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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 12, 2003
Hector Communications Corporation
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(Exact name of Registrant as specified in its charter)
Minnesota 0-18587 41-1666660
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(State or other (Commission (IRS Employer
jurisdiction File Number) Identification
of incorporation) No.)
211 South Main Street
Hector, Minnesota 55342
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (320) 848-6611
Item 9. Regulation FD Disclosure.
The following information is furnished pursuant to Item 12, "Results of
Operations and Financial Condition."
On May 12, 2003, Hector Communications Corporation (the "Company") reported its
financial results for its first fiscal quarter ended March 31, 2003. See the
Company's press release dated May 12, 2003, which is furnished as Exhibit 99 and
incorporated by reference in this Current Report on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Hector Communications Corporation
Date: May 14, 2003 By /s/ Charles A. Braun
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Charles A. Braun
Chief Financial Officer
No. Exhibit Manner of Filing
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99 Press Release dated May 12, 2003. Filed Electronically
Contact: Curtis A. Sampson, Chairman and Chief Executive Officer
Steven H. Sjogren, President
Paul N. Hanson, Vice President and Treasurer
For Immediate Release
Hector Communications Corporation Reports
Revenues and Earnings for the First Quarter of 2003
May 12, 2003--Hector, MN--Hector Communications Corporation (AMEX: HCT) today
reported revenues of $10,494,000 for the three months ended March 31, 2003, an
increase of 6% from $9,859,000 in 2002. The increase was due to increased
revenues from video and internet services and one-time adjustments to access
revenues reflecting greater than anticipated recoveries from bankruptcy claims.
Operating income increased 10% to $2,821,000 in 2003 from $2,557,000 in 2002.
Income from the Company's investment in Midwest Wireless Holdings LLC was
$806,000 in the 2003 period compared to $793,000 in 2002. Income before the
cumulative effect of change in accounting principle for 2003 came to $1,127,000
or $.30 per diluted share, compared to $1,085,000 or $.28 per diluted share in
2002.
During the first half of 2002, the Company tested the value of its goodwill and
intangible assets as required under the provisions of Statement of Financial
Accounting Standards No. 142. As a result of this test, the Company concluded
that the carrying value of the goodwill and intangible assets in certain of its
operating units exceeded the market value. Accordingly, the Company recognized
an impairment loss, net of income taxes and minority interest of $3,147,000
($.82 per diluted share) and recorded it as a cumulative effect of change in
accounting principle against first quarter 2002 earnings. The Company's net loss
for the first quarter of 2002, after the impairment loss, was $2,062,000 or $.54
per diluted share.
The Company now expects to complete the Alliance Telecommunications Corporation
breakup transactions at the end of May, 2003. In the transactions, Golden West
Telecommunications Cooperative, Inc. and Alliance Communications Cooperative,
Inc. (Alliance's minority investors) would exchange their interests in Alliance
for two rural ILECs which serve 8,650 telephone access lines and 2,400 cable
television customers. Revenues and operating income from these operations in the
first quarter of 2003 were $2,461,000 and $989,000, respectively. The Company's
ownership interest in Midwest Wireless Holdings, LLC would be reduced from 10.4%
to 8.0%. The Company's debt to CoBank, incurred in the 1996 purchase of Ollig
Utilities ($37,311,000 at March 31, 2003) would be reduced by $13,145,000. On a
pro forma basis, if this transaction had occurred effective January 1, 2003 the
Company's net income for the first quarter of 2003 would have been reduced to
$875,000 and net income per diluted share would have been reduced to $.23.
Curtis A. Sampson, chairman and chief executive officer, said he was encouraged
that the Company grew revenues and operating income in the first quarter of
2003, despite the down economy. He said the Company recently concluded
negotiations to sell two small groups of cable television systems representing
2,100 subscribers that did not fit into the Company's plan to streamline
operations. The asset sales were expected to close during the second quarter of
2003. He also said that the Company was continuing its efforts to pare down
costs by consolidating Hector and Alliance operations.
Hector Communications Corporation is a telecommunications holding company which,
through its wholly-owned and majority-owned subsidiaries, provides
telecommunications services in rural communities in Minnesota, Wisconsin, South
Dakota, North Dakota and Iowa. The Company presently serves approximately 38,800
telephone access lines and 13,700 cable television subscribers and has minority
ownership interests in many other telecommunications companies.
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From time to time in reports filed with the Securities and Exchange Commission,
in press releases, and in other communications to shareholders and the investing
public, the Company may make statements regarding the Company's future financial
performance. Such forward looking statements are subject to risks and
uncertainties, including but not limited to, the effects of the
Telecommunications Act, new technological developments which may reduce barriers
for competitors entering the Company's local exchange or cable television
markets, higher than expected expenses and other risks involving the
telecommunications industry generally. All such forward-looking statements
should be considered in light of such risks and uncertainties.
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Hector Communications Corporation and Subsidiaries
Earnings Summary
Three Months Ended March 31
2003 2002
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Revenues $ 10,493,587 $ 9,858,596
Costs and expenses:
Plant operations 1,632,921 1,306,871
Customer operations 515,390 594,492
General and administrative expenses 1,441,101 1,341,673
Depreciation and amortization 2,479,181 2,441,678
Other operating expenses 1,603,662 1,617,130
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Total costs and expenses 7,672,255 7,301,844
Operating income 2,821,332 2,556,752
Other expense (income):
Income from investment in
Midwest Wireless Holdings, LLC (806,364) (793,348)
Other income (103,261) (181,752)
Interest expense 1,218,232 1,129,466
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Net other expense 308,607 154,366
Income before income taxes and minority interest 2,512,725 2,402,386
Income tax expense 1,006,000 920,000
Income before minority interest 1,506,725 1,482,386
Minority interest in earnings of Alliance 380,207 397,661
Telecommunications Corp.
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Income before change in accounting principle 1,126,518 1,084,725
Cumulative effect of change in accounting
principle, net of income taxes
and minority interest 3,146,569
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Net Income (Loss) $ 1,126,518 $ (2,061,844)
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Basic net income (loss) per common share:
Before cumulative effect of change
in accounting principle $ .32 $ .31
Cumulative effect of accounting change (.90)
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$ .32 $ (.59)
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Diluted net income (loss) per share:
Before cumulative effect of change in
accounting principle $ .30 $ .28
Cumulative effect of accounting change (.82)
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$ .30 $ (.54)
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