HickoryTech (HTCO) to Restate Financials Due to Interest Rate Swap Accounting Change
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Financial Fact:
Cost of sales, excluding depreciation and amortization: 12.36M
Today's EPS Names:
BTTX, VAXX, ELYS, More
Financial Fact:
Cost of sales, excluding depreciation and amortization: 12.36M
Today's EPS Names:
BTTX, VAXX, ELYS, More
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HickoryTech Corporation (NASDAQ: HTCO) announced that it will restate its previously reported financial results to change its accounting for interest-rate swaps which are used to manage the company’s exposure to interest rate fluctuations as a non-cash interest expense within its statement of operations.
The restatement does not impact or change total comprehensive income, cash flow, operating income, EBITDA, total shareholder’s equity or the company’s ability to pay dividends. HickoryTech utilizes fixed-interest-rate swap agreements (financial derivative instruments) to manage exposure to interest rate fluctuations on a portion of the company’s variable interest-rate debt.
The company will amend and restate financial statements for each of the three years ended December 31, 2009, 2010 and 2011. In addition, the company will file amendments to its quarterly reports for the periods ended March 31, 2012 and June 30, 2012. The company anticipates filing restated financial statements with the Securities and Exchange Commission in November 2012. The restated filings will include unaudited comparative financial data for the years ended December 31, 2007 and 2008.
The company has previously recorded the changes in the fair value of interest rate swap agreements as a component of other comprehensive income/loss under Financial Accounting Standards Board FASB ASC 815, “Derivatives and Hedging.” This accounting is commonly used and referred to as cash flow hedge accounting.
Recently, the company and its former independent registered public accountant, Grant Thornton LLP, discussed the accounting for interest-rate swap agreements and concluded the changes in the fair value of interest-rate swap agreements should have been reported as a non-cash interest charge within the statement of operations. This conclusion was based on the documentation requirement at the inception of the interest swap agreements as well as on an ongoing basis. The company had previously recorded the changes in interest-rate swap agreements within accumulated other comprehensive income/loss.
The restatement does not impact the economics of these interest-rate swaps, nor does it affect cash flow related to cash interest expense. Although the final restatement amounts have not yet been determined, the company estimates the impact as follows:
The restatement does not impact or change total comprehensive income, cash flow, operating income, EBITDA, total shareholder’s equity or the company’s ability to pay dividends. HickoryTech utilizes fixed-interest-rate swap agreements (financial derivative instruments) to manage exposure to interest rate fluctuations on a portion of the company’s variable interest-rate debt.
The company will amend and restate financial statements for each of the three years ended December 31, 2009, 2010 and 2011. In addition, the company will file amendments to its quarterly reports for the periods ended March 31, 2012 and June 30, 2012. The company anticipates filing restated financial statements with the Securities and Exchange Commission in November 2012. The restated filings will include unaudited comparative financial data for the years ended December 31, 2007 and 2008.
The company has previously recorded the changes in the fair value of interest rate swap agreements as a component of other comprehensive income/loss under Financial Accounting Standards Board FASB ASC 815, “Derivatives and Hedging.” This accounting is commonly used and referred to as cash flow hedge accounting.
Recently, the company and its former independent registered public accountant, Grant Thornton LLP, discussed the accounting for interest-rate swap agreements and concluded the changes in the fair value of interest-rate swap agreements should have been reported as a non-cash interest charge within the statement of operations. This conclusion was based on the documentation requirement at the inception of the interest swap agreements as well as on an ongoing basis. The company had previously recorded the changes in interest-rate swap agreements within accumulated other comprehensive income/loss.
The restatement does not impact the economics of these interest-rate swaps, nor does it affect cash flow related to cash interest expense. Although the final restatement amounts have not yet been determined, the company estimates the impact as follows:
- 2011 reported net income will decrease $836,000 or $0.06 per share
- 2010 reported net income will increase $498,000 or $0.04 per share
- 2009 reported net income will increase $829,000 or $0.07 per share
- 2008 reported net income will decrease $1,104,000 or $0.09 per share
- 2007 reported net income will decrease $874,000 or $0.06 per share
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