LICT Corporation Reports Preliminary Fourth Quarter and Full Year 2018 Results and Gary L. Sugarman Rejoins Board of Directors

Fourth Quarter

  • Revenues increased to $28.8 million from $27.5 million.
  • EBITDA grew to $14.5 million from $13.0 million.
  • EPS rose to $269 per share from $210 per share, excluding a
    deferred tax adjustment of $388 in 2017.

Full Year

  • Revenues climbed to $115.8 million from $106.7 million.
  • EBITDA was $57.9 million versus $49.2 million.
  • EPS rose to $1,262 per share from $666 per share, excluding a
    deferred tax adjustment of $383 in 2017.

RYE, N.Y.–(BUSINESS WIRE)–LICT Corporation (“LICT” or the “Company”; OTC Pink®: LICT)
reports preliminary, unaudited, financial results for the year ended
December 31, 2018.

FOURTH QUARTER RESULTS – In 2018, LICT’s reported fourth quarter
revenues increased $1.4 million to $28.8 million compared to $27.5
million for the corresponding quarter in 2017. Reported EBITDA was $14.5
million in the fourth quarter of 2018 as compared to $13.0 million in
the fourth quarter of 2017.

Non-regulated revenues gained 9.9%, to $13.1 million from the prior
year’s $11.9 million due to increased broadband and competitive local
exchange carrier (“CLEC”) revenues. Regulated revenues increased by
1.2%, to $15.7 million in the fourth quarter of 2018 from the prior
year’s $15.5 million. Non-regulated EBITDA, including affiliate
distributions, rose 27.4% to $6.4 million, from $5.0 million, while
regulated EBITDA increased to $8.1 million, from $8.0 million.

EARNINGS PER SHARE – Diluted earnings per share, excluding charitable
contributions, during the fourth quarter were $269 per share in 2018 as
compared to $210 per share in 2017. 2017’s diluted earnings per share
excluded a $388 deferred tax benefit related to the change in the
federal income tax rates. Shares outstanding at December 31, 2018 were
19,931 versus 20,509 at December 31, 2017.

GARY L. SUGARMAN – We are extremely pleased to report that on February
7, 2019, Mr. Sugarman rejoined our Board. He previously served from
September 2006 to 2018.

ALTERNATIVE – CONNECT AMERICA COST MODEL (“A-CAM”) PROGRAM – Effective
January 1, 2017, ten of LICT’s rural telephone companies elected to
participate in the Federal Communications Commission’s (FCC) A-CAM
program. The A-CAM program is designed to increase speed and expand the
deployment of broadband capabilities throughout the nation’s rural areas
and replaced two prior Universal Service Fund mechanisms for companies
electing A-CAM. During 2018, the FCC expanded the A-CAM program
retroactive to January 1, 2017. Accordingly, in 2018, LICT recorded
additional A-CAM revenues of $5.8 million, of which $2.9 million related
to the year ended December 31, 2017.

On December 13, 2018, the FCC announced an additional expansion of the
A-CAM program. While the FCC has not yet provided full details of the
expanded program, it is expected that LICT companies, will receive
additional funds on an annual basis and their revised funding will be
extended two years, to 2028, in exchange for the provision of higher
broadband speeds to designated locations. Also, LICT companies in two
additional states, who were previously ineligible to participate in the
A-CAM program, will be able to voluntarily elect into the Program as of
January 1, 2019 for a ten-year period. Once the FCC provides the full
details of this expanded A-CAM program, LICT companies will review their
funding and consider all provisions as they are detailed.

FULL YEAR RESULTS – The Company recorded revenues of $115.8 million for
2018 and EBITDA before corporate costs, charitable contributions and
non-operating income, of $57.0 million. However, in 2018 the full year
results included two significant out of period items: (a) recording of
additional A-CAM revenues of $2.9 million which were retroactive to
2017, and (b) a prior year billing adjustment related to our California
operations which reduced revenues by $0.4 million. Adjusting for these
items, on-going full year revenues were $113.4 million, and EBITDA was
$55.5 million. The company is forecasting, for 2019, full year revenues
around $117 million, and EBITDA approximately at $54 million; these
amounts do not include the potential additional A-CAM funding that was
discussed above.

SHAREHOLDER DESIGNATED CHARITABLE CONTRIBUTION PROGRAM – In 2016, the
Company adopted a Shareholder Designated Charitable Contribution
Program. Under the Program, all registered shareholders are eligible to
designate charities and the company will a make a contribution to that
charity. In 2016, 2017 and 2018, the company made $100 per share
contribution son behalf of its shareholders to their designated
charities. In 2018 and 2017, total contributions, under this Program,
amounted to $2.5 million and $1.1 million, respectively, and the
after-tax earnings per share effect of these contributions was $90 per
share in 2018 versus $35 per share in 2017. The most recent
contributions will be distributed in the first quarter of 2019.

BALANCE SHEET – Our net debt was $3.3 million at December 31, 2018, as
compared to $23.9 million on December 31, 2017.

CEO SEARCH – As previously announced, we are reviewing candidates to
succeed Mario J. Gabelli as Chief Executive Officer of LICT. The
individual should have knowledge of broadband and, in particular, to
serve our rural communities, as well as opportunities to serve colleges,
universities, hospitals, and small businesses. Mr. Gabelli will continue
to serve as Executive Chairman upon the completion of the search.

FCC SPECTRUM AUCTIONS – LICT Wireless Broadband Company, LLC (“LICT
Wireless”), a wholly owned subsidiary of the Company, is participating
in two ongoing FCC auctions for spectrum, Auction 101 – 28 GHz and
Auction 102 – 24 GHz. These spectrum bands are designated to be used for
provision of 5G wireless services. Auction 101 began on November 14,
2018 and ended on January 28, 2019 and Auction 102 is scheduled to begin
on March 14, 2019. Commensurate with previous spectrum auctions, LICT is
making upfront deposits to participate in this Auctions. FCC
rules restrict information that bidders may disclose about their
participation in these Auctions, including the amount of their upfront
payment and any licenses acquired in Auction 101 until Auction 102 is
completed.

TAX CUTS AND JOBS ACT – On December 22, 2017, the United States Congress
passed the Tax Cuts and Jobs Act of 2017 (“Act”). Two aspects of this
Act significantly impacted LICT: (a) reducing the Federal corporate
income tax rate to 21%, from LICT’s 35% 2017 rate, (b) 100% expensing of
capital expenditures through 2023. As previously reported, the change in
the Federal tax rate reduced our liability for deferred income taxes at
the end of 2017 by $7.1 million and lowered our overall effective tax
rate for 2018 to 26.4%, from 39.5% in the of 2017 period.

GROWING THE COMPANY – The Board of Directors and management have
implemented measures which have improved liquidity and reduced the
Company’s debt position. At this time, the Board continues to
re-evaluate its acquisition activity and related refinancing
alternatives.

CAPITAL EXPENDITURES – For 2018, capital expenditures were $22.9
million, of which $12.6 million was for non-regulated activities and
$10.3 million for regulated activities. In order to expand the Company’s
non-regulated fiber initiatives and provide a high level of broadband to
our customers in the rural areas of the United States, our current plan
calls for capital expenditures of $22 million in 2019. This capital
enables us to offer enhanced broadband speeds and will increase the
overall fiber route miles in our network. As of December 31, 2018, LICT
operations deployed 4,669 miles of fiber optic cable, 11,832 miles of
copper cable, and 701 miles of coaxial cable.

SHARE REPURCHASES – During the year ended December 31, 2018, the Company
repurchased 613 shares for $8.3 million, with an average price of
$13,574 per share. In addition, in 2018, 35 shares were issued under the
Company’s Restricted Stock Awards program. As of December 31, 2018,
19,931 shares were outstanding.

OPERATING STATISTICS – As of December 31, 2018, the Company’s DSL
penetration in its franchised telephone service territories, based on
its total Incumbent Local Exchange Carrier (“ILEC”) voice lines, was
80.3%, as compared to 79.5% at December 31, 2017. Our summary operating
statistics are as follows:

  December 31,     Percent
Increase Increase
2018   2017   (Decrease)   (Decrease)
Broadband lines 33,659   31,521   2,138   6.8%
Voice Lines              
ILEC 26,276   27,195   (919)   (3.4%)
CLEC 7,471   7,006   465   6.6%
Total 33,747   34,201   (454)   (1.3%)
Video Subscribers 5,669   5,985   (316)   (5.3%)
Revenue Generating Units 73,075   71,707   1,368   1.9%
 

This release contains certain forward-looking information within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,
including without limitation anticipated financial results, financing,
capital expenditures and corporate transactions. It should be recognized
that such information is based upon certain assumptions, projections and
forecasts, including without limitation, business conditions and
financial markets, regulatory and other approvals, and the cautionary
statements set forth in documents filed by LICT on its website, www.lictcorp.com.
As a result, there can be no assurance that any possible transactions
will be accomplished or be successful, or that financial targets will be
met. Such forward-looking information is subject to uncertainties, risks
and inaccuracies, which could be material.

LICT Corporation is a holding company with subsidiaries in broadband and
other telecommunications services that actively seeks acquisitions,
principally in its existing business areas.

LICT Corporation is listed on the OTC Pink® under the symbol
LICT. For further information visit our website at http://www.lictcorp.com.

Release 19-2

     

LICT CORPORATION

Exhibit A
Statements of Operations and Selected Balance Sheet Data Page 1 of 2
(In Thousands, Except Per Share Data)  
 
STATEMENTS OF OPERATIONS
Three Months Ended Twelve Months Ended
December 31, December 31,
2018   2017 2018   2017
 
Revenues $28,841 $27,466 $115,818 $106,730
 
Cost and Expenses:
Cost of revenue, excluding depreciation 12,213 12,403 48480 48,084
Selling, general and administration 2,881 2,704 11,596 11,438
Corporate Office Expenses 921 1,065 4,006 3,992
Depreciation and amortization 5,083   4,679 19,746   17,880
Total Costs and Expenses 21,098   20,851 83,828   81,394
 
Operating profit 7,743 6,615 31,990 25,336
 
Other Income (Expense)
Investment income 65 49 612 423
Interest expense (466) (477) (1,742) (2,123)
Equity in earnings of affiliated companies 779 570 2,691 2,320
Other (855)   (23) 1,199   (1,150)
(477)   119 2,760   (530)
 
Income Before Income Tax Provision 7,266 6,734 34,750 24,806
(Provision) Benefit for Income Taxes (1,880)   4,716 (9,164)   (2,417)
Net Income $5,386   $11,450 $25,586   $22,389
 
Capital Expenditures $7,581 $8,068 $22,936 $22,273
 
Weighted Average Shares:
Basic 19,993.89 20,663.54 20,232.46 20,982.19
Diluted 20,028.89 20,995.32 20,268.55 21,046.23
Actual shares outstanding at end of period 19,931.23 20,509.37 19,931.23 20,509.37
 
Earnings Per Share:
Basic Net Income $269.38 $554.12 $1,264.60 $1,067.05
Dilutive Earnings Per Share $268.91 $553.27 $1,262.35 $1,063.80
 
Dilutive Earnings Per Share by Component:
On-going operations $313.00 $209.96 $1,142.56 $761.37
Out of period items 89.40
Charitable contributions (44.09) (89.94) (35.16)
Gain on sale of assets in a minority position 120.33
Deferred tax adjustment due to federal rate change   343.31   337.59
Reported $268.91   $553.27 $1,262.35   $1,063.80
 
See EBITDA on page 2
 
   

LICT Corporation

 

Exhibit A

Statements of Operations and Selected Balance Sheet
Data-Continued

Page 2 of 2

(in thousands, Except Per Share Data)

 

 

SELECTED BALANCE SHEET DATA

Dec. 31, Dec. 31,
2018     2017
Cash and Cash Equivalents $7,732 $7,054
 
Other short-term investments 20,000
 
Note receivables and other deposits 3,250 3,250
 
Long-Term Debt (including current portion) 30,976 31,001
 

Liabilities, including taxes, other than debt

$34,017 $26,685
 
Shareholders’ Equity $139,709 $122,239
 
Shares Outstanding at Date 19,931 20,509
 

EBITDA

EBITDA is an established measure of operating performance and liquidity
that is commonly reported and widely used by analysts, investors, and
other interested parties in the telecommunications industry because it
eliminates many differences in financial, capitalization, and tax
structures, as well as non-cash and non-operating charges to earnings.
We believe that EBITDA trends are a valuable indicator of whether our
operations are able to produce sufficient operating cash flow to fund
working capital needs, service debt obligations, and fund capital
expenditures.

EBITDA equals net income (loss), before interest expense, income tax
expense (benefit), depreciation and amortization expense, investment
income, equity in earnings of affiliated companies, gain (loss) on sale
of investment, impairment charges, and net income from discontinued
operations. EBITDA also now includes the cash distributions we receive
from the equity in earnings of affiliated companies. Although we do not
have majority voting control of such companies, we have the ability to
significantly influence financial and accounting policies. The inclusion
of cash received from equity companies is a change from past practice.

       
Three Months Ended Twelve Months Ended
December 31, December 31,
2018   2017 2018   2017
EBITDA
Operating subsidiaries $13,747 $12,359 $55,742 $47,208
Cash received from equity affiliates 725   613 2,200   1,988
On-going operating subsidiaries 14,472 12,972 57,942 49,196
Deduct out of period items   (2,462)  
On-going EBITDA 14,472 12,972 55,480 49,196
Corporate Office Expense (921)   (1,065) (4,006)   (3,992)
EBITDA 13,551 11,907 51,474 45,204
Depreciation and amortization (5,083) (4,679) (19,746) (17,880)
Add out of period items 2,462
Deduct cash received from equity affiliates (725)   (613) (2,200)   (1,988)
Operating profit $7,743   $6,615 $25,586   $25,3361
 

Contacts

Robert E. Dolan
Executive Vice President and Chief Financial Officer
914/921-8821