(ROSEVILLE, CALIFORNIA) - Integrated communications provider
SureWest Communications (Nasdaq: SURW) announced operating results
today for the quarter and year ended December 31, 2002.
SureWest reported record full-year operating revenues in 2002 of
$188.9 million, up 13.7 percent from $166.2 million in 2001. Net
income for the full year was $11.2 million, or $0.76 per share,
compared to $10.3 million or $0.67 per share in 2001. Consolidated
operating EBITDA, or income from operations plus depreciation and
amortization, was $60.8 million in 2002, a 15.6 percent increase
from $52.6 million in 2001.
Revenues for the fourth quarter of 2002 were $48.8 million, an increase
of 7.7 percent over the same period of 2001. Revenues in the fourth
quarter of 2001 include a $2.2 million increase related to a change
in estimate for regulatory liabilities. Fourth quarter 2002 revenues
include a $1.1 million increase for changes to estimates of regulatory
liabilities. Absent those effects, fourth quarter 2002 revenues
were 11.0 percent higher year over year. The annual increase in
revenues reflects 45.6 percent growth in wireless revenues and 182.1
percent growth in SureWest's emerging broadband businesses including
competitive local exchange (CLEC), internet, custom data and bundled
digital cable services.
Net income in the fourth quarter was $85,000 or $0.01 per share,
which compares to $2.4 million or $0.16 per share in the fourth
quarter of 2001. The changes in estimates for regulatory liabilities
described above increased net income by $0.7 million, or $0.05 per
share, and $1.3 million, or $0.08 per share in the fourth quarters
of 2002 and 2001, respectively. Consolidated operating EBITDA was
$12.2 million in the fourth quarter of 2002, a decrease from $15.3
million in the prior year period. Narrower margins in the fourth
quarter of 2002 reflect expected increased expenses related to the
start-up of bundled digital cable services and higher customer operations
and selling costs in the wireless and Internet groups reflecting
increases in sales activities.
"We're pleased with our operating results in 2002, which reflect
the continued implementation of our layer-and-leverage strategy
to drive strategic growth," said Brian Strom, President and Chief
Executive Officer. "As we have communicated repeatedly over the
past two years, our strategy capitalizes on the strength and stability
of our core telephone operations to deliver growth in our new businesses
that offer choice and value for consumers in the Sacramento regional
market and create long-term opportunity for our shareholders. We
delivered strong wireless and DSL revenue growth, acquired significant
digital cable assets and launched triple-play services while also
achieving a nine-percent increase in annualized net income."
Mr. Strom continued, "As we indicated in the third quarter, our
digital cable rollout impacted fourth quarter margins. The rollout
is proceeding on plan, with solid customer growth, increasing ARPU
and declining customer acquisition costs. Our ability to retain
flexibility in our business strategy is a key advantage as we leverage
our core infrastructure to win high revenue customers throughout
our target market. In summary, the success of our strategy is reflected
in SureWest's capability to develop long-term growth initiatives
while delivering profitable operating results and significant cash
flows."
Highlights
Telecom Segment
- ILEC access lines increased 1.8 percent over 2001 levels to
137,300 at the end of 2002, reflecting a solid local economy and
continued growth in the Greater Sacramento region.
- Local service revenue increased 3.3 percent in 2002 compared
to 2001, reflecting increased access lines and lower reserves
for regulatory liabilities in 2002 versus 2001.
- Network access revenue increased 19.3 percent in 2002, versus
2001. Results benefited from expanded demand for DSL and dedicated
access services as well as positive adjustments to revenues in
2002 of $5.8 million resulting from changes to estimates of certain
regulatory liabilities.
- Non-regulated sales and services decreased by $1.6 million for
the full year 2002, due mainly to the Company's sale of its alarm
monitoring business in January 2002.
- DSL customers totaled 15,650 at December 31, 2002, as SureWest
continued to expand its industry leading residential market penetration
of 16.6 percent. DSL subscribers now represent 11.4 percent of
access lines.
- Directory advertising revenues increased 4.1 percent over full-year
2001 levels to $14.8 million.
- Long distance revenues for the full year totaled $5.7 million,
compared to $5.9 million last year. Long distance revenues in
2002 reflect reduced minutes of use associated with the sale of
alarm monitoring services in the first quarter of 2002. The reduction
in minutes of use was partly offset by an increase in penetration
to nearly 29 percent of lines served.
- Broadband revenues
- Consolidated broadband service revenues including
CLEC, internet, custom data and bundled digital cable
services totaled $13.3 million in 2002, compared to
$4.7 million in 2001, reflecting $3.1 million in digital
cable revenue in the second half of 2002 and an increase
in internet service revenues of $3.1 million for the
full-year 2002, compared to 2001.
- SureWest Internet and custom data services customers
increased 26.6 percent to 20,000 at year-end 2002.
- Digital cable subscribers totaled 5,650 at year-end
2002 as SureWest Broadband Residential accelerated sales
efforts for its bundled video, telephone and high-speed
Internet in the latter half of the quarter. ARPU decreased
to $104.12 at year-end 2002, compared to $105.23 at
the end of the preceding quarter, primarily reflecting
temporary reductions in video-on-demand (VOD) usage
while SureWest replaced its former content provider.
SureWest announced in January 2003 its contract with
content provider TVN Entertainment Group to enhance
the VOD lineup to 400 monthly titles available on-demand
with full DVD functionality. With the completion of
its acquisition and the start of a dedicated customer
service effort, churn dropped significantly from 2.1
percent to 1.5 percent.
|
Wireless Segment
- Wireless revenues increased by 45.6 percent in 2002
to $23.7 million, compared to $16.3 million in 2001
as the Company continued to successfully expand its
PCS operations in a highly competitive marketplace.
For the full year, SureWest added over 8,800 net new
wireless subscribers in 2002, a 28 percent increase.
- ARPU increased from $41.95 in the fourth quarter of
2001 to $48.30 in the fourth quarter of 2002.
- Contract churn fell from 4.2 percent in the fourth
quarter last year to 3.5 percent in the fourth quarter
of 2002.
- SureWest Wireless added 25 new cell sites in 2002,
bringing its total to 174. With a ratio of less than
240 subscribers per cell site, SureWest offers superior
coverage in the Greater Sacramento region and significant
room for subscriber expansion at current infrastructure
levels.
|
Capital Expenditures
- Capital expenditures related to operations decreased
to $42.1 million in 2002, a reduction of $27.5 million
compared to the prior year, as the Company wrapped up
the major portions of its wireless and CLEC infrastructure
build-out. Capital expenditures in 2003 are expected
to total $61 million, including approximately $24 million
for bundled digital cable capital expenditures.
|
Dividends
- SureWest paid $3.6 million in dividends in the fourth
quarter of 2002, representing a quarterly payment of
$0.25 per share. For 2002, SureWest paid $1.00 per share
in dividends.
|
Conference call and Webcast
SureWest Communications will provide additional detail about its
results and business strategy, including the development of its
emerging services on a conference call on Tuesday, March 11, 2003
at 11:00 AM EDT. A live webcast of the call will be available
at www.surewest.com and
will be archived for replay. Additionally, a telephone replay
of the call will be available through Friday, March 14, 2003 by
calling 1-888-203-1112 and entering passcode 767814.
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About SureWest Communications
With nearly 90 years in Northern California, SureWest Communications
and its family of companies represent an integrated network of highly
reliable advanced communications products and services with the
highest standards of customer care. Founded as Roseville Telephone
Company, the company has expanded to provide digital cable TV, fiber
optics, PCS wireless, DSL, high-speed Internet access, data transport,
local and long distance telephone service, and directories. For
more information, visit the SureWest web site at www.surewest.com
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For more information, contact media@surewest.com.
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