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(ROSEVILLE, CALIFORNIA) - Integrated communications provider
SureWest Communications (Nasdaq:SURW) reported its financial results
today for the second quarter ended June 30, 2003.
Revenues for the second quarter of 2003 were $50.3 million, a 16.7
percent increase over second quarter 2002 revenues of $43.1 million.
Net income was $2.7 million, or $0.19 per share in the second quarter
of 2003, compared to $1.7 million, or $0.12 per share in the second
quarter of 2002.
"Our strategy to expand SureWest's customer base and revenues by
offering a complete suite of services on a next-generation technology
platform is delivering strong revenue growth and controlled expenses,"
said Brian Strom, President and Chief Executive Officer. "These
solid operating results reflect steady execution of our plan."
SureWest's significant revenue expansion resulted from growth in
each of its three reportable segments. Broadband segment revenues,
which include Internet service, and business and residential broadband
service, increased by $5.1 million over last year's levels. Telecom
segment revenues, within which network access revenues, highlighted
below, are recorded, increased by $1.3 million, primarily due to
a positive settlement with a long-haul carrier totaling $2.0 million.
Wireless segment revenues grew by $0.7 million compared to the same
period last year.
Consolidated income from operations increased to $5.6 million in
the second quarter of 2003, compared to $3.0 million in the second
quarter of 2002.
- Internet service revenues increased by $2.5 million in
the second quarter of 2003 compared to the same period a year
ago, driven by continued strong DSL and ISP customer growth. In
the fourth quarter last year, Roseville Telephone Company began
providing wholesale DSL to SureWest Broadband, which retails service
to end users. As a result, a higher share of DSL revenue is now
recognized as Internet service revenue. Accordingly, network access
revenues decreased.
- Business broadband service revenues, primarily driven
by dedicated access and data transport, increased 58.7 percent
year over year, reflecting higher line counts in service and greater
usage. SureWest Broadband also received California Multiple Awards
Schedule (CMAS) certification during the quarter to apply for
contracts with the State of California.
- Residential broadband "triple-play" voice, data and video
revenues climbed to $2.3 million in the second quarter from $1.9
million in the first quarter of 2003, as demand remained strong
and the pace of installations accelerated. SureWest launched triple-play
services in July of 2002.
- DSL customers totaled 17,995 at June 30, 2003, reflecting
net subscriber additions of 1,152 in the second quarter and 31.4
percent growth over the same period a year ago.
- Network access revenues increased 8.9 percent primarily
due to the $2.0 million settlement with a long-haul carrier mentioned
earlier. Absent that effect, network access revenues decreased
6.3 percent, reflecting movement to a wholesale DSL model, which
reduces network access revenues.
- Wireless revenues increased by 13.6 percent in the second
quarter of 2003 to $6.7 million, which compares to $5.9 million,
in the same period of 2002. SureWest Wireless continued to achieve
revenue growth in a market crowded with ten providers, differentiating
itself through quality service and coverage, affordable flat-rate
plans and service area expansion. Operating EBITDA in the Wireless
segment also showed strong improvement, driven by effective customer
retention programs and tight cost controls.
- Consolidated operating expenses in the June quarter increased
by $4.7 million compared to the same period last year. Expenses
for customer operations and selling, and depreciation and amortization
increased year over year primarily because of rapid DSL, Internet,
Wireless and Broadband customer growth. General and administrative
expenses rose due to significant increases in headcount and facilities
for broadband segment businesses and higher insurance costs. Costs
in the June quarter a year ago included $1.1 million of bad debt
expense stemming from Worldcom's bankruptcy filing.
- Consolidated operating EBITDA rose to $18.1 million in
the second quarter of 2003 compared to $14.1 million a year ago.
Operating EBITDA benefited from reduced costs of services and
products, as more customers leased DSL equipment and costs of
broadband equipment declined.
- Interest expense in the second quarter of 2003 increased
by $0.9 million compared to the second quarter of 2002, due to
a $60 million private placement of ten-year notes at 4.74 percent
in March of 2003.
Consolidated capital expenditures related to operations totaled
$19.2 million in the second quarter of 2003, compared to $15.8 million
in the second quarter of 2002. Capital expenditures for the remainder
of 2003 are expected to total about $31 million, including approximately
$13 million for residential broadband (triple-play) services. Cash
and equivalents at June 30, 2003, were $27.6 million, and short-term
investments totaled $38.8 million. Long-term debt excluding the
current portion at June 30, 2003, totaled $96.4 million.
SureWest paid $3.6 million in dividends in the second quarter of
2003, representing a quarterly payment of $0.25 per share.
Non-GAAP Financial Measures
Operating EBITDA is not a generally accepted accounting principle
(GAAP) financial measure, and should be considered in addition to,
and not as a substitute for or superior to, either net income determined
in accordance with GAAP as an indicator of financial performance,
nor cash flows from operating activities determined in accordance
with GAAP as a measure of liquidity. SureWest believes that EBITDA
is an appropriate measure because it permits greater comparability
of the company's financial results against historical results and
it is useful, particularly in the telecommunications sector, in
helping investors assess the results of the company's operations.
Management uses EBITDA as an important indicator for planning and
forecasting in future periods. A reconciliation of operating EBITDA
to net income, the most directly comparable GAAP measure, is provided
in the table entitled "Operating EBITDA Reconciliation to Net Income."
Conference call and Webcast
SureWest Communications will provide details about its results
and business strategy, including the development of its emerging
services on a conference call on Tuesday, August 5, 2003 at 11:00
a.m., EDT. A simultaneous live webcast of the call will be available
at www.surewest.com/corporate and will be archived shortly after
the conclusion of the call for replay through the second quarter
of 2003. Additionally, a telephone replay of the call will be available
through Saturday, August 9, 2003 by calling 1-888-203-1112 and entering
passcode 423335.
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
Safe Harbor Statement
Statements made in this news release that are not historical
facts are forward-looking statements and are made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of
1995. Such forward-looking statements are subject to a number of
risks, assumptions and uncertainties that could cause the company's
actual results to differ from those projected in such forward-looking
statements.
Important factors that could cause actual results to differ
from those set forth in the forward-looking statements include,
but are not limited to: advances in telecommunications technology,
changes in the telecommunications regulatory environment, changes
in competition in markets in which the company operates, the availability
of future financing, changes in the demand for services and products,
new product and service development and introductions, pending and
future litigation and unanticipated changes in the growth of the
company's emerging businesses, including the PCS, Internet and CLEC
operating entities.
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