008 RESULTS
D&E COMMUNICATIONS, INC. FOR IMMEDIATE RELEASE May 6, 2008 | CONTACT PERSON: |
Net income of $5.1 million and earnings per share of $0.35
Ephrata, PA -- D&E Communications, Inc. ("D&E" or the "Company") (Nasdaq: DECC), a leading provider of integrated communications services in central and eastern Pennsylvania, today announced the results of its operations for the first quarter ended March 31, 2008.
For the first quarter of 2008, the Company reported net income of $5.1 million, or $0.35 per share, compared to net income of $2.6 million, or $0.18 per share, for the same period last year. Operating income for the first quarter of 2008 was $8.1 million, compared to operating income of $5.5 million in the first quarter of 2007. The Company reported total operating revenue of $37.8 million for the first quarter of 2008, compared to $38.4 million in the first quarter of 2007.
The revenue decrease of $0.6 million for the first quarter of 2008 was primarily the result of a reduction in Systems Integration revenue of $0.9 million due mainly to the March 31, 2007 expiration of a contract with a retail services customer, partially offset by an increase in Wireline segment revenue of $0.3 million.
Included in the first quarter 2008 results was income of $2.9 million ($1.7 million, or $0.12 per common share, after tax) from the termination of a lease guarantee described below. The first quarter 2008 results were also affected by a decrease in depreciation expense in the Wireline segment of $1.6 million ($1.0 million, or $0.06 per share, after tax) primarily due to revisions in the estimated useful lives of certain fixed assets effective July 2007, in addition to certain fixed assets becoming fully depreciated in the first and second quarters of 2007. Results for the first quarter of 2007 included a gain of $0.6 million ($0.6 million, or $0.04 per share, after tax) from life insurance proceeds. Net income before the items described above was $2.4 million, or $0.17 per share, for the first quarter of 2008, compared to $2.0 million, or $0.14 per share, for the first quarter of 2007.
In the first quarter of 2008, D&E entered into an agreement with subsidiaries of Crown Castle International Corp. ("Crown") releasing the Company from its obligations under a guarantee agreement with Crown for lease obligations for wireless tower sites of Keystone Wireless LLC. In connection with the termination of the lease guarantee, D&E and Crown agreed to additional renewal periods through June 2066 for a ground lease agreement under which D&E is the lessor. In the first quarter of 2008, the Company recognized a gain of $2.9 million based on the difference between the carrying value of the guarantee liability of $3.2 million and the fair value of the additional renewal periods of $0.3 million. The fair value of the lease extension will be deferred and recognized over the original lease term and initial renewal periods that expire in June 2026.
"The overall results of the first quarter were quite positive," stated James W. Morozzi, D&E's President and Chief Executive Officer. "Net income for the first quarter of 2008 increased 95% compared to the first quarter of 2007. Excluding certain events noted above, the increase in net income was approximately 20%. From an operating perspective, we continue to execute on our strategies of broadband growth, increased On-Net CLEC business, and improved performance in our Systems Integration segment. The recent changes we've made in Systems Integration are showing tangible results, as the operating loss for the first quarter of 2008 has improved by approximately $0.7 million compared to the same quarter in 2007. We continue to focus on serving our core customers and in driving to eliminate the operating losses in this segment."
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