----

----

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington,DC 20549**

**FORM 10-Q**
| **(Mark One)** |
|----------------|
| ý         | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|           |   |
|           | **For the Quarterly Period Ended June 30, 2001 ** |
|           |   |
|           | **or** |
|           |   |
| o              | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|           |   |
|           | **For the transition period  from________________to________________** |

**Commission file number  0-13721**
| **HICKORY TECH CORPORATION**                                                        |
|-------------------------------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)                              |
|                                                                                |   |
| **Minnesota******                                                                   | **41-1524393****** |
| (State or other  jurisdiction of  incorporation or organization)                    | (I.R.S. Employer  Identification No.) |
|                                                                                |   |
| **221 East Hickory Street**                                                         |
| **Mankato, Minnesota 56002-3248******                                               |
| (Address of principal  executive offices and zip code)                              |
|                                                                                |   |
| **(800) 326-5789******                                                              |
| (Registrant’s  telephone number, including area code)                          |
|                                                                                |   |
|                                                                                |   |
|                                                                                     |
| (Former name, former  address and former fiscal year, if changed since last report) |
|                                                                                |   |

 

Indicate by check mark whether the Registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.     Yes ý  No o

The total number of shares of the registrant's commonstock outstanding as of June 30, 2001:  13,897,679.

----

----

**HICKORY TECH CORPORATION**June 30, 2001PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIALSTATEMENTS.

CONSOLIDATEDSTATEMENTS OF INCOME(UNAUDITED)

| *(In Thousands  Except Per Share Amounts)*                                                   | For  Quarter Ended                                                           |   | For Six  Months Ended |   |
|----------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|--------|-----------------------|--------|
|                                                                                         |                                                                              |   |                       |   |
|                                                                                         | 6/30/2001                                                                    |   | 6/30/2000             |   | 6/30/2001 |   | 6/30/2000 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
| OPERATING REVENUES:                                                                          |                                                                         |   |                  |   |   |   |   |   |
|                                                                                         | Telephone                                                                    | $      | 13,678                |   | $ | 13,296 |   | $ | 27,737 |   | $ | 25,807 |   |
|                                                                                         | Communications Services                                                      | 2,716  |                  | 1,793  |   | 5,341 |   | 3,411 |   |
|                                                                                         | Wireless Services                                                            | 4,759  |                  | 4,856  |   | 9,163 |   | 9,250 |   |
|                                                                                         | Information Solutions                                                        | 965    |                  | 1,127  |   | 1,943 |   | 2,164 |   |
|                                                                                         | Enterprise Solutions                                                         | 4,836  |                  | 5,124  |   | 10,001 |   | 9,410 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
|                                                                                         | TOTAL OPERATING REVENUES                                                     | 26,954 |                  | 26,196 |   | 54,185 |   | 50,042 |   |
| COSTS AND EXPENSES:                                                                          |                                                                         |   |                  |   |   |   |   |   |
|                                                                                         | Operating Expenses                                                           | 17,116 |                  | 16,991 |   | 34,442 |   | 32,067 |   |
|                                                                                         | Depreciation                                                                 | 2,999  |                  | 2,696  |   | 5,945 |   | 5,300 |   |
|                                                                                         | Amortization of Intangibles                                                  | 832    |                  | 777    |   | 1,663 |   | 1,514 |   |
|                                                                                         |                                                                         |        |                  |        |   |  |   |  |   |
|                                                                                         | TOTAL COSTS AND EXPENSES                                                     | 20,947 |                  | 20,464 |   | 42,050 |   | 38,881 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
| OPERATING INCOME                                                                             | 6,007                                                                        |   | 5,732                 |   | 12,135 |   | 11,161 |   |
| OTHER INCOME (EXPENSE):                                                                      |                                                                         |   |                  |   |   |   |   |   |
|                                                                                         | Equity in Net Income (Loss) of  Investees                                    | (6     | )                     | 6      |   | (13 | ) | 20 |   |
|                                                                                         |  Gain on Sale of Assets                                                 | 141    |                  | 271    |   | 141 |   | 271 |   |
|                                                                                         | Interest and Other Income                                                    | 38     |                  | 81     |   | 75 |   | 128 |   |
|                                                                                         | Interest Expense                                                             | (2,777 | )                     | (2,252 | ) | (5,607 | ) | (4,279 | ) |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
|                                                                                         |  TOTAL OTHER INCOME (EXPENSE)                                           | (2,604 | )                     | (1,894 | ) | (5,404 | ) | (3,860 | ) |
|                                                                                         |                                                                         |        |                  |        |   |  |   |  |   |
| INCOME BEFORE INCOME TAXES, EXTRA-  ORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE | 3,403                                                                        |   | 3,838                 |   | 6,731 |   | 7,301 |   |
| INCOME TAXES                                                                                 | 1,399                                                                        |   | 1,555                 |   | 2,764 |   | 2,943 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
| INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF  ACCOUNTING CHANGE                 | 2,004                                                                        |   | 2,283                 |   | 3,967 |   | 4,358 |   |
| EXTRAORDINARY LOSS ON DEBT EXTINGUISHMENT, NET OF TAX BENEFIT OF  $158                       | -                                                                            |   | (233                  | )      | - |   | (233 | ) |
| CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX BENEFIT OF  $14                           | -                                                                            |   | -                     |   | - |   | (20 | ) |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
| NET INCOME                                                                                   | $                                                                            | 2,004  |                  | $      | 2,050 |   | $ | 3,967 |   | $ | 4,105 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
|                                                                                              |                                                                         |
| Basic Earnings Per Share:                                                                    |                                                                         |   |                  |   |   |   |   |   |
|                                                                                         | Income Before Extraordinary Item and Cumulative Effect of  Accounting Change | $      | 0.14                  |   | $ | 0.17 |   | $ | 0.28 |   | $ | 0.32 |   |
|                                                                                         | Extraordinary Item and Cumulative  Effect                                    | -      |                  | (0.02  | ) | - |   | (0.02 | ) |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
|                                                                                         | Net Income                                                                   | $      | 0.14                  |   | $ | 0.15 |   | $ | 0.28 |   | $ | 0.30 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
| Dividends Per Share                                                                          | $                                                                            | 0.11   |                  | $      | 0.11 |   | $ | 0.22 |   | $ | 0.22 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
| Weighted Average Common Shares Outstanding                                                   | 13,894                                                                       |   | 13,815                |   | 13,889 |   | 13,806 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
|                                                                                              |                                                                         |
| Diluted Earnings Per Share:                                                                  |                                                                         |   |                  |   |   |   |   |   |
|                                                                                         | Income Before Extraordinary Item and Cumulative Effect of  Accounting Change | $      | 0.14                  |   | $ | 0.17 |   | $ | 0.28 |   | $ | 0.32 |   |
|                                                                                         | Extraordinary Item and Cumulative  Effect                                    | -      |                  | (0.02  | ) | - |   | (0.02 | ) |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
|                                                                                         | Net Income                                                                   | $      | 0.14                  |   | $ | 0.15 |   | $ | 0.28 |   | $ | 0.30 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
| Weighted Average Common and Equivalent Shares Outstanding                                    | 13,973                                                                       |   | 13,872                |   | 13,977 |   | 13,864 |   |
|                                                                                         |                                                                              |   |                       |   |  |   |  |   |
| The  accompanying notes are an integral part of the consolidated financial  statements.      |
|                                                                                              |                                                                              |        |                       |        |  |  |  |  |  |  |  |  |  |  |

 

**HICKORY TECH CORPORATION**June 30, 2001

CONSOLIDATED BALANCE SHEETS(UNAUDITED)

| *(In Thousands  Except  Share and Per Share Amounts)*                              | **6/30/2001**                                                           |        | 12/31/2000  |      |    |
|-----------------------------------------------------------------------------------------|-------------------------------------------------------------------------|-------------|-------------|-----------|---------|
|                                                                                    | ****                                                                    |        |             |      |    |
| ASSETS                                                                                  |                                                                    |
| CURRENT ASSETS:                                                                         |                                                                    |        |        |      |    |   |
|                                                                                    | Cash and Cash Equivalents                                               |        | **$**       | **1,824** |    | $ | 1,190 |   |   |
|                                                                                    | Receivables, Net of Allowance for  Doubtful Accounts of $1,428 and $961 |        | **16,298**  |      | 16,137  |   |   |
|                                                                                    | Income Taxes Receivable                                                 |        | **-**       |      | 670     |   |   |
|                                                                                    | Inventories                                                             |        | **4,986**   |      | 4,585   |   |   |
|                                                                                    | Deferred Income Taxes                                                   |        | **1,404**   |      | 1,404   |   |   |
|                                                                                    | Other                                                                   |        | **1,356**   |      | 1,423   |   |   |
|                                                                                    |                                                                    |        | ****        |      |         |   |   |
|                                                                                    | TOTAL CURRENT ASSETS                                                    |        | **25,868**  |      | 25,409  |   |   |
|                                                                                    |                                                                    |        |        |      |    |   |
| INVESTMENTS                                                                             |                                                                    | **10,576**  |        | 10,361    |    |   |
|                                                                                    |                                                                    |        |        |      |    |   |
| PROPERTY, PLANT AND EQUIPMENT                                                           |                                                                    | **217,544** |        | 203,362   |    |   |
| Less ACCUMULATED DEPRECIATION                                                           |                                                                    | **91,907**  |        | 86,672    |    |   |
|                                                                                    |                                                                    | ****        |        |           |    |   |
|                                                                                    | PROPERTY, PLANT AND EQUIPMENT, NET                                      |        | **125,637** |      | 116,690 |   |   |
|                                                                                    |                                                                    |        |        |      |    |   |
| OTHER ASSETS:                                                                           |                                                                    |        |        |      |    |   |
|                                                                                    | Intangible Assets, Net                                                  |        | **112,110** |      | 100,603 |   |   |
|                                                                                    | Deferred Costs and Other                                                |        | **2,477**   |      | 2,424   |   |   |
|                                                                                    |                                                                    |        | ****        |      |         |   |   |
|                                                                                    | TOTAL OTHER ASSETS                                                      |        | **114,587** |      | 103,027 |   |   |
|                                                                                    |                                                                    |             |        |           |    |   |
| TOTAL ASSETS                                                                            |                                                                    | **$**       | **276,668** |      | $       | 255,487 |   |   |
|                                                                                    |                                                                    |             |        |           |    |   |
| LIABILITIES  & SHAREHOLDERS' EQUITY                                                 |
| CURRENT LIABILITIES:                                                                    |                                                                    |        |        |      |    |
|                                                                                    | Cash Overdraft                                                          |        | **$**       | **3,836** |    | $ | - |   |
|                                                                                    | Accounts Payable                                                        |        | **5,887**   |      | 10,791  |   |
|                                                                                    | Income Taxes Payable                                                    |        | **894**     |      | -       |   |
|                                                                                    | Accrued Interest                                                        |        | **515**     |      | 108     |   |
|                                                                                    | Advanced Billings and Deposits                                          |        | **3,745**   |      | 4,411   |   |
|                                                                                    | Current Maturities of Long-Term  Debt                                   |        | **1,219**   |      | 1,217   |   |
|                                                                                    |                                                                    |        | ****        |      |         |   |
|                                                                                    | TOTAL CURRENT LIABILITIES                                               |        | **16,096**  |      | 16,527  |   |
|                                                                                    |                                                                    |        |        |      |    |
| LONG-TERM DEBT, Net of Current  Maturities                                              |                                                                    | **167,322** |        | 147,433   |    |
|                                                                                    |                                                                    |        |        |      |    |
| DEFERRED INCOME TAXES                                                                   |                                                                    | **9,417**   |        | 9,417     |    |
|                                                                                    |                                                                    |        |        |      |    |
| DEFERRED COMPENSATION AND OTHER                                                         |                                                                    | **2,874**   |        | 2,932     |    |
|                                                                                    |                                                                    |        |        |      |    |
| DEFERRED REVENUE                                                                        |                                                                    | **1,877**   |        | 1,821     |    |
|                                                                                    |                                                                    |             |        |           |    |
|                                                                                    |                                                                    |        |        |      |    |
|                                                                                    | TOTAL LIABILITIES                                                       |        | **197,586** |      | 178,130 |   |
|                                                                                    |                                                                    |        |        |      |    |
| SHAREHOLDERS' EQUITY:                                                                   |                                                                    |        |        |      |    |
|                                                                                    | Common Stock, no par value, $.10  stated value                          |        |        |      |    |   |
|                                                                                    | Shares authorized: 100,000,000                                          |        |        |      |    |   |
|                                                                                    | Shares outstanding: 2001,  13,897,679; 2000, 13,878,568                 |        | **1,390**   |      | 1,388   |   |
|                                                                                    | Additional Paid-In Capital                                              |        | **6,285**   |      | 5,473   |   |
|                                                                                    | Retained Earnings                                                       |        | **71,407**  |      | 70,496  |   |
|                                                                                    |                                                                    |        | ****        |      |         |   |
|                                                                                    | TOTAL SHAREHOLDERS' EQUITY                                              |        | **79,082**  |      | 77,357  |   |
|                                                                                    |                                                                    |             |        |           |    |
|                                                                                    |                                                                    |        |        |      |    |
| TOTAL LIABILITIES &  SHAREHOLDERS' EQUITY                                           |                                                                    | **$**       | **276,668** |      | $       | 255,487 |   |
|                                                                                    |                                                                    |             |        |           |    |
| The  accompanying notes are an integral part of the consolidated financial  statements. |
|                                                                                         |                                                                         |             |             |           |         |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**HICKORY TECH CORPORATION**June 30, 2001

CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)

|                                                                                    | For Six  Months Ended                                 |        |
|-----------------------------------------------------------------------------------------|-------------------------------------------------------|-------------|
|                                                                                    |                                                       |        |
| *In Thousands*                                                                          | **6/30/2001**                                         |        | 6/30/2000 |   |
|                                                                                    |                                                       |        |  |   |
| CASH FLOWS FROM OPERATING  ACTIVITIES:                                                  |                                                  |        |   |   |
|                                                                                    | Net Income                                            | **$**       | **3,967** |   | $ | 4,105 |   |
|                                                                                    | Adjustments to Reconcile Net  Income to Net           |        |   |   |   |
|                                                                                    | Cash Provided by Operating  Activities:               |        |   |   |   |
|                                                                                    | Depreciation and Amortization                         | **7,608**   |   | 6,814 |   |
|                                                                                    | Stock-Based Compensation                              | **533**     |   | 451 |   |
|                                                                                    | Equity in Net Loss (Income) of  Investees             | **13**      |   | (20 | ) |
|                                                                                    | Gain Resulting from Sale of Assets                    | **(141**    | ) | (161 | ) |
|                                                                                    | Cumulative Effect of Accounting  Change               | **-**       |   | 34 |   |
|                                                                                    | Provision for Losses on Accounts  Receivable          | **467**     |   | 579 |   |
|                                                                                    | Extraordinary Loss on Debt  Extinguishment            | **-**       |   | 391 |   |
| Changes in Operating Assets and  Liabilities:                                           |                                                  |        |   |   |
|                                                                                    | Receivables                                           | **311**     |   | 314 |   |
|                                                                                    | Inventories                                           | **(401**    | ) | (1,917 | ) |
|                                                                                    | Accounts Payable and Accrued  Expenses                | **(3,604**  | ) | (5,929 | ) |
|                                                                                    | Advance Billings and Deposits                         | **(666**    | ) | 381 |   |
|                                                                                    | Deferred Revenue and Compensation                     | **(2**      | ) | 367 |   |
|                                                                                    | Other                                                 | **13**      |   | (476 | ) |
|                                                                                    |                                                  | ****        |   |  |   |
|                                                                                    | Net Cash Provided By Operating  Activities            | **8,098**   |   | 4,933 |   |
|                                                                                    |                                                       |        |  |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                   |                                                  |        |   |   |
|                                                                                    | Additions to Property, Plant and  Equipment           | **(15,133** | ) | (9,075 | ) |
|                                                                                    | Additions to Capitalized Software  Development Costs  | **(2,154**  | ) | (310 | ) |
|                                                                                    | Increase in Investments                               | **(497**    | ) | (89 | ) |
|                                                                                    | Distributions from Investees                          | **-**       |   | 700 |   |
|                                                                                    | Proceeds from Sale of Assets                          | **724**     |   | 176 |   |
|                                                                                    | Acquisition of Licenses                               | **(11,357** | ) | - |   |
|                                                                                    |                                                  | ****        |   |  |   |
|                                                                                    | Net Cash Used In Investing  Activities                | **(28,417** | ) | (8,598 | ) |
|                                                                                    |                                                       |        |  |   |
| CASH FLOWS FROM FINANCING  ACTIVITIES:                                                  |                                                  |        |   |   |
|                                                                                    | Increase (Decrease) in Cash  Overdraft                | **3,836**   |   | (457 | ) |
|                                                                                    | Payment of Debt Issuance Costs                        | **-**       |   | (369 | ) |
|                                                                                    | Repayments of Debt                                    | **(108**    | ) | (40,345 | ) |
|                                                                                    | Borrowings on Line of Credit                          | **21,500**  |   | 48,500 |   |
|                                                                                    | Repayments on Line of Credit                          | **(1,500**  | ) | (1,000 | ) |
|                                                                                    | Proceeds from Issuance of Common  Stock               | **281**     |   | 109 |   |
|                                                                                    | Dividends Paid                                        | **(3,056**  | ) | (2,919 | ) |
|                                                                                    |                                                  | ****        |   |  |   |
|                                                                                    | Net Cash Provided (Provided By  Financing Activities) | **20,953**  |   | 3,519 |   |
|                                                                                    |                                                       |        |  |   |
| NET INCREASE (DECREASE) IN CASH  AND CASH EQUIVALENTS                                   | **634**                                               |        | (146 | ) |
|                                                                                    |                                                  |        |   |   |
| CASH AND CASH EQUIVALENTS AT  BEGINNING OF PERIOD                                       | **1,190**                                             |        | 2,708 |   |
|                                                                                    |                                                       |        |  |   |
| CASH AND CASH EQUIVALENTS AT END  OF PERIOD                                             | **$**                                                 | **1,824**   |   | $ | 2,562 |   |
|                                                                                    |                                                       |        |  |   |
| The  accompanying notes are an integral part of the consolidated financial  statements. |                                                  |
|                                                                                         |                                                       |             |  |  |  |  |  |  |  |

 

HICKORYTECH CORPORATIONJUNE 30, 2001PART 1. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

NOTE 1. BASIS OF PRESENTATION

             Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with generally accepted accounting principles forinterim financial information and with the instructions to Form 10-Q andArticle 10 of Regulation S-X. Accordingly, they do not include all of theinformation necessary for a fair presentation of results of operations,financial position, and cash flows in conformity with accounting principlesgenerally accepted in the United States of America. In the opinion ofmanagement, the condensed consolidated financial statements reflect alladjustments (consisting only of normal recurring adjustments) considerednecessary for a fair presentation of Hickory Tech Corporation’s (HickoryTech)results for the periods presented. Operating results for interim periods are not necessarily indicative ofresults that may be expected for the fiscal year as a whole. The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets, liabilities,revenues, expenses, and related disclosures at the date of the financialstatements and during the reporting period. Actual results could differ fromthese estimates. These unaudited interim condensed consolidated financialstatements should be read in conjunction with HickoryTech’s Annual Report onForm 10-K for the year ended December 31, 2000.

             Theconsolidated financial statements of HickoryTech include Hickory TechCorporation and its subsidiaries in the following five business segments: (i)Telephone Sector, (ii) Communications Services Sector, (iii) Wireless ServicesSector, (iv) Information Solutions Sector and (v) Enterprise Solutions Sector.An investment in an unconsolidated partnership for the Information SolutionsSector is accounted for using the equity method. All intercompany transactionshave been eliminated from the consolidated financial statements.

             Operatingexpenses include all costs related to delivery of HickoryTech’s communicationsservices and products. These costs include all selling, general andadministrative costs and all costs of performing services and providing relatedproducts, except for costs associated with the depreciation and amortization ofproperty, plant and equipment and intangible assets.

             Allrevenues and expenses related to Internet services which were reported in theTelephone Sector in 2000 have been reclassified to the Communications ServicesSector to conform to the 2001 presentation. These reclassifications reduced Telephone Sector revenue and increasedCommunications Services Sector revenue by $394,000 for the three months endedJune 30, 2000 and $754,000 for the six months ended June 30, 2000. Thesereclassifications also reduced Telephone Sector operating expenses andincreased Communications Services Sector operating expenses by $335,000 for thethree months ended June 30, 2000 and $657,000 for the six months ended June 30,2000. In addition, cost of sales of $3,459,000 for the three months ended June30, 2000 and $6,462,000 for the six months ended June 30, 2000 related toEnterprise Solutions Sector sales that were reported separately in 2000 havebeen reclassified to include them in operating expenses to conform to the 2001presentation.  These reclassificationshad no effect on previously reported consolidated operating income, net incomeor cash flows.

NOTE 2. EARNINGSAND CASH DIVIDENDS PER COMMON SHARE

             Basicearnings per share is computed by dividing net income by the weighted averagenumber of shares of common stock outstanding during the quarter. Shares used inthe diluted earnings per share computation are based on the weighted average numberof shares of common stock outstanding during the quarter increased bypotentially dilutive common shares. Potentially dilutive common shares includestock options and stock issued under the employee stock purchase plan (ESPP). For  Three Months Ended For  Six Months Ended      6/30/01 6/30/00 6/30/01 6/30/00               Weighted Average  Shares Outstanding13,893,551 13,815,253 13,889,449 13,805,901 Stock Options  (dilutive only)65,897 36,119 76,188 40,913 Weighted Average Stock  Subscribed (ESPP)13,382 20,685 11,367 16,945      Weighted Average  Dilutive Shares Outstanding13,972,830 13,872,057 13,977,004 13,863,759      
             Optionsto purchase 39,750 and 175,900 shares for the three months ended June 30, 2001and 2000, respectively, and 39,750 and 122,000 shares for the six months endedJune 30, 2001 and 2000, respectively, were not included in the computation ofearnings per share assuming dilution because their effect on earnings per sharewould have been antidilutive.

             Cashdividends are based on the number of common shares outstanding at therespective record dates. Listed below are the number of shares outstanding asof the record date for the first quarter of 2001 and 2000.
Shares Outstanding on Record Date2001 2000   First Quarter (Feb. 15)13,886,669 13,799,056 Second Quarter (May 15)13,892,254 13,817,168 
             Dividendsper share reflect dividends declared during the applicable quarter divided bythe weighted average common shares outstanding during the period.

             During the first six months of 2001 and 2000,shareholders have elected to reinvest $124,000 and $119,000, respectively, ofdividends into HickoryTech common stock pursuant to the HickoryTech DividendReinvestment Plan.

NOTE 3. COMPREHENSIVE INCOME

             Forthe three months and six months ended June 30, 2001 and 2000, comprehensiveincome was comprised solely of net income.

NOTE 4. INVENTORIES

             Inventoriesat June 30, 2001 and December 31, 2000 consist of raw materials and supplies.

NOTE 5.   PLANNEDDISPOSITION

             OnJuly 21, 2000, HickoryTech announced plans to sell its local telephone exchangein Amana, Iowa. The Amana operation, known as Amana Colonies Telephone Company(ACTC), serves approximately 1,500 access lines in the seven communities of theAmana Colonies in east central Iowa. The sale has received the approval of the Federal CommunicationsCommission and closed on August 6, 2001. ACTC was sold in exchange for cashproceeds of $6,500,000.  The operationsof ACTC are included in the Telephone Sector. For the three months ended June 30, 2001 and 2000, ACTC generatedrevenues of $347,000 and $376,000 and generated operating income (loss) of$28,000 and ($8,000), respectively.  Forthe six months ended June 30, 2001 and 2000, ACTC generated revenues of$687,000 and $733,000 and generated operating income (loss) of $7,000 and$(12,000), respectively.

 

NOTE 6.    ACQUISITION

             OnJune 26, 2001, HickoryTech acquired two digital personal communicationsservices (PCS) licenses from McLeodUSA Incorporated for $11,100,000 in cash.The PCS licenses acquired by HickoryTech include the Minnesota Basic TradingAreas (BTAs) of Mankato-Fairmont and Rochester-Austin-Albert Lea, an areacovering a population of approximately 493,000 people. The acquisition was apurchase of the licenses only. There are no customers, existing revenue streamor physical property and equipment included with this acquisition as the BTAsare undeveloped.

NOTE 7.   RECENT ACCOUNTING DEVELOPMENTS

             InJuly 2001, the Financial Accounting Standards Board issued Statement No. 141,“Business Combinations,” and Statement No. 142, “Goodwill and Other IntangibleAssets,” (collectively, “the Statements”). The Statements eliminate thepooling-of-interests method of accounting for business combinations and thesystematic amortization of goodwill and indefinite life intangibles.  HickoryTech intends to adopt the Statementsduring the first quarter of 2002 and expects that the adoption of the Statementswill reduce 2002 amortization expense, although the amount of such reductioncannot be determined at this time.

NOTE 8. QUARTERLY SECTOR FINANCIAL SUMMARY
*(In Thousands)*Telephone Comm.  Services Wireless  Services Information  Solutions Enterprise  Solutions Corporate and  Eliminations HickoryTech  Consolidated                        **Three  Months Ended 6/30/01**              Operating Revenue from               Unaffiliated Customers$13,678 $2,716 $4,759 $965 $4,836 $- $26,954 Intercompany Revenues958 208 - 1,242 - (2,408)-         Total14,636 2,924 4,759 2,207 4,836 (2,408)26,954                Depreciation and Amortization2,148 369 1,024 100 88 102 3,831 Operating Income/(Loss)6,420 (1,371)626 298 225 (191)6,007 Net Income/(Loss)3,775 (844)357 158 124 (1,566)2,004 Total Assets113,107 38,209 95,675 5,105 8,724 15,848 276,668 Property, Plant and Equip.,Net70,006 35,564 15,919 3,413 689 46 125,637 Capital Expenditures3,544 4,599 323 682 85 144 9,377                 **Three  Months Ended 6/30/00**              Operating Revenue from               Unaffiliated Customers$13,296 $1,793 $4,856 $1,127 $5,124 $- $26,196 Intercompany Revenues709 242 - 1,178 - (2,129)-         Total14,005 2,035 4,856 2,305 5,124 (2,129)26,196                Depreciation and Amortization2,003 189 1,038 92 84 67 3,473 Operating Income/(Loss)6,488 (1,227)940 165 275 (909)5,732 Net Income/(Loss)3,828 (755)515 99 150 (1,787)2,050 Total Assets102,537 14,318 85,754 4,190 9,921 3,229 219,949 Property, Plant and Equip.,Net60,554 13,228 14,894 2,066 746 459 91,947 Capital Expenditures3,411 1,001 2,200 38 23 5 6,678                
 
*(In Thousands)*Telephone Comm.  Services Wireless  Services Information  Solutions Enterprise  Solutions Corporate and  Eliminations HickoryTech  Consolidated                        **Six Months  Ended 6/30/01**              Operating Revenue from               Unaffiliated Customers$27,737 $5,341 $9,163 $1,943 $10,001 $- $54,185 Intercompany Revenues1,882 427 - 2,545 - (4,854)-         Total29,619 5,768 9,163 4,488 10,001 (4,854)54,185                Depreciation and Amortization4,288 656 2,085 200 173 206 7,608 Operating Income/(Loss)13,555 (2,859)840 860 592 (853)12,135 Net Income/(Loss)7,939 (1,733)455 480 329 (3,503)3,967 Total Assets113,107 38,209 95,675 5,105 8,724 15,848 276,668 Property, Plant and Equip.,Net70,006 35,564 15,919 3,413 689 46 125,637 Capital Expenditures4,662 8,404 731 1,069 90 177 15,133                 **Six Months  Ended 6/30/00**              Operating Revenue from               Unaffiliated Customers$25,807 $3,411 $9,250 $2,164 $9,410 $- $50,042 Intercompany Revenues1,409 473 - 2,230 - (4,112)-         Total27,216 3,884 9,250 4,394 9,410 (4,112)50,042                Depreciation and Amortization4,002 305 2,063 153 168 123 6,814 Operating Income/(Loss)12,879 (2,471)1,613 294 113 (1,267)11,161 Net Income/(Loss)7,580 (1,495)901 181 34 (3,096)4,105 Total Assets102,537 14,318 85,754 4,190 9,921 3,229 219,949 Property, Plant and Equip.,Net60,554 13,228 14,894 2,066 746 459 91,947 Capital Expenditures5,219 1,382 2,312 93 55 14 9,075 
 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS ANDFINANCIAL CONDITION.

FORWARD-LOOKINGSTATEMENTS

             ThisForm 10-Q contains forward-looking statements that are based on management’scurrent expectations, estimates and projections about the industry in whichHickoryTech operates and management’s beliefs and assumptions. Suchforward-looking statements are subject to important risks and uncertaintiesthat could cause HickoryTech’s future actual results to differ materially fromsuch statements. These statements are not guarantees of future performance andinvolve certain risks, uncertainties and probabilities, which are difficult topredict. Therefore, actual outcomes and results may differ materially from whatis expressed or forecasted in such forward-looking statements, whether as aresult of new information, future events or otherwise.  Factors that might cause such a differenceinclude, but are not limited to, those contained in this “Management’sDiscussion and Analysis” (Item 2) and Exhibit 99 to HickoryTech’s Annual Reporton Form 10-K for the year ended December 31, 2000, which is incorporated hereinby reference. You are cautioned not to place undue reliance on these forwardlooking statements, which speak only as of the date on which they weremade.  HickoryTech undertakes noobligation to update any of its forward-looking statements for any reason.

BUSINESSES

             Thebusiness segments of HickoryTech are:

*TELEPHONE SECTOR*

             HickoryTech’sTelephone Sector provides local exchange telephone service and owns andoperates certain fiber optic cable transport facilities outside of its localservice territory. There are four incumbent local exchange carriers (ILECs) inthis sector. Two ILECs provide telephone service in south central Minnesota,specifically Mankato (population 42,000) and eleven communities surroundingMankato. One Iowa ILEC provides telephone service for eleven communities in northwestIowa and another Iowa ILEC provides telephone service for the seven communitiesof the Amana Colonies in east central Iowa. The exchange in the Amana Colonieswas sold on August 6, 2001. HickoryTech also owns and operates fiber opticcable facilities in Minnesota, which are used to transport interexchangecommunications as a service to telephone exchange companies. HickoryTech’sMinnesota ILECs and its Communications Services Sector are the primary users ofthe fiber optic cable facilities.

*COMMUNICATIONS SERVICES SECTOR*

             Thissector provides telephone services as a competitive local exchange carrier(CLEC) to customers in towns in Minnesota and Iowa not currently inHickoryTech’s Telephone Sector’s service area. HickoryTech’s CLEC currentlyoffers local dial tone, long distance and local call Internet access servicesas an alternative choice for local telecommunications service to the incumbentlocal exchange carrier in those towns. This alternative service is currentlyoffered by HickoryTech’s CLEC to customers in eight communities in Minnesotaand six communities in Iowa. Additional opportunities are being pursued incommunities in Minnesota and Iowa. This sector also provides long distanceservice and Internet access to HickoryTech’s southern Minnesota and northernIowa Telephone Sector subscribers.

*WIRELESS SERVICES SECTOR*

             HickoryTech’sWireless Services Sector owns and operates cellular telephone businesses insouth central Minnesota and in the Minneapolis/St. Paul area. In south centralMinnesota, the sector provides cellular service for Minnesota’s Rural ServiceArea (RSA) 10, under the business name of HickoryTech Wireless. This businessholds 100% of the “A-side” FCC cellular license for seven counties in southcentral Minnesota. The area overlaps and is larger than the telephone lineservice area of HickoryTech’s Minnesota ILEC and CLEC service areas and servesa population of approximately 230,000. This business also holds theMinneapolis/St. Paul Metro A-2 (Metro A-2) cellular license. The Metro A-2property surrounds the metropolitan Twin Cities area and is located in fiveMinnesota counties and in one Wisconsin county. Metro A-2 provides service toan area with a population of approximately 170,000.  This business also holds the newly acquired PCS licenses for theMinnesota BTAs of Mankato-Fairmont and Rochester-Austin-Albert Lea.  The two BTAs are located in 16 Minnesotacounties and one Iowa county and provide service to an area with a populationof approximately 493,000, some of which coincide with the previously mentionedcellular RSA 10 population of 230,000.
*INFORMATIONSOLUTIONS SECTOR*

             HickoryTech’sInformation Solutions Sector provides data processing and related services,principally for HickoryTech, other ILECs, CLECs, interexchange networkcarriers, wireless companies, municipalities and utilities. HickoryTech’sInformation Solutions Sector’s principal activity is the provision of monthlybatch processing of computerized data. Currently, this sector is working on anew integrated billing and management system, to be called SuiteSolution.HickoryTech considers the wireless market, as well as the CLEC market,important components in the future of telecommunications. SuiteSolution shouldenable HickoryTech to become a full-service billing provider for all aspects ofthe telecommunications industry on a fully integrated basis.

*ENTERPRISE SOLUTIONS SECTOR*

             TheEnterprise Solutions Sector’s activities are focused on the sale, installationand service of business telephone systems and data communications equipment tocompanies based in metropolitan Minneapolis/St. Paul, Minnesota.  HickoryTech also applies this businesstelephone system expertise to its ILEC and CLEC operations in Minnesota andIowa.

RESULTS OF OPERATIONS:

CONSOLIDATED OPERATING RESULTS

             Thefollowing is a summarized discussion of consolidated results of operations.More detailed discussion of operating results by segment follows thisdiscussion.

OPERATING REVENUES- Consolidated operating revenues were $758,000 or 2.9% higher for the threemonths ended June 30, 2001 than for the three months ended June 30, 2000.Consolidated operating revenues were $4,143,000 or 8.3% higher for the sixmonths ended June 30, 2001 than for the six months ended June 30, 2000. Therevenue increase was primarily due to a 19.3% increase in HickoryTech’s totalcustomer base. The revenue increases from the higher customer base werepartially offset in the second quarter of 2001 by a decrease in revenues inHickoryTech’s Enterprise Solutions and Information Solutions Sectors.

OPERATING EXPENSES - Operating expenses for the three months ended June30, 2001 increased $125,000 or 0.7% compared with the same period in 2000.Operating expenses for the six months ended June 30, 2001 increased $2,375,000or 7.4% compared with the same period in 2000. The increase in operatingexpenses for the six months ended June 30 was primarily due to higher customeracquisition costs, primarily advertising and promotions, in the CommunicationsServices and Wireless Sectors. A further cause for the increase in operatingexpenses was the higher employee count maintained by HickoryTech to service itsexpanding customer base. During the second quarter of 2001, HickoryTechimplemented a series of management actions aimed at reducing operatingexpenses.  These management actions weresuccessful in limiting the operating expense growth in the second quarter.

             Includedin operating expenses were cost of sales of HickoryTech’s Enterprise SolutionsSector of $3,236,000 and $3,459,000 for the three months ended June 30, 2001and 2000, respectively, and $6,637,000 and $6,462,000 for the six months endedJune 30, 2001 and 2000, respectively. The increase in cost of sales from thissector for the six months ended June 30, 2001 of $175,000 or 2.7% was primarilydue to its increase in revenues.

DEPRECIATION AND AMORTIZATION - Depreciation expense for the three months ended June30, 2001 was $303,000 or 11.2% higher than for the same period in 2000.Depreciation expense for the six months ended June 30, 2001 was $645,000 or12.2% higher than for the same period in 2000. The capital expenditures in theemerging CLEC and fiber optic networks account for the increase in depreciationexpense. Amortization expense for the three months ended June 30, 2001 was$55,000 or 7.1% higher than for the same period in 2000. Amortization expensefor the six months ended June 30, 2001 was $149,000 or 9.8% higher than for thesame period in 2000. The amortization of capitalized software development costsrelated to the Information Solutions Sector’s billing software was the primaryreason for the increase in amortization expense.
OPERATINGINCOME - Operating income was4.8% higher for the three months ended June 30, 2001 than for the three monthsended June 30, 2000. Operating income was 8.7% higher for the six months endedJune 30, 2001 than for the six months ended June 30, 2000. The increase inoperating income primarily reflects the impact of the increase in operatingrevenues for this period and the implementation of management actions aimed atreducing operating expenses. Operating income was negatively impacted by theincrease in customer acquisition costs and higher depreciation expense relatedto building out the infrastructure of the CLEC business.

INTEREST EXPENSE - Interest expense increased $525,000 or 23.3% for thethree months ended June 30, 2001 compared to the same period in 2000. Interestexpense increased $1,328,000 or 31.0% for the six months ended June 30, 2001compared to the same period in 2000. The increase in interest expense was dueto an increase in long-term debt of $49,785,000 as of June 30, 2001, comparedto June 30, 2000, offset by a decrease in the weighted average interest rate onthe revolving credit facility from 8.26% on June 30, 2000 to 7.01% on June 30,2001. The outstanding balance of the revolving credit facility was $168,000,000on June 30, 2001.  HickoryTech expectsinterest expense to increase in future periods given higher levels of borrowingexpected to fund capital expenditures in its emerging businesses.

NETINCOME - Consolidated net income for the three monthsended June 30, 2001 was 2.2% lower than the comparable period in 2000.Consolidated net income for the six months ended June 30, 2001 was 3.4% lowerthan for the comparable period in 2000. The six months ended June 30, 2001included an after-tax gain on the sale of assets of $83,000. The six monthsended June 30, 2000 included an after-tax gain on the sale of assets of$160,000. The six months ended June 30, 2000 also included a $233,000 after-taxextraordinary loss on debt extinguishment and a $20,000 after-tax charge forthe cumulative effect of a change in accounting principle related to theadoption of Staff Accounting Bulletin (SAB) No. 101.  Without the effects of these one-time items, net income wouldhave decreased 7.5% for the six months ended June 30, 2001 compared to the sameperiod in 2000. The primary reason for the decrease in net income forHickoryTech was the increase in interest expense due to funds borrowed forcapital expenditures required to expand the CLEC business.

OPERATING STATISTICS
 6/30/01 6/30/00     Local Telephone Access Lines65,599 64,267  Local CLEC Access Lines9,968 6,385  Wireless Customers26,548 22,005  Long Distance Customers21,871 15,255  Internet Customers12,837 6,765 
SECTOR RESULTSOF OPERATIONS

             TELEPHONE- Operating revenues for the three months ended June 30, 2001 increased$382,000 or 2.9% compared with the same period in 2000. Operating revenues forthe six months ended June 30, 2001 increased $1,930,000 or 7.5% compared withthe same period in 2000. An increase in total access revenues for the sixmonths ended June 30, 2001 of $552,000 was the primary reason for the increasein operating revenues. Access revenues were bolstered by a continuing demandfor special circuits and a 4.0% increase in minutes of use in the first sixmonths of 2001 over the first six months of 2000. Access revenue in 2001 wasalso aided by $200,000 of retroactive billings during the first quarter forspecial access circuit revenue from interexchange carriers, which is anonrecurring event. Access line growth, vertical service penetration and higherlarge system sales accounted for the remaining revenue increase in the firstsix months of 2001.

             Operatingincome decreased $68,000 or 1.0% for the three months ended June 30, 2001compared with the same period in 2000. For the six months ended June 30, 2001,operating income was $676,000 or 5.2% higher than the same period in 2000. Thedecrease in operating income for the second quarter of 2001 was primarily dueto a higher employee base and other expenses incurred to support the growth andactivity of HickoryTech’s CLEC. The increase in operating income for the sixmonths ended June 30, 2001 was due primarily to the increase in operatingrevenues.

             TheEBITDA(1) margin for this sector was 58.5% for the quarter endedJune 30, 2001 compared to 60.6% for the same quarter in 2000. For the sixmonths ended June 30, 2001, the EBITDA(1) margin was 60.2%compared to 62.0% for the same period in 2000. The decrease in margin wasprimarily due to the higher employee base and other expenses incurred tosupport the growth and activity of HickoryTech’s CLEC.

(1) –*EBITDArepresents operating income plus depreciation and amortization expense. EBITDA,which is not a measure of financial performance or liquidity under generallyaccepted accounting principles, is provided because such information is used bycertain investors when analyzing the financial position and performance ofHickoryTech. Because of the variety of methods used by companies and analyststo calculate EBITDA, and the fact that EBITDA calculations may not accuratelymeasure a company’s ability to meet debt service requirements, caution shouldbe used in relying on any EBITDA presentation. HickoryTech sees value indisclosing its calculation of EBITDA for the financial community and indisplaying the change in EBITDA. HickoryTech believes an increasing EBITDAdepicts increased ability to attract financing and increased valuation ofHickoryTech’s business.*

 

             COMMUNICATIONSSERVICES  - For the three monthsended June 30, 2001, operating revenues were $923,000 or 51.5% higher than thethree months ended June 30, 2000. For the six months ended June 30, 2001,operating revenues were $1,930,000 or 56.6% higher than the six months endedJune 30, 2000. This increase was primarily attributable to increased marketshare and customer penetration. The Communications Services Sector had a countof 45,000 in combined access lines, long distance customers and Internetcustomers at June 30, 2001 (including approximately 5,000 Internet customersacquired in October 2000) compared to 28,000 combined customer units at June30, 2000.

             Despitethe increase in revenues, the emerging Communications Services Sector reporteda loss for the quarter, as it has since its inception in 1998, due to fixedcost components of operating expenses, primarily administrative, anddepreciation expense related to capital expenditures made to build the CLECnetwork. For the three months ended June 30, 2001, the operating loss increased$144,000 or 11.7% over the comparable period in 2000. For the six months endedJune 30, 2001, the operating loss increased $388,000 or 15.7% over thecomparable period in 2000. This sector continues to be in its start-up phase,and is experiencing growth in its customer base. In order to service thisgrowing customer base, this sector has increased its employee count andexperienced higher operating expenses, resulting in an increase in operatingexpenses of $1,033,000 or 31.7% for the three months ended June 30, 2001 and anincrease of $2,272,000 or 35.8% for the six months ended June 30, 2001 over thecomparable periods in 2000. This sector also experienced an increase indepreciation expense of $180,000 and $351,000 for the three months and sixmonths ended June 30, 2001, respectively, as compared to the same periodsin 2000. The increase in depreciation expense was caused by the capital expendituresrelated to overbuilding towns to provide local telecommunications services.

             TheEBITDA(1) margin for this sector was (34.3%) for the quarter endedJune 30, 2001 compared to (51.0%) for the same quarter in 2000. For thesix months ended June 30, 2001, the EBITDA(1) margin was(38.2%) compared to (55.8%) for the same period in 2000. The improved marginwas primarily due to the increase in operating revenues.

(1) –*EBITDArepresents operating income plus depreciation and amortization expense. EBITDA,which is not a measure of financial performance or liquidity under generallyaccepted accounting principles, is provided because such information is used bycertain investors when analyzing the financial position and performance ofHickoryTech. Because of the variety of methods used by companies and analyststo calculate EBITDA, and the fact that EBITDA calculations may not accuratelymeasure a company’s ability to meet debt service requirements, caution shouldbe used in relying on any EBITDA presentation. HickoryTech sees value indisclosing its calculation of EBITDA for the financial community and indisplaying the change in EBITDA. HickoryTech believes an increasing EBITDAdepicts increased ability to attract financing and increased valuation of HickoryTech’sbusiness.*

             WIRELESSSERVICES  - Operating revenues forthe three months ended June 30, 2001 decreased $97,000 or 2.0% compared withthe same period in 2000. For the six months ended June 30, 2001, operatingrevenues decreased $87,000 or 0.9% compared with the same period in 2000.  Local service revenues increased 24.2% forthe three months and 26.8% for the six months ended June 30, 2001 compared tothe same periods in 2000 as a result of retail customers at June 30, 2001growing 20.6% over the June 30, 2000 customer base. The increased revenue fromthe increase in the number of retail customers was more than offset by adecrease in roaming revenue. Roaming rates and minutes from other wirelesscarriers’ customers travelling into HickoryTech’s service territory havecontinued to erode, particularly due to technological changes among otherwireless providers which diminish the roaming minutes on HickoryTech’s wirelessservice towers. In addition, AT&T Wireless changed its Intelligent RoamingDatabase to favor its roaming partners in HickoryTech’s service territory andhas continued to build-out its PCS license in RSA10.  Both of these actions by AT&T will continue to cause adecline in roaming minutes for HickoryTech, which will only be partially offsetby increases in local recurring service revenues from HickoryTech’s retailcustomers.

             Forthe three months ended June 30, 2001, operating income was $314,000 or 33.4%lower than the comparable period in 2000. For the six months ended June 30,2001, operating income was $773,000 or 47.9% lower than the comparable periodin 2000. The decrease in operating income was primarily due to the moderationof wireless revenue, as discussed above, and higher customer acquisition costs.This trend is expected to continue.

             The EBITDA(1) margin forthis sector was 34.7% for the quarter ended June 30, 2001 compared to40.7% for the same quarter in 2000. For the six months ended June 30,2001, the EBITDA(1) margin as 31.9% compared to 39.7% for the sameperiod in 2000. The decrease in margin was primarily due to the decrease inoperating revenues.

(1) –*EBITDA representsoperating income plus depreciation and amortization expense. EBITDA, which isnot a measure of financial performance or liquidity under generally acceptedaccounting principles, is provided because such information is used by certaininvestors when analyzing the financial position and performance of HickoryTech.Because of the variety of methods used by companies and analysts to calculateEBITDA, and the fact that EBITDA calculations may not accurately measure acompany’s ability to meet debt service requirements, caution should be used inrelying on any EBITDA presentation. HickoryTech sees value in disclosing itscalculation of EBITDA for the financial community and in displaying the changein EBITDA. HickoryTech believes an increasing EBITDA depicts increased abilityto attract financing and increased valuation of HickoryTech’s business.*

             INFORMATION SOLUTIONS -Operating revenues from unaffiliated customers for the three months ended June30, 2001 decreased $162,000 or 14.4% compared with the same period in 2000. Forthe six months ended June 30, 2001, operating revenues decreased $221,000 or10.2% compared with the same period in 2000. Asthe Information Solutions Sector develops its new convergent billing system, SuiteSolution, the first users of thebilling system will be internal customers. A predecessor to SuiteSolution called WRITE2K wasimplemented in the Wireless Services Sector in November 1999. There have beenno significant revenues recognized from SuiteSolution in HickoryTech’sconsolidated financial statements from unaffiliated customers.

             Operating income increased $133,000or 80.6% for the three months ended June 30, 2001 as compared to the sameperiod in 2000. For the six months ended June 30, 2001, operating incomeincreased $566,000 or 192.5% compared with the same period in 2000. The increase in operating income was attributableto operating expense controls as well as an increase in personnel costsincurred on software development activities that required capitalization.

             TheEBITDA(1) margin for this sector was 18.0% for the quarter endedJune 30, 2001 compared to 11.1% for the same quarter in 2000. For the sixmonths ended June 30, 2001, the EBITDA(1) margin was 23.6%compared to 10.2% for the same period in 2000. The improved margin wasprimarily due to the operating expense controls and the increase in costscapitalized for software development.

(1) –*EBITDArepresents operating income plus depreciation and amortization expense. EBITDA,which is not a measure of financial performance or liquidity under generallyaccepted accounting principles, is provided because such information is used bycertain investors when analyzing the financial position and performance ofHickoryTech. Because of the variety of methods used by companies and analyststo calculate EBITDA, and the fact that EBITDA calculations may not accuratelymeasure a company’s ability to meet debt service requirements, caution shouldbe used in relying on any EBITDA presentation. HickoryTech sees value indisclosing its calculation of EBITDA for the financial community and indisplaying the change in EBITDA. HickoryTech believes an increasing EBITDAdepicts increased ability to attract financing and increased valuation ofHickoryTech’s business.*

                           ENTERPRISESOLUTIONS – Operating revenues for the three months ended June 30, 2001decreased $288,000 or 5.6% compared with the same period in 2000. For the sixmonths ended June 30, 2001, operating revenues increased $591,000 or 6.3%compared with the same period in 2000. The decrease in revenue for the secondquarter was due primarily to the non-recurrence of unusually large customerinstallation activity that occurred in the second quarter of 2000. The salesand installation activity has been more consistent and overall higher in 2001than 2000. The primary reason for the increase in operating revenues for thefirst six months of 2001 compared to the same period of 2000 was a 34.1% increasein sales and installations of PBX and data equipment.
             Operatingincome decreased $50,000 or 18.2% for the three months ended June 30, 2001compared with the same period in 2000. For the six months ended June 30, 2001,operating income increased $479,000 or 423.9% over the same period in 2000. Thedecrease in operating income for the second quarter was due primarily to thedecrease in operating revenues for the quarter. The increase in operatingincome for the first six months of 2001 was attributable to the increase inoperating revenues, along with an increase in the proportion of more profitableinstallation contracts.

             Thegross margin for Enterprise Solutions was 33.1% for the quarter endedJune 30, 2001 compared to 32.5% for the quarter ended June 30, 2000.For the six months ended June 30, 2001, the gross margin was 33.6%compared to 31.3% for the same period in 2000.

             TheEBITDA(1) margin for this sector was 6.5% for the quarter endedJune 30, 2001 compared to 7.0% for the same quarter in 2000. For the sixmonths ended June 30, 2001, the EBITDA(1) margin was 7.6%compared to 3.0% for the same period in 2000. The improved margin for the sixmonths ended June 30, 2001 was primarily due to the increased operatingrevenues and gross margin.

(1) –*EBITDArepresents operating income plus depreciation and amortization expense. EBITDA,which is not a measure of financial performance or liquidity under generallyaccepted accounting principles, is provided because such information is used bycertain investors when analyzing the financial position and performance ofHickoryTech. Because of the variety of methods used by companies and analyststo calculate EBITDA, and the fact that EBITDA calculations may not accuratelymeasure a company’s ability to meet debt service requirements, caution shouldbe used in relying on any EBITDA presentation. HickoryTech sees value indisclosing its calculation of EBITDA for the financial community and indisplaying the change in EBITDA. HickoryTech believes an increasing EBITDAdepicts increased ability to attract financing and increased valuation ofHickoryTech’s business.*

LIQUIDITY AND CAPITAL RESOURCES

             CAPITALSTRUCTURE – The total long-term capital structure (long-term debt plusshareholders’ equity) for HickoryTech was $246,404,000 at June 30, 2001,reflecting 32.1% equity and 67.9% debt. This compares to a capital structure of$224,790,000 at December 31, 2000, reflecting 34.4% equity and 65.6% debt.Management believes adequate internal and external resources are available tofinance ongoing operating requirements, including capital expenditures,business development, debt service and the payment of dividends for at leastthe next twelve months.

             CASHFLOWS – Cash provided by operations was $8,098,000 for the six-month periodended June 30, 2001 compared to $4,933,000 for the six-month period ended June30, 2000.  Cash flows from operationsfor the six months ended June 30, 2001 and 2000 were primarily attributable tonet income plus non-cash expenses for depreciation and amortization, partiallyoffset by decreases in accounts payable related to timing of payments.

             Cashflows used in investing activities were $28,417,000 for the six months endedJune 30, 2001 compared to $8,598,000 for the same period in 2000. Capital expendituresrelating to ongoing businesses were $15,133,000 during the first six months of2001 as compared to $9,075,000 for the same period in 2000. Capitalexpenditures were incurred primarily to construct additional network facilitiesto provide CLEC services. Also included in cash flows used in investingactivities for the six months ended June 30, 2001 were additions to capitalizedsoftware development costs for the Information Solutions Sector’s SuiteSolutionbilling product of $2,154,000, compared to $310,000 for the same period in2000.   Cash flows used in investingactivities for the first six months of 2001 also included $11,357,000 for theacquisition of the two PCS licenses in Minnesota.

             Cashflows provided by financing activities was $20,953,000 for the six-month periodended June 30, 2001 compared to $3,519,000 for the six-month period ended June30, 2000.  Included in cash flows fromfinancing activities are debt borrowings, debt repayments, and dividendpayments. During the first six months of 2001, HickoryTech borrowed $21,500,000under its revolving credit facility to cover cash requirements, primarily forcapital expenditures and the PCS acquisition. During the first six months of2000, HickoryTech borrowed $48,500,000 under the revolving credit facility,primarily to repay $40,000,000  ofsenior unsecured notes and for capital expenditures. During the six monthsended June 30, 2001, an increase in HickoryTech’s cash overdraft provided$3,836,000 to cash flows. The cash overdraft reflects HickoryTech’s effectiveuse of cash float. Dividend payments for the first six months of 2001 were$3,056,000 compared to $2,919,000 for the same period in 2000.

             WORKINGCAPITAL – Working capital was $9,772,000 as of June 30, 2001, compared toworking capital of $8,882,000 as of December 31, 2000. The increase isprimarily due to the decrease in accounts payable and advanced billings anddeposits.  The ratio of current assetsto current liabilities was 1.6:1.0 as of June 30, 2001 and 1.5:1.0 as ofDecember 31, 2000.

             LONG-TERMDEBT – HickoryTech’s long-termdebt as of June 30, 2001 was $167,322,000 excluding current maturities of$1,219,000. In September 2000, HickoryTech obtained a $225,000,000 creditfacility with a syndicate of banks.  Thecredit facility is comprised of a $125,000,000 revolving credit facility and a$100,000,000 term loan facility.  Theavailable line of credit on the $125,000,000 revolving credit facilitydecreases in increments beginning in March 2004 with a final maturity date inSeptember 2008.  The term loan requiresequal quarterly principal payments of $250,000 during the period March 2001 toDecember 2008, and $23,000,000 of principal payments per quarter in 2009.  The weighted average interest rateassociated with this credit facility varies with LIBOR and certain other ratesand was 7.01% at June 30, 2001.  The$100,000,000 term loan component has a provision whereby HickoryTechperiodically receives patronage capital refunds depending on the amount ofinterest paid. As of June 30, 2001, HickoryTech had drawn $168,000,000 on thiscredit facility and had $56,500,000 of available credit.
             OTHER - HickoryTech has not conducted a publicequity offering. It operates with original equity capital, retained earningsand recent additions to indebtedness in the form of bank term and revolvinglines of credit. HickoryTech believes its current level of debt to totalcapital is acceptable for ongoing operations.

             Cashprovided by operations and access to new debt continue to be HickoryTech’s primarysources of funds. HickoryTech’s financial strength continues to be supported byits current ratio (1.6 to 1), cash flows generated by operations, andborrowings under the credit facility described above.

             HickoryTechprimarily uses variable interest rate financial instruments as of June 30,2001. HickoryTech continually monitors the interest rates on its bank loans. Ahigher level of interest expense is likely to occur because of expanded use ofthe credit facility for additional capital expenditures in the CommunicationsServices Sector.

             On August 6, 2001, HickoryTechsold its local telephone exchange in Amana, Iowa. The proceeds from the salewill be applied to HickoryTech’s outstanding debt balance. Refer to Note 5 forfurther discussion of this disposition.

RECENT ACCOUNTING DEVELOPMENTS

             InJuly 2001, the Financial Accounting Standards Board issued Statement No. 141,“Business Combinations,” and Statement No. 142, “Goodwill and Other IntangibleAssets,” (collectively, “the Statements”). The Statements eliminate thepooling-of-interests method of accounting for business combinations and thesystematic amortization of goodwill and indefinite life intangibles.  HickoryTech intends to adopt the Statementsduring the first quarter of 2002 and expects that the adoption of theStatements will reduce 2002 amortization expense, although the amount of suchreduction cannot be determined at this time.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK

             HickoryTech does not haveoperations subject to risks of foreign currency fluctuations, nor doesHickoryTech use derivative financial instruments in its operations orinvestment portfolio. HickoryTech’s earnings are affected by changes ininterest rates as a portion of its long-term debt has variable interest ratesbased on LIBOR. If interest rates for the portion of HickoryTech’s long-termdebt based on variable rates had averaged 10% more for the entire quarter andsix months ended June 30, 2001, HickoryTech’s interest expense would haveincreased $298,000 for the three months ended June 30, 2001 and $615,000 forthe six months ended June 30, 2001. In case of a change of such magnitude,management would likely act to mitigate its exposure to the change.

PARTII. OTHER INFORMATION

Item 1.  LegalProceedings.

             None

Item 2.  Changesin Securities.

             None

Item 3.  DefaultUpon Senior Securities.

             None.

Item 4.  Submissionof Matters to a Vote of Security Holders.
 a.The annual shareholders’ meeting was held on April 9,  2001. b.Three directors were elected to serve three-year  terms.  The names of the directors  elected at the annual meeting and the applicable votes were as follows:
 
     BrokerDirectorFor Withheld Nonvotes  James H. Holdrege10,543,764 106,462 NONELyle G. Jacobson10,536,553 113,673 NONEStarr J. Kirklin10,398,753 251,473 NONE
Item 5.  OtherInformation.

             None.

Item 6.  Exhibitsand Reports of Form 8-K.
 (a)Exhibits    10.HickoryTech Corporation Directors’ Stock Option Plan  Amended and Restated February 6, 2001.    (b)HickoryTech filed a Form 8-K on May 10, 2001  announcing that it had signed a definitive agreement to purchase two PCS  licenses from McLeodUSA Incorporated.     HickoryTech filed a Form 8-K on June 29, 2001  announcing that it had closed on the purchase of two PCS licenses from  McLeodUSA Incorporated on June 26, 2001.
 

SIGNATURES

             Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.
Dated:August 10, 2001HICKORY TECH CORPORATION      By:/s/ Robert D. Alton, Jr.   Robert D. Alton, Jr., Chief Executive Officer          By:/s/ David A. Christensen   David A. Christensen, Chief Financial Officer