Exhibit 99.1
Iowa Telecom Reports Results for Fourth Quarter and Year Ended December 31, 2008
NEWTON, Iowa--(BUSINESS WIRE)--February 27, 2009--Iowa Telecommunications Services, Inc. (NYSE: IWA) today announced operating results for the fourth quarter and year ended December 31, 2008. Quarterly highlights for the Company include:
- Operating revenues were $65.0 million.
- Operating income was $17.5 million.
- Net income was $5.2 million or $0.16 per diluted share.
- Adjusted EBITDA (as defined herein) was $33.1 million.
“We are very pleased with our operational and financial performance for both the fourth quarter and the year,” said Alan L. Wells, Iowa Telecom chairman and chief executive officer. “Total revenues continued to climb for the quarter, increasing 5.9% over the prior year. Our revenue growth was the result of the acquisition of Bishop Communications, which was completed in July of 2008, and the ongoing success we are having with our DSL product and our bundled product offerings, as well as the expansion of our customer premise equipment (CPE) and data businesses. We added 1,200 new DSL customers during the quarter and 12,900 DSL customers during 2008 inclusive of the Bishop acquisition, representing a 20.5% increase in our DSL customer base for the year.
“Our adjusted EBITDA for the quarter grew to $33.1 million, and was benefited by a $2.5 million curtailment gain as our post retirement benefit plan obligations were further modified. Our adjusted EBITDA for the year was $128.3 million, reflecting a decrease of $6.0 million, or 4.4%, primarily due to a favorable $5.8 million non-recurring network access billing matter in 2007,” added Wells. “Income tax expense for the quarter was $4.0 million compared to $4.4 million a year ago, but our actual cash taxes paid during the quarter were only $53,000. Income tax expense for the year was $17.3 million, but our actual cash taxes paid during 2008 were only $399,000. Our lower actual cash tax payments reflect the benefit of our continued utilization of our net operating loss carry forwards and the amortization of our goodwill for tax purposes.
“During the fourth quarter of 2008 we announced that we had reached an agreement, subject to regulatory approvals, to acquire substantially all of the assets of Sherburne Tele Systems, Inc. (“Sherburne”) for a total purchase price of $80.6 million subject to certain balance sheet and tax adjustments. Sherburne is a closely held telecommunications company headquartered in Big Lake, Minnesota, less than 30 miles from the headquarters of Bishop Communications,” Wells noted. “As of December 31, 2008, Sherburne served 15,500 ILEC access lines, 10,200 CLEC lines, 13,900 DSL high-speed Internet customers and 3,700 video customers, primarily in communities and rural areas near the Minneapolis/St. Paul Metropolitan Area. Sherburne’s operations include its incumbent local exchange carrier services, marketed as Connections, Etc., and competitive local exchange carrier services provided through its wholly-owned subsidiary, Northstar Access. We look forward to closing this transaction by the middle of the year, and expect the transaction to be accretive to cash flow on a per share basis. We believe the Sherburne acquisition is another example of progress we’ve made on our strategy of pursuing accretive acquisitions.
“Capital expenditures were $8.0 million for the quarter and $28.2 million for the year, in line with our prior guidance. This included capital expenditures for our newly acquired Bishop operation, as well as capital expenditures related to the historic flooding that we experienced during the second quarter of 2008,” Wells continued. “Our cash interest expense was $8.1 million for the quarter and $30.8 million for 2008, which was also in line with our prior guidance. Our interest expense included the additional interest costs on debt related to the acquisition of Bishop.
“For 2009 guidance on our existing operations, we expect that capital expenditures will be between $25.0 million and $27.0 million, and that cash interest expense will be between $29.0 million and $31.0 million,” Wells noted. “We expect to update our guidance for the impact of our Sherburne acquisition as that closing date becomes more certain.
“Overall, we believe our results for the quarter and year were impressive in light of the general economic conditions, and were in line with our expectations,” Wells concluded. “While we continued to face residential competition in many of our markets during 2008, I am pleased with our current competitive position. During 2009, we will continue to focus on the competitiveness of our bundled product offerings and DSL products. We also expect continued growth in our data and CPE business. Lastly, we will continue to pursue opportunities to profitably grow our business through select strategic acquisitions, such as the acquisition of Sherburne, while continuing to return a significant portion of our cash flow back to our shareholders in the form of our dividends.”
FINANCIAL DISCUSSION FOR FOURTH QUARTER 2008:
- Revenues and Sales were $65.0 million in the fourth quarter of 2008 compared to $61.4 million in the fourth quarter of 2007. Local services revenues increased $51,000, or 0.3%, primarily due to access line increases from the acquisition of Bishop Communications which offset the line losses in our other markets. Network access services revenues increased $429,000, or 1.9%, for the fourth quarter. Data and Internet sales increased $1.8 million, or 23.6%, primarily as a result of growth in our DSL Internet access service revenues and growth in our enhanced data solutions products. Other services and sales revenues increased by $1.1 million, or 14.8% primarily due to growth in our CPE business and the acquisition of Bishop Communications.
- Operating Costs and Expenses increased $4.5 million, or 10.4%, in the fourth quarter of 2008 as compared to the fourth quarter of 2007. Cost of services and sales decreased $139,000, or 0.7% due to a $2.5 million one-time curtailment gain resulting from changes to our postretirement benefit offerings, which was offset by higher costs of CPE sales and operating expenses as a result of the Bishop acquisition. Selling, general and administrative costs increased $2.4 million compared to the year-ago period, primarily due to the operating costs of Bishop. Depreciation and amortization expense increased $2.2 million over the fourth quarter of 2007 due primarily to higher plant balances for the Iowa properties and the depreciation and amortization expense for Bishop Communications.
- Operating Income was $17.5 million in the fourth quarter of 2008 as compared to $18.4 million in the same period in 2007.
- Interest Expense for the fourth quarter of 2008 was $8.3 million compared with $7.9 million in the fourth quarter of 2007, due to the higher average debt balance as a result of the acquisition of Bishop Communications.
- Earnings Before Income Taxes for the fourth quarter of 2008 were $9.1 million compared to $10.4 million in the fourth quarter of 2007.
- Income Tax Expense for the fourth quarter of 2008 was $4.0 million compared to $4.4 million in the fourth quarter of 2007. The recorded book tax expense did not impact the actual cash taxes paid during the quarter, as the Company paid actual cash income taxes during the quarter of only $53,000. The level of cash income taxes paid reflects the continued utilization of net operating loss carry forwards and continued goodwill amortization for tax purposes. At the end of the quarter, the Company had a net operating loss carry forward balance of approximately $149 million, and continues to take tax deductions of approximately $41 million annually related to the amortization of goodwill.
- Net Income was $5.2 million for the fourth quarter of 2008, compared to net income of $6.0 million in the fourth quarter of 2007.
- Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA as defined herein) was $33.1 million, up $1.4 million from the fourth quarter of 2007.
- Total Access Lines decreased by 3,700 during the fourth quarter of 2008 from the third quarter of 2008, as ILEC access lines declined by 4,000 lines and CLEC lines increased by 300 lines. Total access lines increased 1,400, or 0.6%, for the fourth quarter of 2008 compared to the fourth quarter of 2007, primarily due to the addition of access lines related to the Bishop acquisition during the third quarter of 2008.
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Fourth Quarter 2008 Financial Summary |
| (Unaudited) |
| (dollars in thousands, except per share amounts) |
| | | | | | | | | | | | | | | | |
| | | | 4th Quarter | | | | 4th Quarter | | Change |
| | | | | 2008 | | | | 2007 | | | | Amount | | Percent |
| | | | | | | | | | | | | | | | |
| Revenue | | | | $ | 65,020 | | | | $ | 61,390 | | | $ | 3,630 | | | 5.9 | % |
| Operating Income | | | | $ | 17,538 | | | | $ | 18,369 | | | $ | (831 | ) | | -4.5 | % |
| Interest Expense | | | | $ | 8,250 | | | | $ | 7,921 | | | $ | 329 | | | 4.2 | % |
| Earnings Before Income Taxes | | | | $ | 9,105 | | | | $ | 10,388 | | | $ | (1,283 | ) | | -12.4 | % |
| Income Tax Expense | | | | $ | 4,034 | | | | $ | 4,411 | | | $ | (377 | ) | | -8.5 | % |
| Net Income | | | | $ | 5,176 | | | | $ | 5,977 | | | $ | (801 | ) | | -13.4 | % |
| Basic Earnings Per Share | | | | $ | 0.16 | | | | $ | 0.19 | | | $ | (0.03 | ) | | -15.8 | % |
| Diluted Earnings Per Share | | | | $ | 0.16 | | | | $ | 0.19 | | | $ | (0.03 | ) | | -15.8 | % |
| | | | | | | | | | | | | | | | |
| Adjusted EBITDA(1) | | | | $ | 33,127 | | | | $ | 31,716 | | | $ | 1,411 | | | 4.4 | % |
| Capital Expenditures | | | | $ | 8,044 | | | | $ | 7,050 | | | $ | 994 | | | 14.1 | % |
| Dividends Paid | | | | $ | 12,949 | | | | $ | 12,887 | | | $ | 62 | | | 0.5 | % |
| | | | | | | | | | | | | | | | |
(1) See the definition of Adjusted EBITDA under Explanation and Reconciliation to Non-GAAP Concepts at the end of the financial statements. |
| | | | | | | | | | | | | | | |
| Key Operating Statistics | | | | 4th Quarter | | | | 4th Quarter | | | | Change |
| | | | | 2008 | | | | 2007 | | | | Amount | | Percent |
| | | | | | | | | | | | | | | | |
| Telephone Access Lines | | | | | | | | | | | | | | | | |
| ILEC Lines(1) | | | | | 209,700 | | | | | 214,300 | | | | (4,600 | ) | | -2.1 | % |
| CLEC Lines(2) | | | | | 32,400 | | | | | 26,400 | | | | 6,000 | | | 22.7 | % |
| Total Telephone Access Lines | | | | | 242,100 | | | | | 240,700 | | | | 1,400 | | | 0.6 | % |
| | | | | | | | | | | | | | | | |
| Long Distance Subscribers | | | | | 146,400 | | | | | 143,600 | | | | 2,800 | | | 1.9 | % |
| Dial-up Internet Subscribers | | | | | 16,700 | | | | | 22,500 | | | | (5,800 | ) | | -25.8 | % |
| DSL Subscribers | | | | | 75,700 | | | | | 62,800 | | | | 12,900 | | | 20.5 | % |
| Video Subscribers | | | | | 20,300 | | | | | 9,000 | | | | 11,300 | | | 125.6 | % |
| | | | | | | | | | | | | | | | |
| | | | 4th Quarter | | | | 3rd Quarter | | | | Change |
| | | | | 2008 | | | | 2008(3) | | | | Amount | | Percent |
| | | | | | | | | | | | | | | | |
| Telephone Access Lines | | | | | | | | | | | | | | | | |
| ILEC Lines(1) | | | | | 209,700 | | | | | 213,700 | | | | (4,000 | ) | | -1.9 | % |
| CLEC Lines(2) | | | | | 32,400 | | | | | 32,100 | | | | 300 | | | 0.9 | % |
| Total Telephone Access Lines | | | | | 242,100 | | | | | 245,800 | | | | (3,700 | ) | | -1.5 | % |
| | | | | | | | | | | | | | | | |
| Long Distance Subscribers | | | | | 146,400 | | | | | 147,600 | | | | (1,200 | ) | | -0.8 | % |
| Dial-up Internet Subscribers | | | | | 16,700 | | | | | 18,500 | | | | (1,800 | ) | | -9.7 | % |
| DSL Subscribers | | | | | 75,700 | | | | | 74,500 | | | | 1,200 | | | 1.6 | % |
| Video Subscribers | | | | | 20,300 | | | | | 18,500 | | | | 1,800 | | | 9.7 | % |
| | | | | | | | | | | | | | | | |
(1) Includes lines subscribed by our incumbent local exchange carrier retail customers and lines subscribed by our “wholesale” customers who are competing local exchange carriers. Wholesale access lines include: lines subscribed by our local exchange carrier competitors pursuant to interconnection agreements on an unbundled network element basis, for which the competitive local exchange carrier pays us a monthly fee; lines that we provide to competitive local exchange carriers for resale to their subscribers, for which the competitive local exchange carrier pays us a monthly fee equal to what we would charge our customers for local service less an agreed discount; and shared lines, for which a competitive local exchange carrier pays us a monthly fee to provide DSL service to its customers. We had 2,300 wholesale lines subscribed at December 31, 2008; 2,900 wholesale lines subscribed at December 31, 2007; and 2,400 at September 30, 2008. |
(2) Access lines subscribed by customers of our competitive local exchange carrier subsidiaries, Iowa Telecom Communications, Inc., IT Communications, LLC, EN-TEL Communications LLC, and Lakedale Link, Inc. |
(3) Includes the following units as of September 30, 2008 which were acquired from Bishop Communications Corporation on July 18, 2008. |
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| |
| Bishop Communications Corporation |
| | |
| Telephone Access Lines | | |
| ILEC Lines | | 11,600 |
| CLEC Lines | | 4,600 |
| Total Telephone Access Lines | | 16,200 |
| | |
| Long Distance Subscribers | | 9,700 |
| Dial-up Internet Subscribers | | 1,700 |
| DSL Subscribers | | 4,900 |
| Video Subscribers | | 3,800 |
| | |
FINANCIAL DISCUSSION FOR YEAR ENDED DECEMBER 31, 2008:
- Operating Revenues decreased $4.4 million, or 1.8%, to $247.0 million for the year ended December 31, 2008, as compared to 2007. The decrease was primarily the result of an $11.2 million, or 11.1% decrease, in network access services revenue. The network access revenue decrease was primarily due to $5.8 million of revenue from the settlement of certain non-recurring network access matters with connecting carriers in 2007, coupled with resolution of a similar item which resulted in a $1.5 million unfavorable impact in 2008. Data and Internet Services revenues increased by $5.7 million, or 19.1%, for 2008 as compared to 2007, primarily as a result of customer growth in our DSL Internet access service, growth in our enhanced data solutions products revenue and revenue from Bishop Communications. Other services and sales revenues increased by $2.1 million, or 8.1%, for 2008 as compared to 2007, principally due to the growth in our CPE business and the acquisition of Bishop Communications.
- Operating Costs and Expenses increased $7.0 million, or 4.2%, to $176.5 million in 2008 as compared to 2007. Cost of service and sales decreased $155,000, or 0.2%. A change to the Company’s post retirement welfare obligation resulted in a one time benefit of $2.5 million in 2008. Exclusive of the benefit plan change, costs of services and sales increased by $2.4 million, principally due to costs attributable to the acquisition of Bishop Communications and growth of our CPE and data business. Selling, general and administrative expenses increased $2.5 million primarily resulting from increased costs from Bishop Communications, partially offset by lower salary, wages, benefits and insurance costs. Depreciation and amortization increased by $4.7 million, or 9.6%, for 2008 as compared to 2007, primarily due to higher plant balances for the Iowa properties and depreciation and amortization expense for Bishop Communications.
- Operating Income decreased to $70.5 million in 2008 compared to $81.9 million in 2007, primarily due to the network access matters and depreciation and amortization discussed above.
- Interest Expense decreased $441,000, or 1.4%, in 2008 as compared to 2007, principally as a result of lower interest rates on our variable rate debt.
- Earnings Before Income Taxes for the year was $40.4 million, a decrease of 19.6%, compared to $50.3 million in 2007.
- Income Tax Expense for 2008 was $17.3 million compared $20.9 million in 2007. The increase is primarily due to lower earnings before income taxes in 2008. The Company paid actual cash income taxes in 2008 of only $399,000.
- Net Income was $23.1 million for 2008 compared to net income of $29.3 million in 2007.
- Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA as defined herein) was $128.3 million for 2008 as compared with $134.3 million for 2007.
- Total Access Lines increased by 1,400, or 0.6%, for 2008 as compared to 2007 primarily due to the addition of access lines related to the Bishop acquisition during the third quarter of 2008. Incumbent local exchange carrier access lines declined by 4,600 lines and competitive local exchange carrier lines increased by 6,000 lines from the end of 2007.
| |
| 2008 Financial Summary |
| (Unaudited) |
| (dollars in thousands, except per share amounts) |
| | | | | | | | Change |
| | | 2008 | | 2007 | | Amount | | Percent |
| | | | | | | | | | | |
| Revenue | | $ | 246,965 | | $ | 251,401 | | $ | (4,436) | | -1.8% |
| Operating Income | | $ | 70,466 | | $ | 81,936 | | $ | (11,470) | | -14.0% |
| Interest Expense | | $ | 31,444 | | $ | 31,885 | | $ | (441) | | -1.4% |
| Earnings Before Income Taxes | | $ | 40,389 | | $ | 50,260 | | $ | (9,871) | | -19.6% |
| Income Tax Expense | | $ | 17,345 | | $ | 20,945 | | $ | (3,600) | | -17.2% |
| Net Income | | $ | 23,149 | | $ | 29,315 | | $ | (6,166) | | -21.0% |
| Basic Earnings Per Share | | $ | 0.74 | | $ | 0.93 | | $ | (0.19 ) | | -20.4% |
| Diluted Earnings Per Share | | $ | 0.72 | | $ | 0.91 | | $ | (0.19 ) | | -20.9% |
| | | | | | | | | | | |
| Adjusted EBITDA(1) | | $ | 128,311 | | $ | 134,263 | | $ | (5,952) | | -4.4% |
| Capital Expenditures | | $ | 28,166 | | $ | 26,903 | | $ | 1,263 | | 4.7% |
| | | | | | | | | | | |
| Dividends Paid | | $ | 51,748 | | $ | 51,452 | | $ | 296 | | 0.6% |
| | | | | | | | | | | |
| (1) See the definition of Adjusted EBITDA under Explanation and Reconciliation to Non-GAAP Concepts at the end of the financial statements. |
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Investor Call
As previously announced, Iowa Telecom’s management will hold a conference call to discuss the Company’s fourth quarter 2008 results on Friday, February 27, 2009, at 9:00 a.m. (Eastern Time). To listen to the call, participants should dial (719) 325-4798 approximately 10 minutes prior to the start of the call. A telephonic replay will become available after 12:00 p.m. (Eastern Time) on February 27, 2009, and will remain available through March 6, 2009, by dialing (719) 457-0820 and entering Confirmation Code 4008429.
The live broadcast of Iowa Telecom’s quarterly conference call will be available online at www.iowatelecom.com or www.earnings.com on February 27, 2009, beginning at 9:00 a.m. (Eastern Time). The online replay will become available after 12:00 p.m. (Eastern Time) and will continue to be available for 30 days.
Forward-Looking Statements
The press release may contain forward-looking statements that are not based on historical fact, including without limitation statements containing the words “believes,” “may,” “plans,” “will,” “estimate,” “continue,” “anticipates,” “intends,” “expects,” and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from future results, events or developments described in the forward-looking statements. Such factors include those risks described in Iowa Telecom’s Form 10-K on file with the SEC. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and Iowa Telecom undertakes no duty to update this information.
About Iowa Telecom
Iowa Telecommunications Services, Inc. (d/b/a Iowa Telecom) is a telecommunications service provider that offers local telephone, long distance, Internet, broadband and network access services to business and residential customers. Today, the Company serves over 450 communities and 6 Minnesota communities and employs nearly 800 people. The company’s headquarters are in Newton, Iowa. The Company trades on the New York Stock Exchange under the symbol IWA. For further information regarding Iowa Telecom, please go to www.iowatelecom.com and select “Investor Relations.” The Iowa Telecom logo is a registered trademark of Iowa Telecommunications Services, Inc. in the United States.
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| IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES |
Consolidated Balance Sheets |
| (Unaudited) |
| (dollars in thousands, except per share amounts) |
| | | | | | |
| | As of | | As of |
| | December 31, 2008 | | December 31, 2007 |
| ASSETS | | | | | | |
| | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 11,605 | | | $ | 21,919 | |
| Accounts receivable, net | | | 23,320 | | | | 20,252 | |
| Inventories | | | 3,946 | | | | 2,995 | |
| Prepayments and other assets | | | 3,149 | | | | 2,288 | |
| Total Current Assets | | | 42,020 | | | | 47,454 | |
| | | | | | |
| PROPERTY, PLANT AND EQUIPMENT | | | | | | |
| Property, plant and equipment | | | 601,782 | | | | 542,949 | |
| Accumulated depreciation | | | (310,936 | ) | | | (264,284 | ) |
| Property Plant and Equipment, net | | | 290,846 | | | | 278,665 | |
| | | | | | |
| GOODWILL | | | 473,984 | | | | 466,554 | |
| INTANGIBLE ASSETS AND OTHER, net | | | 36,904 | | | | 24,888 | |
| INVESTMENT IN AND RECEIVABLE FROM | | | | | | |
| THE RURAL TELEPHONE FINANCE | | | | | | |
| COOPERATIVE | | | 16,174 | | | | 13,998 | |
| Total Assets | | $ | 859,928 | | | $ | 831,559 | |
| | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Revolving credit facility | | $ | 39,000 | | | $ | 18,000 | |
| Accounts payable | | | 11,017 | | | | 9,062 | |
| Advanced billings and customer deposits | | | 8,615 | | | | 9,365 | |
| Accrued and other current liabilities | | | 32,429 | | | | 32,104 | |
| Current maturities of long-term debt | | | 1,219 | | | | - |
| Total Current Liabilities | | | 92,280 | | | | 68,531 | |
| | | | | | |
| LONG-TERM LIABILITIES | | | | | | |
| Long-Term Debt | | | 489,003 | | | | 477,778 | |
| Deferred Tax Liabilities | | | 47,575 | | | | 35,255 | |
| Other Long-Term Liabilities | | | 28,326 | | | | 7,028 | |
| Total long-term liabilities | | | 564,904 | | | | 520,061 | |
| | | | | | |
| TOTAL LIABILITIES | | | 657,184 | | | | 588,592 | |
| | | | | | |
| Minority interest in consolidated subsidiary | | | 287 | | | | - |
| | | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | |
Common stock, $.01 par value, 100,000,000 shares authorized, 31,500,687 and 31,440,215 shares issued and outstanding | | | 315 | | | | 314 | |
| Additional paid-in-capital | | | 327,264 | | | | 324,170 | |
| Retained deficit | | | (110,814 | ) | | | (82,154 | ) |
| Accumulated other comprehensive income | | | (14,308 | ) | | | 637 | |
| | | | | | |
| Total Stockholders’ Equity | | | 202,457 | | | | 242,967 | |
| Total Liabilities and Stockholders’ Equity | | $ | 859,928 | | | $ | 831,559 | |
| | | | | | | | |
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| IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES |
| Consolidated Statements of Income |
| (Unaudited) |
| (in thousands, except per share amounts) |
| | | | | | | | | | | | |
| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
| | 2008 | | 2007 | | 2008 | | 2007 | |
| REVENUE AND SALES | | | | | | | | | | | | |
| Local services | | $ | 18,005 | | | $ | 17,954 | | | $ | 71,131 | | | $ | 73,918 | |
| Network access services | | | 23,563 | | | | 23,134 | | | | 89,420 | | | | 100,636 | |
| Toll services | | | 5,616 | | | | 5,353 | | | | 23,010 | | | | 21,213 | |
| Data and internet services | | | 9,548 | | | | 7,727 | | | | 35,163 | | | | 29,512 | |
| Other services and sales | | | 8,288 | | | | 7,222 | | | | 28,241 | | | | 26,122 | |
| Total revenues and sales | | | 65,020 | | | | 61,390 | | | | 246,965 | | | | 251,401 | |
| | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
Cost of services and sales (exclusive of items shown separately below) | | | 20,310 | | | | 20,449 | | | | 78,091 | | | | 78,246 | |
| Selling, general and administrative | | | 12,484 | | | | 10,098 | | | | 44,714 | | | | 42,227 | |
| Depreciation and amortization | | | 14,688 | | | | 12,474 | | | | 53,694 | | | | 48,992 | |
| Total operating costs and expenses | | | 47,482 | | | | 43,021 | | | | 176,499 | | | | 169,465 | |
| | | | | | | | | | | | |
| OPERATING INCOME | | | 17,538 | | | | 18,369 | | | | 70,466 | | | | 81,936 | |
| | | | | | | | | | | | |
| OTHER INCOME (EXPENSE) | | | | | | | | | | | | |
| Interest and dividend income | | | 209 | | | | 176 | | | | 938 | | | | 928 | |
| Interest expense | | | (8,250 | ) | | | (7,921 | ) | | | (31,444 | ) | | | (31,885 | ) |
| Other, net | | | (392 | ) | | | (236 | ) | | | 429 | | | | (719 | ) |
| Total other expense, net | | | (8,433 | ) | | | (7,981 | ) | | | (30,077 | ) | | | (31,676 | ) |
| | | | | | | | | | | | |
| EARNINGS BEFORE INCOME TAXES | | | 9,105 | | | | 10,388 | | | | 40,389 | | | | 50,260 | |
| | | | | | | | | | | | |
| INCOME TAX EXPENSE | | | 4,034 | | | | 4,411 | | | | 17,345 | | | | 20,945 | |
| | | | | | | | | | | | |
| NET INCOME BEFORE | | | | | | | | | | | | |
| MINORITY INTEREST | | $ | 5,071 | | | $ | 5,977 | | | $ | 23,044 | | | $ | 29,315 | |
| | | | | | | | | | | | |
| Minority interest in loss of subsidiary | | | 105 | | | | - | | | 105 | | | | - |
| | | | | | | | | | | | |
| NET INCOME | | $ | 5,176 | | | $ | 5,977 | | | $ | 23,149 | | | $ | 29,315 | |
| | | | | | | | | | | | |
| ADJUSTED EBITDA | | $ | 33,127 | | | $ | 31,716 | | | $ | 128,311 | | | $ | 134,263 | |
| | | | | | | | | | | | |
| COMPUTATION OF EARNINGS | | | | | | | | | | | | |
| PER SHARE | | | | | | | | | | | | |
| Basic - Earnings Per Share | | $ | 0.16 | | | $ | 0.19 | | | $ | 0.74 | | | $ | 0.93 | |
Basic - Weighted average number of shares outstanding | | | 31,501 | | | | 31,440 | | | | 31,477 | | | | 31,415 | |
| | | | | | | | | | | | |
| Diluted - Earnings Per Share | | $ | 0.16 | | | $ | 0.19 | | | $ | 0.72 | | | $ | 0.91 | |
Diluted - Weighted average number of shares outstanding | | | 32,140 | | | | 32,037 | | | | 32,122 | | | | 32,045 | |
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| IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES |
| Consolidated Statements of Cash Flows |
| (Unaudited) |
| (in thousands) |
| | | | | | | | | | | | |
| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| CASH FLOWS FROM OPERATING | | | | | | | | | | | | |
| ACTIVITIES | | | | | | | | | | | | |
| Net income | | $ | 5,176 | | | $ | 5,977 | | | $ | 23,149 | | | $ | 29,315 | |
| Adjustments to reconcile net income | | | | | | | | | | | | |
| to net cash provided by operating activities: | | | | | | | | | | | | |
Net Income (Loss) allocated to minority interest | | | (105 | ) | | | - | | | (105 | ) | | | - |
| Depreciation | | | 13,906 | | | | 12,100 | | | | 51,747 | | | | 47,243 | |
| Amortization of intangible assets | | | 782 | | | | 374 | | | | 1,947 | | | | 1,749 | |
| Amortization of debt issuance costs | | | 174 | | | | 148 | | | | 640 | | | | 591 | |
| Deferred income taxes | | | 4,613 | | | | 4,268 | | | | 17,286 | | | | 19,973 | |
Non-cash stock-based compensation expense | | | 893 | | | | 736 | | | | 3,553 | | | | 2,687 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Receivables | | | (2,032 | ) | | | 1,196 | | | | (1,754 | ) | | | 576 | |
| Inventories | | | 265 | | | | 340 | | | | (15 | ) | | | 129 | |
| Accounts payable | | | 739 | | | | (970 | ) | | | 1,267 | | | | (503 | ) |
Pension and postretirement benefit plan obligations | | | (2,746 | ) | | | (199 | ) | | | (4,147 | ) | | | (2,655 | ) |
| Other assets and liabilities | | | 920 | | | | 3,411 | | | | (5,012 | ) | | | 1,096 | |
| Net cash provided by operating activities | | | 22,585 | | | | 27,381 | | | | 88,556 | | | | 100,201 | |
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| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | |
| Capital expenditures | | | (8,044 | ) | | | (7,050 | ) | | | (28,166 | ) | | | (26,903 | ) |
| Business acquisitions, net of cash acquired | | | 319 | | | | - | | | (33,100 | ) | | | - |
| Purchase of wireless licenses | | | - | | | - | | | (5,938 | ) | | | - |
| Net cash used in investing activities | | | (7,725 | ) | | | (7,050 | ) | | | (67,204 | ) | | | (26,903 | ) |
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| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | |
| Net change in revolving credit facility | | | 2,000 | | | | 10,000 | | | | 21,000 | | | | (13,000 | ) |
Proceeds from exercise of stock options | | | - | | | - | | | - | | | 21 | |
| Payment of debt issuance costs | | | - | | | - | | | (351 | ) | | | - |
| Payment of long-term debt | | | (291 | ) | | | - | | | (599 | ) | | | - |
| Capital contributions from investees | | | 520 | | | | - | | | 520 | | | | - |
| Repurchase of common stock | | | - | | | - | | | (488 | ) | | | (561 | ) |
| Dividends paid | | | (12,949 | ) | | | (12,887 | ) | | | (51,748 | ) | | | (51,452 | ) |
| Net cash used in financing activities | | | (10,720 | ) | | | (2,887 | ) | | | (31,666 | ) | | | (64,992 | ) |
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Net Increase (Decrease) in Cash and Cash Equivalents | | | 4,140 | | | | 17,444 | | | | (10,314 | ) | | | 8,306 | |
Cash and Cash Equivalents at Beginning of Period | | | 7,465 | | | | 4,475 | | | | 21,919 | | | | 13,613 | |
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Cash and Cash Equivalents at End of Period | | $ | 11,605 $ | | | | 21,919 | | | $ | 11,605 | | | $ | 21,919 | |
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| IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES |
| EXPLANATION AND RECONCILIATION TO NON-GAAP CONCEPTS | |
| (Unaudited) | |
| (in thousands) | |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Twelve Months Ended | |
| | December 31, | | December 31, |
| | 2008 | | | 2007 | | | 2008 | | | 2007 | | |
| | | | | | | | | | | | | | | |
| ADJUSTED EBITDA: | | | | | | | | | | | | | | | |
| Net Income | | $ | 5,176 | | | $ | 5,977 | | | $ | 23,149 | | | $ | 29,315 | |
| Income Tax Expense | | | 4,034 | | | | 4,411 | | | | 17,345 | | | | 20,945 | |
| Interest Expense | | | 8,250 | | | | 7,921 | | | | 31,444 | | | | 31,885 | |
| Depreciation and Amortization | | | 14,688 | | | | 12,474 | | | | 53,694 | | | | 48,992 | |
| Unrealized losses on financial derivatives | | | 455 | | | | 236 | | | | (314 | ) | | | 719 | |
Non-cash stock-based compensation expense (1) | | | 893 | | | | 736 | | | | 3,553 | | | | 2,687 | |
| Extraordinary or unusual (gains) losses | | | - | | | | - | | | | - | | | - | |
| Non-cash portion of RTFC Capital | | | | | | | | | | | | | | | |
| Allocation(2) | | | (369 | ) | | | (39 | ) | | | (560 | ) | | | (280 | ) |
| Other non-cash losses (gains) | | | - | | | | - | | | | - | | | - | |
Loss (gain) on disposal of assets not in ordinary course | | | - | | | | - | | | | - | | | - | |
| Transaction costs | | | - | | | | - | | | | - | | | - | |
| ADJUSTED EBITDA | | $ | 33,127 | | | $ | 31,716 | | | $ | 128,311 | | | $ | 134,263 | |
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(1) Included in Selling, General and Administrative Expense on the Consolidated Statements of Income. | |
(2) Included in Interest and Dividend Income on the Consolidated Statements of Income. | |
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We present Adjusted EBITDA because we believe it is a useful indicator of our historical debt capacity and our ability to service debt and pay dividends. We also present Adjusted EBITDA because covenants in our credit facilities contain ratios based on Adjusted EBITDA.
Adjusted EBITDA is defined in our credit facilities as: (1) consolidated net income, as defined therein; plus (2) the following items, to the extent deducted from consolidated net income: (a) interest expense; (b) provision for income taxes; (c) depreciation and amortization; (d) transaction expenses related to the IPO and the related debt refinancing and other limited expenses related to permitted securities offerings, investments and acquisitions incurred after the closing date of the IPO, to the extent not exceeding $5.0 million; (e) unrealized losses on financial derivatives recognized in accordance with SFAS No. 133; (f) non-cash stock-based compensation expense; (g) extraordinary or unusual losses (including extraordinary or unusual losses on permitted sales of assets and casualty events); (h) losses on sales of assets other than in the ordinary course of business; and (i) all other non-cash charges that represent an accrual for which no cash is expected to be paid in the next twelve months; minus (3) the following items, to the extent any of them increases consolidated net income: (w) extraordinary or unusual gains (including extraordinary or unusual gains on permitted sales of assets and casualty events); (x) gains on asset disposals not in the ordinary course; (y) unrealized gains on financial derivatives recognized in accordance with SFAS No. 133; and (z) all other non-cash income (including the non-cash portion of any RTFC patronage capital allocation). If our Adjusted EBITDA were to decline below certain levels, covenants in our credit facilities that are based on Adjusted EBITDA, including our fixed charge coverage and total leverage ratio covenants, may be violated and could cause, among other things, a default or mandatory prepayment under our credit facilities, or result in our inability to pay dividends.
We believe that net income is the most directly comparable financial measure to Adjusted EBITDA under GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for consolidated statement of operations and cash flows data prepared in accordance with GAAP. Adjusted EBITDA is not a complete measure of an entity’s profitability because it does not include costs and expenses identified above; nor is Adjusted EBITDA a complete net cash flow measure because it does not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, capital expenditures and acquisitions and pay its income taxes and dividends.
CONTACT:
Corporate Communications, Inc.
Investor Relations Contacts:
Kevin Inda, 407-566-1180
Kevin.Inda@cci-ir.com
or
Iowa Telecommunications Services, Inc.
Craig Knock, 641-787-2089
Chief Financial Officer
or
Media Contact:
Julie White, 641-787-2040
Director, Corporate Communications
Julie.White@iowatelecom.com
