Exhibit 99.1
Iowa Telecom Reports Results For Fourth
Quarter and Year Ended December 31, 2005
NEWTON, Iowa--(BUSINESS WIRE)--March 3, 2006--Iowa
Telecommunications Services, Inc. (NYSE:IWA) today announced operating
results for the fourth quarter and year ended December 31, 2005.
Quarterly highlights for the Company include:
-- Operating revenues were $58.2 million.
-- Operating income was $18.9 million.
-- Net income was $11.6 million or $0.37 per share.
-- Adjusted EBITDA (as defined herein) was $31.9 million.
"We're pleased to have had another quarter of solid performance,"
said Alan L. Wells, Iowa Telecom president and chief executive
officer. "Our operating revenues, operating income, net income and
Adjusted EBITDA all increased over the previous quarter's levels. Our
DSL service offering continues to be very well received as we added
4,000 net subscribers during the fourth quarter. This increase more
than offset our losses in total access lines, which declined by 2,000
during the quarter. Our access line loss slowed somewhat during the
quarter, reflecting the success in our marketing campaigns focused on
communities in which our services have been deregulated. Overall, it
was a very good quarter and was in line with our expectations for the
business.
"Our results for the year were also consistent with our
expectations, and reflect the relatively stable nature of our rural
telecommunications business," Wells added. "Adjusted EBTIDA for 2005
was $127.9 million, a decrease of $10.1 million from 2004. However,
this decrease is the direct result of several unique events that
occurred in both 2004 and 2005. In April 2004, as a result of our rate
settlement, we recognized $7.1 million in revenue that was collected
in prior periods subject to refund, and thus our 2004 revenues and
Adjusted EBITDA were unusually high. In addition, as a result of our
recapitalization in late 2004, we received approximately $2.0 million
less in cash patronage dividend income in 2005 from our capital
investment in the Rural Telephone Finance Cooperative, one of our
primary lenders. Finally, as a result of certain amendments to our
defined benefit pension plan made in 2005, we incurred $1.5 million in
additional pension expense during the last half of 2005, of which,
$435,000 occurred during the fourth quarter. We expect these pension
plan changes to also increase our expense and cash-funding requirement
next year. However, we continue to believe the resulting significant
reduction in future pension expense, and the elimination of the
associated future pension liability risk, outweigh these one-time
costs and help to further enhance the predictability of our future
cash flows.
"Our capital expenditures for 2005 were $30.1 million and were in
line with our prior guidance. We anticipate our 2006 capital
expenditures to be between $28 million and $30 million," Wells added.
"Our interest expense for 2005, excluding amortization of debt
issuance costs, was also in line at $30.5 million. We believe our 2006
cash interest expense will be between $30 million and $32 million.
During 2005, we used our excess cash to reduce our net debt by $25.4
million. As a result of our successful refinancing in 2005, we have
effectively locked the rate on most of our term debt through 2011,
therefore mitigating the risk associated with the potential future
increases in interest rates.
"Generating strong cash flows remains our primary focus in 2006
and beyond," Wells said. "Operationally, we intend to achieve this
goal by continuing to leverage our local presence and increasing our
revenue per access line by selling additional and enhanced services
such as DSL. Through our competitive local exchange subsidiaries, we
will continue to selectively pursue customers in markets adjacent to
our existing markets. During 2005, our competitive local exchange
operations gained 5,600 customers and turned Adjusted EBITDA positive
as we expected. Finally, we will continue to evaluate selective
accretive acquisitions, similar to our pending acquisition of the
Montezuma Mutual Telephone Company. We believe this acquisition is on
track to close during the first half of 2006, and should add
approximately 2,200 telephone access lines, 1,300 cable television
customers and 900 data customers to our operations.
FINANCIAL DISCUSSION FOR 4TH QUARTER 2005:
-- Operating Revenues increased $1.5 million, or 2.6%, to $58.2
million for the fourth quarter of 2005 as compared to the same
quarter in 2004. DSL Internet access service revenues
increased $1.5 million, or 81.3%, due primarily to customer
growth.
-- Operating Costs and Expenses increased $1.7 million, or 4.4%,
in the fourth quarter of 2005 as compared to the fourth
quarter of 2004. The increase in costs includes $435,000 of
additional pension expense for distributions during the fourth
quarter of 2005 related to the amendments to the defined
benefit plan during the second quarter. Other significant
items that contributed to the higher expense included
additional non-cash equity-based compensation expense of
$433,000 and higher costs related to serving a larger number
of competitive local exchange carrier access lines.
-- Operating Income was $18.9 million in the fourth quarter of
2005 as compared to $19.1 million in the same period in 2004.
-- Interest Expense decreased $7.2 million, or 47.7%, to $7.9
million in the fourth quarter of 2005 as compared to the
fourth 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 2004.
-- Net Income increased by $28.2 million to $11.6 million for the
quarter compared to net a loss of $16.7 million in the fourth
quarter of 2004. Net income in the fourth quarter of 2004 was
negatively impacted by $26.2 million of one-time
transaction-related costs associated with the Company's
initial public offering. Excluding these one-time costs, net
income would have been $9.5 million in the year-ago quarter.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $31.9
million for the fourth quarter of 2005, as compared with $31.6
million in the same period in 2004.
-- Total Access Lines decreased by 8,300, or 3.1%, for the fourth
quarter of 2005 as compared to the fourth quarter in 2004.
Total access lines decreased by 2,000 during the fourth
quarter of 2005 from the third quarter in 2005 as ILEC access
lines declined by 2,600 lines and CLEC lines increased by 600
lines.
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*T
Fourth Quarter 2005 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
Change
-----------------
2005 2004 Amount Percent
---------- ---------- -----------------
Revenue $ 58,226 56,734 $ 1,492 2.6%
Operating Income $ 18,901 $ 19,082 $ (181) -1.0%
Interest Expense $ 7,897 $ 15,094 $ (7,197) -47.7%
Net Income (Loss) $ 11,595 $ (16,653) $ 28,248 169.6%
Income (Loss) Available for
Common $ 11,595 $ (16,653) $ 28,248 169.6%
Basic Earnings (Loss) Per
Share $ 0.37 $ (0.64) $ 1.01 157.8%
Diluted Earnings (Loss) Per
Share $ 0.36 $ (0.64) $ 1.00 156.3%
Adjusted EBITDA (1) $ 31,926 $ 31,632 $ 294 0.9%
Capital Expenditures and
Acquisitions $ 6,609 $ 11,109 $ (4,500) -40.5%
(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
2005 2004 % Change
--------- ---------- ---------
Telephone Access Lines
ILEC Lines (1) 237,900 251,800 -5.5%
CLEC Lines (2) 20,800 15,200 36.8%
--------- ---------- ---------
Total Telephone Access Lines 258,700 267,000 -3.1%
Long Distance Subscribers 142,800 135,800 5.2%
Dial-up Internet Subscribers 41,700 51,500 -19.0%
DSL Subscribers 31,200 15,600 100.0%
Average Monthly Revenue Per
Access Line (3) $ 74.73 $71.03 5.2%
4th Quarter 3rd Quarter
2005 2005 % Change
--------- ---------- ---------
Telephone Access Lines
ILEC Lines (1) 237,900 240,500 -1.1%
CLEC Lines (2) 20,800 20,200 3.0%
--------- ---------- ---------
Total Telephone Access Lines 258,700 260,700 -0.8%
Long Distance Subscribers 142,800 141,800 0.7%
Dial-up Internet Subscribers 41,700 44,200 -5.7%
DSL Subscribers 31,200 27,200 14.7%
Average Monthly Revenue Per
Access Line (3) $ 74.73 $ 73.34 1.9%
(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 3,200 wholesale lines subscribed at December 31, 2005; 3,600
wholesale lines subscribed at September 30, 2005; and 4,600 wholesale
lines subscribed at December 31, 2004.
(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 by the average of the access
lines at the beginning and at the end of the period.
*T
FINANCIAL DISCUSSION FOR YEAR ENDED DECEMBER 31, 2005:
-- Operating Revenues increased $3.5 million, or 1.5%, to $231.6
million for the year ended December 31, 2005 as compared to
2004. Revenue during 2004 included $7.1 million of revenue
collected subject to refund in prior periods and recognized
during 2004 as a result of a rate increase settlement during
the period. Excluding the impact of the prior period revenue
in 2004, operating revenue increased by $10.6 million. The
revenue increase was driven primarily by growth in network
access revenues and customer growth in DSL service.
-- Operating Costs and Expenses increased $13.3 million, or 9.4%,
in 2005 as compared to 2004. The increase in long distance
customers, coupled with the termination of the historical
agreement for the exchange of traffic related to our
discontinued local calling plans, resulted in approximately
$4.4 million of additional cost to deliver long distance
traffic. As a result of customer growth, we experienced an
increase in competitive local exchange carrier access lines
which, in turn, raised costs for providing this service by
$3.3 million for 2005 as compared to 2004. Salary, wages and
benefits for 2005 includes a pension settlement charge of
approximately $1.5 million for distributions related to
amendments to the pension plan during the second quarter of
2005 and additional non-cash equity-based compensation expense
of $1.7 million. Also contributing to the increase were $1.4
million of external costs related to Sarbanes Oxley compliance
and other costs related to being a publicly traded company.
Depreciation and amortization increased $659,000, or 1.4%, for
2005 as compared to 2004. This was primarily due to higher
average property, plant and equipment balances relating mainly
to additions to our network facilities. Offsetting these
increases was a $2.0 million favorable impact resulting from
past access disputes with other carriers.
-- Operating Income decreased $9.8 million, or 11.2%, in 2005
from 2004 due to the previously discussed revenue and expense
items.
-- Interest and Dividend Income decreased $3.0 million, or 73.4%,
in 2005 compared to 2004 primarily due to the reduction in
patronage dividend income from the RTFC Subordinated Capital
Certificates, which were partially redeemed in connection with
the initial public offering and debt refinancing in November
2004.
-- Interest Expense decreased $24.6 million, or 44.1%, for 2005
as compared to 2004, principally as a result of the reductions
in the amount of debt outstanding, and in the average interest
rate on our new debt issued in connection with our debt
refinancing in November 2004.
-- Net Income increased $32.2 million in 2005 to $46.4 million
from $14.2 million in 2004. Net income in 2004 was impacted by
one-time transaction-related costs associated with the
Company's initial public offering. Excluding the one-time
transaction-related costs and the recognition of revenue
collected subject to refund from the rate increase settlement,
net income would have been $33.3 million in 2004, and the
increase in 2005 would have been $13.3 million.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $127.9
million for 2005 as compared with $137.9 million in 2004. The
decrease in Adjusted EBITDA was primarily due to the $7.1
million of revenue collected subject to refund in prior
periods and recognized during 2004 as a result of a rate
increase settlement during the period and a $2.0 million
non-operating reduction in the cash portion of the patronage
dividend income resulting from the decrease in the investment
in the RTFC Subordinated Capital Certificates.
-- Total Access Lines decreased by 8,300, or 3.1%, for 2005 as
compared to 2004. Incumbent local exchange carrier access
lines declined by 13,900 lines and CLEC lines increased by
5,600 lines from the end of 2004.
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*T
2005 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
Change
---------------
2005 2004 Amount Percent
-------- -------- ---------------
Revenue $231,640 $228,119 $ 3,521 1.5%
-
Operating Income $ 77,214 $ 86,994 $ (9,780) -11.2%
Interest Expense $ 31,089 $ 55,654 $(24,565) -44.1%
Net Income $ 46,390 $ 14,204 $ 32,186 226.6%
Income Available for Common $ 46,390 $ 69,829 $(23,439) -33.6%
Basic Earnings Per Share $ 1.50 $ 2.97 $ (1.47) -49.5%
Diluted Earnings Per Share $ 1.46 $ 2.64 $ (1.18) -44.7%
Adjusted EBITDA (1) $127,864 $137,935 $-10,071 -7.30%
Capital Expenditures and
Acquisitions $ 30,235 $ 36,500 $ (6,265) -17.2%
(1) See the definition of Adjusted EBITDA under Explanation and
Reconciliation to Non-GAAP Concepts at the end of the financial
statements.
*T
Investor Call
As previously announced, Iowa Telecom's management will hold a
conference call to discuss the fourth quarter and year-end results on
Friday, March 3, 2006 at 9:00 a.m. (Eastern Time). To listen to the
call, participants should dial (913) 981-5519 approximately 10 minutes
prior to the start of the call. A telephonic replay will become
available after 12:00 p.m. (Eastern Time) on March 3, 2006 and will
continue through March 10, 2006 by dialing (719) 457-0820 and entering
Confirmation Code 7016840. The live broadcast of Iowa Telecom's
quarterly conference call will be available online at
www.iowatelecom.com or www.earnings.com on March 3, 2006, 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 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, 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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*T
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Balance Sheets
(Unaudited)
(dollars in thousands, except per share amounts)
As of As of
December 31, December 31,
2005 2004
------------- ---------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 26,782 $ 2,874
Accounts receivable, net 18,121 19,416
Inventory 2,722 2,979
Prepayments and other assets 2,402 3,224
------------- ---------------
Total Current Assets 50,027 28,493
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment 504,662 496,145
Accumulated depreciation (189,163) (164,409)
------------- ---------------
Net Property Plant and
Equipment 315,499 331,736
GOODWILL 460,113 460,113
INTANGIBLE AND OTHER ASSETS, net 23,993 15,800
INVESTMENT IN AND RECEIVABLE FROM
THE RURAL TELEPHONE FINANCE
COOPERATIVE 14,890 16,642
------------- ---------------
Total Assets $ 864,522 $ 852,784
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 40,000 $ 41,507
Accounts payable 10,416 15,889
Advanced billings and customer
deposits 6,042 6,525
Accrued and other current liabilities 29,842 23,123
------------- ---------------
Total Current Liabilities 86,300 87,044
LONG-TERM DEBT 477,778 477,778
OTHER LONG-TERM LIABILITIES 19,913 12,000
------------- ---------------
Total Liabilities 583,991 576,822
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
100,000,000 shares authorized,
31,065,963 and 30,864,195 shares
issued and outstanding 311 309
Additional paid-in-capital 317,877 314,634
Retained deficit (42,874) (38,897)
Other comprehensive income 5,217 (84)
------------- ---------------
Total Stockholders' Equity 280,531 275,962
------------- ---------------
Total Liabilities and Stockholders'
Equity $ 864,522 $ 852,784
================================
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Income Statements
(Unaudited)
(dollars in thousands, except per share amounts)
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------------------------
2005 2004 2005 2004
------- -------- -------- --------
REVENUE AND SALES
Local services $18,737 $ 18,366 $ 75,581 $ 82,778
Network access services 25,516 25,291 101,227 94,957
Toll services 5,813 6,040 23,813 23,167
Other services and sales 8,160 7,037 31,019 27,217
------- -------- -------- --------
Total revenues and sales 58,226 56,734 231,640 228,119
OPERATING EXPENSES
Cost of services and sales
(exclusive of items shown
separately below) 16,262 15,407 64,118 55,766
Selling, general and
administrative 11,072 10,168 41,708 37,418
Depreciation and
amortization 11,991 12,077 48,600 47,941
------- -------- -------- --------
Total operating costs and
expenses 39,325 37,652 154,426 141,125
OPERATING INCOME 18,901 19,082 77,214 86,994
OTHER INCOME (EXPENSE)
Interest and dividend
income 646 552 1,078 4,057
Interest expense (7,897) (15,094) (31,089) (55,654)
Other, net (55) (21,193) (813) (21,193)
------- -------- -------- --------
Total other expense, net (7,306) (35,735) (30,824) (72,790)
EARNINGS BEFORE INCOME TAXES 11,595 (16,653) 46,390 14,204
INCOME TAX EXPENSE - - - -
------- -------- -------- --------
NET INCOME (LOSS) 11,595 (16,653) 46,390 14,204
GAIN ON REDEMPTION OF REDEEMABLE
CONVERTIBLE PREFERRED STOCK - - - 57,681
PREFERRED DIVIDEND - - - (2,056)
------ -------- -------- --------
INCOME (LOSS) AVAILABLE FOR
COMMON STOCKHOLDERS $11,595 $(16,653)$ 46,390 $ 69,829
======== ========= ======== ========
ADJUSTED EBITDA $31,926 $ 31,632 $127,864 $137,935
======== ========= ======= =========
COMPUTATION OF EARNINGS
PER SHARE
Basic - Earnings per share $ 0.37 $ (0.64) $ 1.50 2.97
======= ========== ======== ========
Basic - Weighted average number
of shares outstanding 31,062 26,104 30,937 23,482
======== ======== ======== =========
Diluted - Earnings per share $ 0.36 $ (0.64) $ 1.46 $ 2.64
======== ========= ======== ========
Diluted - Weighted average number
of shares outstanding 31,900 26,104 31,720 27,206
======== ======== ======== =========
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended
December 31,
2005 2004
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 11,595 $ (16,653)
Adjustments to reconcile
net income (loss)
to net cash provided
by operating activities:
Depreciation 11,389 11,484
Amortization of intangible assets 602 593
Non-cash stock based compensation
expense 572 139
Loss from fees to retire existing debt - 18,557
Write-off of deferred financing costs - 3,568
Changes in operating assets and
liabilities:
Receivables 498 (871)
Inventory 172 234
Accounts payable (749) (671)
Other assets and liabilities 1,975 7,279
---------- ----------
Net cash provided by operating activities
$ 26,054 $ 23,659
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (6,609) (11,109)
Business acquisitions - -
Redemption of RTFC capital certificates - 50,000
Purchase of RTFC capital certificates - (7,778)
Net cash provided by (used in) investing
activities (6,609) 31,113
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in revolving credit facility 14,500 38,507
Redemption of redeemable preferred stock - -
Issuance of senior subordinated notes - -
Payment of issuance costs for senior
subordinated notes - -
Early retirement of long-term debt - (681,500)
Payment of fees to retire existing debt - (18,557)
Issuance of long-term debt - 477,778
Payment of issuance costs for long term
debt - (4,138)
Issuance of capital common stock, net of
Issuance costs - 144,848
Redemption of stock options - (10,046)
Proceeds from exercise of stock options 222 -
Dividends paid (12,666) -
---------- ----------
Payment on long-term debt - -
Net cash used in financing activities 2,056 (53,108)
Net Increase (Decrease) in Cash and Cash
Equivalents 21,501 1,664
---------- ----------
Cash and Cash Equivalents at Beginning
of Period 5,281 1,210
---------- ----------
Cash and Cash Equivalents at End
of Period $ 26,782 $ 2,874
========== ==========
Twelve Months Ended
December 31,
2005 2004
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 46,390 $ 14,204
Adjustments to reconcile
net income (loss)
to net cash provided
by operating activities:
Depreciation 46,213 45,576
Amortization of intangible assets 2,387 2,365
Non-cash stock based compensation
expense 1,828 141
Loss from fees to retire existing debt - 18,557
Write-off of deferred financing
costs - 3,568
Changes in operating assets and
liabilities:
Receivables 1,295 (2,600)
Inventory 257 (51)
Accounts payable (5,473) 3,044
Other assets and liabilities 4,424 (8,169)
---------- ----------
Net cash provided by operating activities
$ 97,321 $ 76,635
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (30,141) (34,803)
Business acquisitions (94) (1,697)
Redemption of RTFC capital certificates - 50,000
Purchase of RTFC capital certificates - (7,778)
---------- ----------
Net cash provided by (used in) investing
activities (30,235) 5,722
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in revolving credit facility (1,507) 41,507
Redemption of redeemable preferred stock - (100,000)
Issuance of senior subordinated notes - 66,000
Payment of issuance costs for senior
subordinated notes - (1,974)
Early retirement of long-term debt - (681,500)
Payment of fees to retire existing debt - (18,557)
Issuance of long-term debt - 477,778
Payment of issuance costs for long term
debt - (4,138)
Issuance of capital common stock, net of
Issuance costs - 144,848
Redemption of stock options - (10,046)
Proceeds from exercise of stock options 1,417 -
Dividends paid (43,088) -
Payment on long-term debt - (30,250)
Net cash used in financing activities (43,178) (116, 332)
Net Increase (Decrease) in Cash and Cash
Equivalents 23,908 (33,975)
---------- ----------
Cash and Cash Equivalents at Beginning
of Period 2,874 36,849
---------- ----------
Cash and Cash Equivalents at End
of Period
$ 26,782 $ 2,874
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
- ----------------------------------------------------------------------
EXPLANATIONS AND RECONCILIATIONS TO NON-GAAP CONCEPTS
- ----------------------------------------------------------------------
(Unaudited)
--------------------------------
(in thousands)
--------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -----------------
2005 2004 2005 2004
------- -------- -------- --------
ADJUSTED EBITDA:
Net Income $11,595 $(16,653 $ 46,390 14,204
Income Taxes - -- -- --
Interest Expense 7,897 15,094 31,089 55,654
Depreciation and Amortization 11,991 12,077 48,600 47,941
Unrealized losses on financial
derivatives 49 (1,452) 234 (1,452)
Non-cash stock-based
compensation expense (1) 572 139 1,828 141
Extraordinary or unusual (gains)
losses -- -- -- --
Non-cash portion of RTFC Capital
Allocation (2) (178) (162) (277) (1,142)
Other non-cash losses (gains) -- -- -- --
Loss (gain) on disposal of assets
not in ordinary course -- -- -- --
Transaction costs -- 22,589 -- 22,589
--------- -------- -------- -------
ADJUSTED EBITDA $31,926 $ 31,632 $127,864 $137,935
=======================================
(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.
*T
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: Investor Relations Contacts:
Corporate Communications, Inc.
Kevin Inda, 407-566-1180
Kevin.Inda@cci-ir.com
or
Craig Knock, 641-787-2089
or
Media Contact:
Julie White, 641-787-2040
Julie.White@iowatelecom.com