Exhibit 99.1
Iowa Telecom Reports Results for the Quarter Ended June 30, 2005
NEWTON, Iowa--(BUSINESS WIRE)--Aug. 4, 2005--Iowa
Telecommunications Services, Inc. (NYSE:IWA) today announced operating
results for the quarter ended June 30, 2005. Quarterly highlights for
the Company include:
-- Operating revenue was $58.0 million.
-- Operating income was $21.0 million.
-- Net income was $13.3 million, or $0.43 per share.
-- Adjusted EBITDA (as defined herein) was $33.8 million.
"We're pleased with our solid second quarter financial results, as
revenue, operating income, net income and Adjusted EBITDA were higher
than in the first quarter of 2005," said Alan L. Wells, Iowa Telecom
president and chief executive officer. "Throughout the first six
months of this year we have performed well, and our results reflect
our strategy of being very cash flow focused. Our DSL High-Speed
Internet service offering continues to do well, as we added 3,000 net
subscribers for the second quarter. We continue to be successful in
using our strong incumbent market position to increase revenue per
access line by providing additional services to our customers. Our
average monthly revenue per access line continues to increase, growing
to $73 in the second quarter of 2005.
"Our focus on cash flow is evidenced by the fact that we have now
paid two quarterly cash dividends of $0.405 per share on Iowa
Telecommunications common stock in 2005," Wells added. "These payments
are consistent with our policy of paying quarterly dividends at an
annual rate of $1.62 per share, or approximately $50 million total in
2005, as we return a significant portion of our excess cash flow to
our shareholders.
"Capital expenditures of $8.0 million this quarter and $13.7
million for the first six months of 2005 continue to be on track with
our expectations," Wells continued. "We continue to anticipate our
2005 capital expenditures to be approximately $30.0 million.
"As to our debt service, our interest expense for the second
quarter, excluding amortization of debt issuance cost, was again $7.6
million. As a result, we now expect that our 2005 cash interest
expense will be approximately $30.5 million, reflecting the lower side
of our prior guidance of between $30 million and $32 million," Wells
continued. "Additionally, we used our excess cash to reduce our net
debt by over $5.9 million during the quarter ended June 30, 2005, and
have reduced our net debt by $14.6 million for the year.
"Finally, during the quarter we have taken steps to eliminate some
of the future uncertainty regarding our defined benefit pension plans.
As a result of these measures, we estimate that only 40 of our
employees will continue to accrue the same level of benefits as they
did in the past. While these actions will somewhat increase our
expense during the last half of this year and our expense and
cash-funding requirement next year, we believe the related reduction
in future pension expense and the elimination of the associated risk
will further enhance the predictability of our future cash flows.
Overall, our operational and financial performance during the second
quarter was strong, and was consistent with our expectations," Wells
concluded.
FINANCIAL DISCUSSION FOR 2nd QUARTER 2005:
-- Operating Revenues decreased $4.9 million, or 7.7%, to $58.0
million for the second quarter of 2005 as compared to the same
quarter in 2004. The decrease in revenue was primarily due to
the one-time revenue recognized in the second quarter of 2004,
when the Company recognized $7.7 million of local service
revenue that was collected in prior periods subject to refund.
If the second quarter of 2004 results were adjusted to
eliminate this one-time revenue item, operating revenues would
have increased by $2.9 million, or 5.2%, over the second
quarter of 2004. Also contributing to the decrease compared to
the prior year was the loss of $1.5 million in revenues
resulting from the discontinuance of the expanded local area
calling plans during the third quarter of 2004. Contributing
favorably were a $2.3 million increase in network access
service revenues driven by increased revenues from switched
access services and an increase of $803,000 in other services
and sales revenues primarily due to growth in DSL services.
-- Operating Costs and Expenses increased $3.2 million, or 9.5%,
in the second quarter of 2005 as compared to the second
quarter of 2004. The significant items that contributed to the
higher expense included additional costs to deliver long
distance traffic, higher costs related to serving a larger
number of competitive local exchange carrier access lines, and
additional costs related to being a publicly-traded company,
of which Sarbanes-Oxley related implementation costs were
approximately $500,000. Partially offsetting the increase was
a $2.0 million favorable impact resulting from past access
disputes with other carriers. Depreciation and amortization
also increased $372,000 due to higher average property, plant
and equipment balances as a result of additions to the
Company's network facilities.
-- Operating Income was $21.0 million in the second quarter of
2005 as compared to $29.1 million in the same period in 2004,
a reduction of $8.1 million. The decrease in operating income
was primarily due to the one-time revenue recognized in the
second quarter of 2004, when the Company recognized $7.7
million of local service revenue that was collected in prior
periods subject to refund. If the second quarter of 2004
results were adjusted to eliminate this one-time revenue item,
operating income would have decreased by $0.4 million, or
1.7%, from the second quarter of 2004.
-- Interest and Dividend Income decreased $649,000, or 83.0%, to
$133,000 in the second quarter of 2005 as compared to the
second quarter of 2004. The reduction was primarily due to the
decrease in the Company's investment in subordinated capital
certificates with the Rural Telephone Finance Cooperative
(RTFC) resulting from the Company's initial public offering
and debt refinancing in November of 2004.
-- Interest Expense decreased $5.6 million, or 42.3%, to $7.7
million in the second quarter of 2005 as compared to the
second quarter of 2004. The decrease was a result of the
reductions in the amount of debt outstanding and in the
average interest rate as a result of the Company's initial
public offering and debt refinancing in November of 2004.
-- Net Income decreased $3.2 million, or 19.2%, to $13.3 million
in the second quarter of 2005 compared to the same period in
2004. The decrease in net income was primarily due to the
one-time revenue recognized in the second quarter of 2004,
when the Company recognized $7.7 million of local service
revenue that was collected in prior periods subject to refund.
If the second quarter of 2004 results were adjusted to
eliminate this one-time revenue item, net income would have
increased by $4.6 million, or 52.0%, over the second quarter
of 2004. In addition, interest expense decreased by $5.6
million, which contributed to the change in net income.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $33.8
million for the second quarter of 2005, as compared with $41.6
million in the same period in 2004. The decrease in Adjusted
EBITDA was primarily due to the $7.7 million of local service
revenue collected subject to refund in prior periods and
recognized during the second quarter of 2004.
-- Total Access Lines decreased by 2,200, or 0.8%, for the second
quarter of 2005 as compared to the second quarter in 2004.
Total access lines decreased by 1,000 during the second
quarter of 2005 from the first quarter in 2005. Incumbent
local exchange carrier access lines declined by 2,800 lines,
or 1.1%, from the first quarter of 2005.
Second Quarter 2005 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
Change
----------------
2005 2004 (2) Amount Percent
------- -------- -------- -------
Revenue $58,037 $ 62,911 $ (4,874) -7.7%
Operating Income $20,974 $ 29,071 $ (8,097) -27.9%
Interest Expense $ 7,706 $ 13,345 $ (5,639) -42.3%
Net Income $13,334 $ 16,508 $ (3,174) -19.2%
Income Available for Common $13,334 $ 16,508 $ (3,174) -19.2%
Basic Earnings Per Share $ 0.43 $ 0.73 $ (0.30) -41.1%
Diluted Earnings Per Share $ 0.42 $ 0.72 $ (0.30) -41.7%
Adjusted EBITDA (1) $33,780 $ 41,600 $ (7,820) -18.8%
Capital Expenditures $ 8,038 $ 8,084 $ (46) -0.6%
(1) See the definition of Adjusted EBITDA under Explanation and
Reconciliation to Non-GAAP Concepts at the end of the financial
statements.
(2) Results include $7.7 million of revenue collected in prior
periods subject to refund and recognized in the three months
ended June 30, 2004.
2nd Quarter 2nd Quarter
Key Operating Statistics 2005 2004 % Change
- ----------------------------------------------------------------------
Telephone Access Lines
ILEC Lines (1) 246,200 257,500 -4.4%
CLEC Lines (2) 19,200 10,100 90.1%
----------- ---------- --------
Total Telephone Access Lines 265,400 267,600 -0.8%
Long Distance Subscribers 141,200 121,400 16.3%
Dial-up Internet Subscribers 47,200 53,100 -11.1%
DSL Subscribers 22,600 9,900 128.3%
Average Monthly Revenue Per
Access Line (3) $ 73 $ 69 5.8%
2nd Quarter 1st Quarter
2005 2005 % Change
-----------------------------------
Telephone Access Lines
ILEC Lines (1) 246,200 249,000 -1.1%
CLEC Lines (2) 19,200 17,400 10.3%
----------- ---------- --------
Total Telephone Access Lines 265,400 266,400 -0.4%
Long Distance Subscribers 141,200 139,200 1.4%
Dial-up Internet Subscribers 47,200 49,300 -4.3%
DSL Subscribers 22,600 19,600 15.3%
Average Monthly Revenue Per
Access Line (3) $ 73 $ 72 1.4%
(1) Includes lines subscribed by our incumbent local exchange carrier
customers and lines subscribed by our "wholesale" customers who
are competing local exchange carriers. Wholesale access lines
include: lines subscribed by our competitive 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 4,100 wholesale
lines subscribed at June 30, 2005; 4,500 wholesale lines
subscribed at June 30, 2004; and 4,200 wholesale lines subscribed
at March 31, 2005.
(2) Access lines subscribed by customers of our competitive local
exchange carrier subsidiary, Iowa Telecom Communications, Inc.
(3) Average monthly revenue per access line is computed by dividing
the total revenue for the period, excluding revenue collected in
prior periods subject to refund recognized in the period, by the
average of the access lines at the beginning and at the end of
the period. Revenue collected in prior periods subject to refund
and recognized in the three months ended June 30, 2004 was $7.7
million.
Investor Call
As previously announced, Iowa Telecom's management will hold a
conference call to discuss the second quarter results on Thursday,
August 4, 2005 at 9:30 a.m. (Eastern Time). To listen to the call,
participants should dial (913) 981-5533 approximately 10 minutes prior
to the start of the call. A telephonic replay will become available
after 12:30 p.m. (Eastern Time) on August 4, 2005 and will continue
through August 11, 2005 by dialing (719) 457-0820 and entering
Confirmation Code 6242364.
The live broadcast of Iowa Telecom's quarterly conference call
will be available online at www.iowatelecom.com or www.earnings.com on
August 4, 2005, beginning at 9:30 a.m. (Eastern Time). The online
replay will become available after 12:30 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 Annual
Report on 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 440
communities and employs over 600 people throughout the State of Iowa.
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, this press release or the
conference call, please go to Iowa Telecom's website at
www.iowatelecom.com and select "Investor Relations." The Iowa Telecom
logo is a registered trademark of Iowa Telecommunications Services,
Inc. in the United States.
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share amounts)
As of As of
June 30, 2005 December 31,
2004
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,511 $ 2,874
Accounts receivable, net 20,535 19,416
Inventory 4,123 2,979
Prepayments and other current assets 1,842 3,224
------------- -------------
Total Current Assets 30,011 28,493
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment 493,530 496,145
Accumulated depreciation (171,686) (164,409)
------------- -------------
Net Property Plant and Equipment 321,844 331,736
GOODWILL 460,113 460,113
INTANGIBLE ASSETS AND OTHER, net 16,393 15,800
INVESTMENT IN AND RECEIVABLE FROM
THE RURAL TELEPHONE FINANCE
COOPERATIVE 14,188 16,642
------------- -------------
Total Assets $ 842,549 $ 852,784
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 27,500 $ 41,507
Accounts payable 10,674 15,889
Advanced billings and customer deposits 6,398 6,525
Accrued and other current liabilities 27,487 23,123
------------- -------------
Total Current Liabilities 72,059 87,044
LONG-TERM DEBT 477,778 477,778
OTHER LONG-TERM LIABILITIES 13,349 12,000
------------- -------------
TOTAL LIABILITIES 563,186 576,822
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
100,000,000 shares authorized,
30,915,016 and 30,864,195
issued and outstanding, respectively 309 309
Additional paid-in-capital 315,733 314,634
Retained deficit (38,740) (38,897)
Other comprehensive income (loss) 2,061 (84)
------------- -------------
Total Stockholders' Equity 279,363 275,962
------------- -------------
Total Liabilities and Stockholders'
Equity $ 842,549 $ 852,784
============ =============
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- -------- -------- ---------
REVENUE AND SALES
Local services $19,021 $ 27,508 $ 37,828 $ 45,270
Network access services 25,365 23,044 50,867 46,709
Toll services 5,986 5,497 11,975 11,072
Other services and sales 7,665 6,862 14,868 13,292
--------- -------- -------- ---------
Total revenues and sales 58,037 62,911 115,538 116,343
OPERATING EXPENSES
Cost of services and sales
(exclusive of items shown
separately below) 15,909 13,074 31,442 25,923
Selling, general and
administrative 8,808 8,792 18,926 17,985
Depreciation and amortization 12,346 11,974 24,689 23,774
--------- -------- -------- ---------
Total operating costs and
expenses 37,063 33,840 75,057 67,682
OPERATING INCOME 20,974 29,071 40,481 48,661
OTHER INCOME (EXPENSE)
Interest and dividend income 133 782 292 1,700
Interest expense (7,706) (13,345) (15,449) (26,188)
Other, net (67) -- (146) --
--------- -------- -------- ---------
Total other expense, net (7,640) (12,563) (15,303) (24,488)
NET INCOME 13,334 16,508 25,178 24,173
GAIN ON REDEMPTION OF REDEEMABLE
CONVERTIBLE PREFERRED STOCK -- -- -- 57,681
PREFERRED DIVIDEND -- -- -- (2,056)
--------- -------- -------- ---------
INCOME AVAILABLE FOR
COMMON STOCKHOLDERS $13,334 $ 16,508 $ 25,178 $ 79,798
========= ======== ======== =========
COMPUTATION OF EARNINGS
PER SHARE
Basic - Earnings Per Share $ 0.43 $ 0.73 $ 0.82 $ 3.53
Diluted - Weighted average
number of shares
outstanding 30,879 22,601 30,872 22,601
Diluted - Earnings Per
Share $ 0.42 $ 0.72 $ 0.80 $ 2.83
Diluted - Weighted average
number of shares
outstanding 31,598 23,065 31,596 28,930
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2005 2004 2005 2004
-------- -------- -------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 13,334 $ 16,508 $ 25,178 $ 24,173
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 11,751 11,364 23,501 22,594
Amortization of intangible
assets 595 610 1,188 1,180
Non-cash stock-based
compensation 361 1 715 1
Changes in operating assets
and liabilities:
Receivables (2,384) (1,456) (1,119) (628)
Inventory (544) (1,236) (1,144) (267)
Accounts payable (2,119) 3,923 (5,215) 3,178
Other assets and
liabilities 5,149 (9,358) 2,810 (9,144)
-------- -------- -------- ---------
Net cash provided by operating
activities 26,143 20,356 45,914 41,087
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures (8,038) (8,084) (13,668) (14,636)
Business acquisitions (85) -- (85) (1,697)
-------- -------- -------- ---------
Net cash used in investing
activities (8,123) (8,084) (13,753) (16,333)
CASH FLOWS FROM FINANCING
ACTIVITIES
Net change in revolving credit
facility (6,500) -- (14,007) --
Redemption of redeemable
preferred stock -- -- -- (100,000)
Issuance of long-term debt -- -- -- 66,000
Payment of debt issuance costs -- -- -- (1,974)
Proceeds from exercise of
employee stock options 384 -- 384 --
Dividends paid (12,500) -- (17,901) --
Payment on long-term debt -- (11,000) -- (19,250)
-------- -------- -------- ---------
Net cash used in financing
activities (18,616) (11,000) (31,524) (55,224)
Net Change in Cash and Cash
Equivalents (596) 1,272 637 (30,470)
-------- -------- -------- ---------
Cash and Cash Equivalents at
Beginning of Period 4,107 5,107 2,874 36,849
-------- -------- -------- ---------
Cash and Cash Equivalents at
End of Period $ 3,511 $ 6,379 $ 3,511 $ 6,379
======== ======== ======== =========
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
EXPLANATIONS AND RECONCILIATIONS TO NON-GAAP CONCEPTS
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2005 2004 2005 2004
-------- -------- ------- --------
ADJUSTED EBITDA:
Net Income $13,334 $16,508 $25,178 $24,173
Income Taxes -- -- -- --
Interest Expense 7,706 13,345 15,449 26,188
Depreciation and Amortization 12,346 11,974 24,689 23,774
Unrealized losses on financial
derivatives 67 -- 146 --
Non-cash stock-based compensation
expense (1) 361 1 715 1
Extraordinary or unusual (gains)
losses -- -- -- --
Non-cash portion of RTFC Capital
Allocation (2) (34) (228) (67) (456)
Other non-cash losses (gains) -- -- -- --
Loss (gain) on disposal of assets
not in ordinary course -- -- -- --
Transaction costs -- -- -- --
-------- -------- ------- --------
ADJUSTED EBITDA $33,780 $41,600 $66,110 $73,680
======== ======== ======= ========
(1) Included in Selling, General and Administrative Expense on the
Consolidated Statements of Operations.
(2) Included in Interest and Dividend Income on the Consolidated
Statements of Operations.
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: Iowa Telecommunications Services Inc., Newton
Media Contact:
Julie White, 641-787-2040
Julie.White@iowatelecom.com
www.iowatelecom.com
or
Corporate Communications, Inc.
Investor Relations Contacts:
Kevin Inda, 407-566-1180
Kevin.Inda@cci-ir.com
or
Craig Knock, 641-787-2089