ITC Deltacom 8K Itc^deltacom Reports 2008 First Quarter Results | ITCD 21 May 08

Exhibit 99

LOGO

Investor Contact:

Richard E. Fish

Chief Financial Officer

256-382-3827

richard.fish@deltacom.com

FOR IMMEDIATE RELEASE

ITC^DELTACOM REPORTS 2008 FIRST QUARTER RESULTS

Huntsville, Ala.—(May 15, 2008)— ITC^DeltaCom, Inc. (OTC: ITCD.OB), a leading provider of integrated communications services to customers in the southeastern United States, today reported its operating and financial results for the quarter ended March 31, 2008.

For the quarter ended March 31, 2008, ITC^DeltaCom reported total operating revenues of $124.8 million, a net loss of $(5.9) million, and adjusted EBITDA* of $20.8 million.

“The first quarter of 2008 was a continuation of the solid results that we have reported over recent quarters,” said Randall E. Curran, ITC^DeltaCom’s Chief Executive Officer. He continued, “Our adjusted EBITDA increased significantly in the first quarter while we have continued to invest in products such as Simpli-Business and our new Simpli-Mobile offering to provide our customers with unparalleled office communications solutions.”

Among its operating highlights for the first quarter, ITC^DeltaCom:

•

increased adjusted EBITDA by 19.2% over the first quarter of 2007 and by 6.1 % over the fourth quarter of 2007;

•

increased business local, data and Internet revenues for the eighth consecutive quarter, generating an increase of $6.5 million, or 8.3%, over the first quarter of 2007 and an increase of $2.0 million, or 2.4%, over the fourth quarter of 2007;

•

increased total operating revenues 2.4% over the first quarter of 2007 and 2.3% over the fourth quarter of 2007;

•

ended the first quarter of 2008 with 423,899 retail local voice lines in service, of which 82.5% were provided on its own network, up from 76.6% at the end of the first quarter of 2007;

•

increased its core, facilities-based business voice lines in service by approximately 10,000 lines over the fourth quarter of 2007;

•

reduced its cost of services and equipment from 47.7% of revenues in the first quarter of 2007 to 46.8% in the first quarter of 2008;

•

reduced its selling, operations and administrative expenses from 38.6% in the first quarter of 2007 to 37.1% in the first quarter of 2008;

•

generated $16.8 million in net cash provided by operating activities, which represented an increase of $10.4 million, or 163.4%, over the first quarter of 2007, and an increase of $3.1 million, or 22.6%, over the fourth quarter of 2007; and

- 1 -

•

increased adjusted unlevered free cash flow** 111.7% over the first quarter of 2007 and 8.7% over the fourth quarter of 2007.

“Our significant increases in adjusted EBITDA and adjusted unlevered free cash flow during the first quarter reflect our continued focus on driving cost efficiencies in the business as well as our growth in our core local business customer segment,” said Richard E. Fish, ITC^DeltaCom’s Executive Vice President and Chief Financial Officer.

Adjusted EBITDA is defined by ITC^DeltaCom as net income (loss) before interest expense, provision for income taxes, depreciation and amortization, non-cash loss on extinguishment of debt, debt issue cost write-off, prepayment penalties on debt, equity commitment fees, stock-based compensation, restructuring expenses and other income or loss all as disclosed in the condensed consolidated statements of operations and comprehensive loss. Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles. For information about management’s reasons for providing data with respect to adjusted EBITDA, the limitations associated with the use of adjusted EBITDA and a quantitative reconciliation of adjusted EBITDA to net loss, as net loss is calculated in accordance with generally accepted accounting principles, see the accompanying table captioned “Adjusted EBITDA Reconciliation.”

Adjusted unlevered free cash flow is defined by ITC^DeltaCom as adjusted EBITDA (as defined above) less capital expenditures (including equipment purchased through capital leases) and changes in accounts payable – construction all as disclosed in the condensed consolidated statements of cash flows or the condensed consolidated statements of operations and comprehensive loss. Adjusted unlevered free cash flow is not a measurement of financial performance under generally accepted accounting principles. For information about management’s reasons for providing data with respect to adjusted unlevered free cash flow and the limitations associated with the use of adjusted unlevered free cash flow, and for a quantitative reconciliation of adjusted unlevered free cash flow to net cash provided by operating activities, as net cash provided by operating activities is calculated in accordance with generally accepted accounting principles, see the accompanying table captioned “Adjusted Unlevered Free Cash Flow Reconciliation.”

ABOUT ITC^DELTACOM, INC.

ITC^DeltaCom, Inc., headquartered in Huntsville, Alabama, provides, through its operating subsidiaries, integrated telecommunications and technology services to businesses and consumers in the southeastern United States. ITC^DeltaCom has a fiber optic network spanning approximately 15,800 route miles, including more than 11,800 route miles of owned fiber, and offers a comprehensive suite of voice and data communications services, including local, long distance, broadband data communications, Internet connectivity, and customer premise equipment to end-user customers. ITC^DeltaCom is one of the largest competitive telecommunications providers in its primary eight-state region. For more information about ITC^DeltaCom, visit ITC^DeltaCom’s web site at http://www.deltacom.com.

- 2 -

FORWARD-LOOKING STATEMENTS

Except for the historical and present factual information contained herein, this release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this release, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to ITC^DeltaCom, Inc. or its management are intended to identify these forward-looking statements. All statements by the Company regarding its expected financial position, revenues, liquidity, cash flow and other operating results, balance sheet improvement, business strategy, financing plans, forecasted trends related to the markets in which it operates, legal proceedings and similar matters are forward-looking statements. The Company’s actual results could be materially different from its expectations because of various risks. These risks, some of which are discussed under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, and in the Company’s subsequent SEC reports, include the Company’s dependence on new product development, rapid technological and market changes, the Company’s dependence upon rights of way and other third-party agreements, debt service and other cash requirements, liquidity constraints and risks related to future growth and rapid expansion. Other important risk factors that could cause actual events or results to differ from those contained or implied in the forward-looking statements include, without limitation, customer attrition, delays or difficulties in deployment and implementation of colocation arrangements and facilities, appeals of or failures by third parties to comply with rulings of governmental entities, inability to meet installation schedules, general economic and business conditions, failure to maintain underlying service/vendor arrangements, competition, adverse changes in the regulatory or legislative environment, and various other factors beyond the Company’s control. ITC^DeltaCom disclaims any responsibility to update these forward-looking statements.

- 3 -

ITC^DeltaCom, Inc.

Financial Highlights

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended March 31,
	2008			2007
OPERATING REVENUES:
Integrated communications services⁽¹⁾	$	103,469		$	97,359
Wholesale services		16,639			18,348
Equipment sales and related services⁽¹⁾		4,675			6,127

TOTAL OPERATING REVENUES		124,783			121,834

COSTS AND EXPENSES:
Cost of services and equipment, excluding depreciation and amortization		58,368			58,109
Selling, operations and administration		46,254			46,987
Depreciation and amortization		18,316			17,378

Total operating expenses		122,938			122,474

OPERATING INCOME (LOSS)		1,845			(640	)

OTHER (EXPENSE) INCOME:
Interest expense		(8,318	)		(15,309	)
Interest income		577			611
Other income		31			12

Total other expense, net		(7,710	)		(14,686	)

LOSS BEFORE INCOME TAXES		(5,865	)		(15,326	)

INCOME TAX EXPENSE		—			—

NET LOSS		(5,865	)		(15,326	)
PREFERRED STOCK DIVIDENDS AND ACCRETION		(7,073	)		(1,942	)

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS	$	(12,938	)	$	(17,268	)

BASIC AND DILUTED NET LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDERS	$	(0.17	)	$	(0.92	)

BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		76,387,873			18,766,942

(1)	Certain amounts have been reclassified for presentation purposes.

- 4 -

ITC^DeltaCom, Inc.

Quarterly Highlights

(Unaudited)

(In thousands)


	Three Months Ended
	March 31, 2008		Dec. 31, 2007			Sept. 30, 2007			June 30, 2007		March 31, 2007
Integrated communications services revenues:⁽¹⁾
Long distance and access	$	19,195	$	18,146		$	19,476		$	20,220	$	19,568
Business local, data and internet		84,274		82,303			81,749			79,881		77,791

Total integrated communications services revenues		103,469		100,449			101,225			100,101		97,359

Wholesale services revenues:
Broadband transport		13,451		13,287			13,613			13,986		13,976
Local interconnection		1,235		1,279			1,434			1,644		1,900
Directory assistance and operator services		1,140		1,344			1,402			1,387		1,429
Other		813		982			906			978		1,043

Total wholesale services revenues		16,639		16,892			17,355			17,995		18,348

Equipment sales and related services revenues⁽¹⁾		4,675		4,639			6,182			5,476		6,127

Total operating revenues		124,783		121,980			124,762			123,572		121,834

COSTS AND EXPENSES:
Cost of services and equipment, excluding depreciation and amortization		58,368		56,577			58,838			58,668		58,109
Selling, operations and administration expense		46,254		50,239			48,713			46,146		46,987
Depreciation and amortization		18,316		19,079			19,449			18,260		17,378

Total operating expenses		122,938		125,895			127,000			123,074		122,474

OPERATING INCOME (LOSS)	$	1,845	$	(3,915	)	$	(2,238	)	$	498	$	(640	)

(1)	Certain amounts have been reclassified for presentation purposes.

- 5 -

ITC^DeltaCom, Inc.

Quarterly Highlights (continued)

(Unaudited)


	Three Months Ended
	March 31, 2008		Dec. 31, 2007		Sept. 30, 2007		June 30, 2007		March 31, 2007
Retail business voice lines in service⁽¹⁾
UNE-T and UNE lines⁽²⁾	349,537		339,534		327,915		316,267		309,178
Increase from previous quarter	2.9	%	3.5	%	3.7	%	2.3	%	4.5	%

Resale and UNEP lines⁽³⁾	74,362		78,976		83,697		89,454		94,373
(Decrease) from previous quarter	(5.8	%)	(5.6	%)	(6.4	%)	(5.2	)%	(4.5	)%

Total retail business voice lines in service	423,899		418,510		411,612		405,721		403,551

Wholesale voice lines in service⁽⁴⁾	40,825		40,319		42,596		46,345		49,427
Increase (decrease) from previous quarter	1.3	%	(5.3	)%	(8.1	)%	(6.2	)%	3.6	%

Total business voice lines in service⁽⁵⁾	464,724		458,829		454,208		452,066		452,978

Number of employees⁽⁶⁾	1,724		1,800		1,813		1,807		1,867

(1)	Lines in service include only voice lines in service. Conversion of data services provided to customers to a voice line equivalent is not included.

(2)	Facilities-based service offering in which ITC^DeltaCom provides local transport through its owned and operated switching facilities.

(3)	Resale service offering in which ITC^DeltaCom provides local service through a leased switch port and loop from the local operating company.

(4)	Represents primary rate interface circuits provided as part of ITC^DeltaCom’s local interconnection services for Internet service providers.

(5)	Reported net of lines disconnected or canceled.

(6)	Includes full-time and part-time employees.

- 6 -

ITC^DeltaCom, Inc.

Balance Sheet and Other Financial Highlights

(In thousands)


	March 31, 2008		December 31, 2007
	(Unaudited)
Balance Sheet Data(at period end):

Cash and cash equivalents (unrestricted)	$	60,400	$	57,505

Working capital		41,597		42,179

Total assets		394,857		398,366

Long-term liabilities		309,806		306,535

Convertible redeemable preferred stock		—		34,351

Stockholders’ equity (deficit)		355		(23,924	)

Total liabilities and stockholders’ deficit		394,857		398,366


	Three Months Ended
	March 31, 2008			Dec. 31, 2007			Sept.30, 2007			June 30, 2007			March 31, 2007
	(Unaudited)
Other Financial Data:

Capital expenditures⁽¹⁾	$	12,741		$	12,215		$	11,508		$	13,105		$	13,661

Cash flows (used in) provided by:
Operating activities		16,844			13,740			(5,712	)		8,739			6,396
Investing activities		(13,232	)		(12,552	)		(11,767	)		(13,269	)		(13,157	)
Financing activities		(717	)		(2,111	)		22,817			(3,079	)		(183	)

Adjusted EBITDA⁽²⁾		20,833			19,634			20,479			19,468			17,483

Adjusted unlevered free cash flow⁽³⁾		8,092			7,447			9,015			6,363			3,822

- 7 -

ITC^DeltaCom, Inc.

Balance Sheet and Other Financial Highlights (continued)

(In thousands)

Notes:

(1)	Includes equipment purchased through capital leases and changes in accrued capital related costs.

(2)

(3)

Adjusted unlevered free cash flow is defined by ITC^DeltaCom as adjusted EBITDA as defined above in Note (2) less capital expenditures (including equipment purchased through capital leases) and changes in accounts payable – construction all as disclosed in the condensed consolidated statements of cash flows or the condensed consolidated statements of operations and comprehensive loss. Adjusted unlevered free cash flow is not a measurement of financial performance under generally accepted accounting principles. For information about management’s reasons for providing data with respect to adjusted unlevered free cash flow and the limitations associated with the use of adjusted unlevered free cash flow, and for a quantitative reconciliation of adjusted unlevered free cash flow to net cash provided by operating activities, as net cash provided by operating activities is calculated in accordance with generally accepted accounting principles, see the accompanying table captioned “Adjusted Unlevered Free Cash Flow Reconciliation.”

- 8 -

ITC^DeltaCom, Inc.

Adjusted EBITDA Reconciliation

(In thousands)

(Unaudited)

Adjusted EBITDA is defined by ITC^DeltaCom as net income (loss) before interest expense, provision for income taxes, depreciation and amortization, non-cash loss on extinguishment of debt, debt issue cost write-off, prepayment penalties on debt, equity commitment fees, stock-based compensation, restructuring expenses and other income or loss all as disclosed in the condensed consolidated statements of operations and comprehensive loss. Not all of these adjustments are applicable in every period. Adjusted EBITDA is not a financial measurement under generally accepted accounting principles (“GAAP”). The following table presents adjusted EBITDA amounts for the fiscal quarters indicated and also sets forth a quantitative reconciliation of adjusted EBITDA to net loss, as net loss is calculated in accordance with GAAP:


	Three Months Ended
	March 31, 2008			Dec. 31, 2007			Sept. 30, 2007			June 30, 2007			March 31, 2007
	(Unaudited)
Net loss	$	(5,865	)	$	(11,643	)	$	(135,523	)	$	(14,534	)	$	(15,326	)
Add: non-EBITDA items included in net loss:
Depreciation and amortization		18,316			19,079			19,449			18,260			17,378
Interest expense, net of interest income		7,741			7,715			10,849			15,043			14,698
Stock-based compensation		672			4,470			3,268			710			721
Non-cash loss on extinguishment of debt		—			—			105,269			—			—
Debt issue cost write-off		—			—			7,298			—			—
Prepayment penalties on debt		—			—			8,208			—			—
Equity commitment fees		—			—			1,620			—			—
Restructuring expenses		—			—			—			—			24
Other (income) loss		(31	)		13			41			(11	)		(12	)

Adjusted EBITDA	$	20,833		$	19,634		$	20,479		$	19,468		$	17,483

ITC^DeltaCom has included data with respect to adjusted EBITDA because its management evaluates and projects the performance of ITC^DeltaCom’s business using several measures, including adjusted EBITDA. Management uses adjusted EBITDA to enhance its understanding of ITC^DeltaCom’s core operating performance, which represents management’s views concerning ITC^DeltaCom’s performance in the ordinary, ongoing and customary course of its operations.

ITC^DeltaCom’s management also uses adjusted EBITDA to evaluate ITC^DeltaCom’s core operating performance relative to that of its competitors. This financial measure permits a comparative assessment of ITC^DeltaCom’s operating performance, relative to the company’s performance based on its GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Companies within the communications industry exhibit significant variations with respect to capital structures and cost of capital (which affect interest expense) and differences in taxation and book depreciation of facilities

- 9 -

ITC^DeltaCom, Inc.

Adjusted EBITDA Reconciliation (continued)

(In thousands)

(Unaudited)

and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. In addition, increased merger and acquisition activity and financial restructurings have resulted in significant non-operating changes to earnings of communications companies that may not be reflective of their core operating performance. Management believes that adjusted EBITDA facilitates company-to-company comparisons within ITC^DeltaCom’s industry by eliminating some of the foregoing variations. Adjusted EBITDA, however, may not be directly comparable to similarly titled measures reported by other companies due to differences in accounting policies and items excluded or included in the adjustments, which limits its usefulness as a comparative measure.

ITC^DeltaCom provides information relating to its adjusted EBITDA so that analysts, investors and other interested persons have the same data that management uses to assess ITC^DeltaCom’s core operating performance. Management believes that providing this information permits the foregoing persons to obtain a better understanding of ITC^DeltaCom’s core operating performance and to evaluate the efficacy of the methodology and information used by management to evaluate and measure that performance on a standalone and a comparative basis.

ITC^DeltaCom’s management believes that consideration of adjusted EBITDA should be supplemental, however, because adjusted EBITDA has limitations as an analytical financial measure, including the following:

•

adjusted EBITDA does not reflect ITC^DeltaCom’s capital expenditures, future requirements for capital expenditures or contractual commitments to purchase capital equipment;

•

adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, associated with ITC^DeltaCom’s indebtedness;

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will likely have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements;

•

adjusted EBITDA does not reflect the effect of earnings or charges resulting from matters that ITC^DeltaCom’s management considers as not indicative of ITC^DeltaCom’s ongoing operations; and

•

to the extent that ITC^DeltaCom changes its accounting of certain transactions or other items from period to period, ITC^DeltaCom’s adjusted EBITDA may not be directly comparable from period to period.

Management compensates for these limitations by using adjusted EBITDA only as a supplemental measure of ITC^DeltaCom’s operating performance and by considering independently the economic effects of the foregoing items that are or are not reflected in adjusted EBITDA. As a result of the foregoing limitations, adjusted EBITDA should not be considered as an alternative to net income (loss), as calculated in accordance with GAAP, as a measure of operating performance, nor should it be considered as an alternative to cash flows, as calculated in accordance with GAAP, as a measure of liquidity.

- 10 -

ITC^DeltaCom, Inc.

Adjusted Unlevered Free Cash Flow Reconciliation

(In thousands)

(Unaudited)

Adjusted unlevered free cash flow is defined by ITC^DeltaCom as adjusted EBITDA (as defined above) less capital expenditures (including equipment purchased through capital leases) and changes in accounts payable – construction all as disclosed in the condensed consolidated statements of cash flows or the condensed consolidated statements of operations and comprehensive loss. Adjusted unlevered free cash flow is not a measurement of financial performance under generally accepted accounting principles (“GAAP”). The following table presents adjusted unlevered free cash flow amounts for the fiscal quarters indicated and also sets forth a quantitative reconciliation of adjusted unlevered free cash flow to net cash provided by operating activities, as net cash provided by operating activities is calculated in accordance with GAAP:


	Three Months Ended
	March 31, 2008			Dec. 31, 2007			Sept. 30, 2007			June 30, 2007			March 31, 2007
	(Unaudited)
Net cash provided by (used in) operating activities	$	16,844		$	13,740		$	(5,712	)⁽¹⁾	$	8,739		$	6,396

Adjustments to reconcile net cash provided by operating activities to adjusted unlevered free cash flow-
Elements included in net cash provided by (used in) operating activities not included in adjusted unlevered free cash flow:
Total changes in current operating assets and liabilities		(2,104	)		(218	)		9,062	⁽¹⁾		(151	)		1,270
Provision for bad debts		(1,005	)		(975	)		(1,865	)		(33	)		(850	)
Interest expense excluding interest paid in kind and in common stock, and amortization of debt issuance costs and debt discount, net of interest income		7,129			7,102			9,404			10,924			10,655
Other (income) loss		(31	)		13			41			(11	)		(12	)
Restructuring expenses		—			—			—			—			24
Prepayment penalties paid in cash on debt extinguishment		—			—			7,973			—			—
Unused equity commitment fees		—			—			1,620			—			—

Adjusted EBITDA		20,833			19,662			20,523			19,468			17,483
Less:
Capital expenditures (including equipment purchased through capital leases)		(13,016	)		(14,053	)		(11,965	)		(12,826	)		(10,487	)
Change in accounts payable -construction		275			1,838			457			(279	)		(3,174	)

Adjusted unlevered free cash flow	$	8,092		$	7,447		$	9,015		$	6,363		$	3,822

See accompanying Notes to Adjusted Unlevered Free Cash Flow Reconciliation on the following page.

- 11 -

ITC^DeltaCom, Inc.

Adjusted Unlevered Free Cash Flow Reconciliation (continued)

(In thousands)

(Unaudited)

Notes:

(1)

Cash payments of interest during the three months ended September 30, 2007 included two quarterly interest payments totaling $19.5 million compared to interest expense of $11.4 million recorded for this period. Before the refinancing transactions completed on July 31, 2007, interest payments were due and made on the first day of each quarter. After the refinancing transactions, interest payments were due and made on the last day of the quarter. The additional quarterly interest paid during the foregoing period as a result of the refinancing transactions totaled $9.9 million.

ITC^DeltaCom has included data with respect to adjusted unlevered free cash flow because its management considers adjusted unlevered free cash flow to be a useful, supplemental indicator of its operating performance because, when measured over time, adjusted unlevered free cash flow provides supplemental information to investors concerning the growth rate in ITC^DeltaCom’s operating results and its ability to generate cash flows to satisfy mandatory debt service requirements and make other mandatory, non-discretionary expenditures.

ITC^DeltaCom’s management believes that consideration of adjusted unlevered free cash flow should be supplemental, however, because adjusted unlevered free cash flow has limitations as an analytical financial measure, including the following:

•

adjusted unlevered free cash flow does not reflect ITC^DeltaCom’s cash expenditures for changes in current operating assets and liabilities;

•

adjusted unlevered free cash flow does not reflect ITC^DeltaCom’s cash expenditures for interest expense or accrued restructuring and merger costs, prepayment penalties on debt paid in cash, equity commitment fees, changes in restricted cash balances or proceeds from sales of fixed assets;

•

ITC^DeltaCom does not pay income taxes due to net operating losses, and therefore, generates greater adjusted unlevered free cash flow than a comparable business that does pay income taxes;

•

adjusted unlevered free cash flow is subject to variability on a quarterly basis as a result of the timing of payments made or received related to accounts receivable, accounts payable and other current operating assets and liabilities; and

•

adjusted unlevered free cash flow may be calculated in a different manner by other companies in ITC^DeltaCom’s industry, which limits its usefulness as a comparative measure.

ITC^DeltaCom’s management compensates for these limitations by relying primarily on its results under GAAP to evaluate its operating performance and by considering independently the economic effects of the foregoing items that are not reflected in adjusted unlevered free cash flow. As a result of these limitations, adjusted unlevered free cash flow should not be considered as a measure of liquidity nor as an alternative to net cash provided by operating activities, cash used in investing activities, cash provided by (used in) financing activities or change in cash and cash equivalents, as calculated in accordance with GAAP.

- 12 -

ITC Deltacom (ITCD) Inactive 8-KItc^deltacom Reports 2008 First Quarter Results