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Commonwealth Sees Strong Quarter: Despite Lower Sales Numbers, Telecom Company Showed an Increase Over Same Period Last Year.

Posted on: Wednesday, 10 May 2006, 06:00 CDT

By Jerry Lynott, Wilkes-Barre, Pa., Times Leader

May 10--DALLAS -- Commonwealth Telephone Enterprises Inc. reported net income of $16.2 million for the first quarter ending March 31 compared with $15.9 million for the same time period last year.

In its quarterly earnings report released Tuesday, Commonwealth said diluted earnings per share decreased to 61 cents from 67 cents for the 2005 first quarter, mainly because of the addition of 2.1 million shares connected to the company's dividend payment program. The additional shares reduced the quarterly number by 5 cents per share.

Sales also dropped to $82.2 million for the quarter compared with $83.5 million in 2005.

Even with the decreases, Michael Mahoney, president and chief executive officer of the publicly traded telecommunications company, said it "completed another solid quarter."

Operating income for the company whose two main operations are Commonwealth Telephone Co. and CTSI LLC was $28.1 million versus $26.1 million for the first quarter of 2005. The company's digital subscriber line Internet sector increased 61 percent to 33,946 from 21,135.

However, dial-up Internet service with CTSI declined, following the national trend as more people migrated to high-speed Internet services, Mahoney said. Also, the total number of access lines for the company declined by 3 percent to 458,562 from 471,133.

Looking beyond the quarter to the full year, the company that has approximately 800 employees in Northeastern Pennsylvania strengthened its balance sheet by completing a $150 million stock repurchase program. It bought approximately 55 percent of the remaining $31 million worth of shares in the first quarter and the remainder in April.

The addition of $30 million from the dissolution of the Rural Telephone Bank in April also will affect year-end and second-quarter earnings. The bank was created in 1971 and served as a source of financing for telecommunications companies. In order to raise capital to complement the federal startup funds, the bank also sold stock to recipients such as Commonwealth Telephone Co.

The company redeemed its shares with the dissolution and is expected to receive an estimated $19 million net cash payment after taxes. The payment will be recorded in the second quarter and will push diluted earning per share for the year into the $2.97 to $3.02 range from the previously announced $2.43 to $2.49 range, the company said.

The company's solid financial foundation presents it with a number of options, Mahoney said.

"We will consider and make investments in our business," he said, adding that other options include the additional repurchase of common stock, enhancing dividends, debt retirements and mergers and acquisitions.

Jerry Lynott, a Times Leader staff writer, may be reached at 829-7237.

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Copyright (c) 2006, Wilkes-Barre, Pa., Times Leader

Distributed by Knight Ridder/Tribune Business News.

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NASDAQ-NMS:CTCO,

Source: The Times Leader (Wilkes-Barre, Pa.)

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