Exhibit 99.1
Iowa Telecom Reports Results for Quarter Ended March 31, 2006
NEWTON, Iowa--(BUSINESS WIRE)--May 4, 2006--Iowa
Telecommunications Services, Inc. (NYSE: IWA) today announced
operating results for the quarter ended March 31, 2006. Quarterly
highlights for the Company include:
-- Operating revenues were $57.4 million.
-- Operating income was $19.7 million.
-- Net income was $12.0 million or $0.38 per diluted share.
-- Adjusted EBITDA (as defined herein) was $32.1 million.
"We're very pleased with our first quarter performance, which was
strong from every perspective," said Alan L. Wells, Iowa Telecom
chairman and chief executive officer. "Operating income and Adjusted
EBITDA increased 4.2% and 0.6%, respectively, from the fourth quarter
of 2005. Our DSL service continues to do very well as we added 4,700
net subscribers during the first quarter, the largest quarterly gain
in DSL that we've ever had. We also are pleased that the rate of our
access line loss declined in the quarter. Our total access lines
declined by 1,000 and was comprised of a 1,500 line decline at our
ILEC, offset by a 500 line gain from our CLEC operations.
"Our capital expenditures for the first quarter were $5.1 million.
We continue to anticipate our 2006 capital expenditures will be
between $28 million and $30 million," Wells added. "Interest expense
for the first quarter, excluding amortization of debt issuance costs,
was $7.7 million, and was on track with our guidance of between $30
million and $32 million for 2006. During the quarter, we repaid $24
million on our revolving credit facility, and reduced our net debt by
$2.2 million. Overall, we are pleased with our performance this
quarter, and with the trends in our business."
FINANCIAL DISCUSSION FOR 1ST QUARTER 2006:
-- Operating Revenues were $57.4 million in the first quarter
compared to $57.5 million in the first quarter of 2005.
Network access services revenues decreased $754,000, or 3.0%,
for the first quarter but were offset by a $914,000, or 12.7%
increase in other services and sales revenues primarily due to
growth in DSL revenues. DSL Internet access service revenues
increased $1.4 million, or 61.9%, due primarily to customer
growth.
-- Operating Costs and Expenses decreased $0.2 million, or 0.6%,
in the first quarter of 2006 as compared to the first quarter
of 2005. Selling, general and administrative costs increased
$403,000, or 4.0%, for the first quarter including a pension
settlement charge of approximately $239,000 for distributions
related to amendments to the pension plan made during the
second quarter of 2005. Non-cash equity based compensation
increased by $214,000 for the quarter. Depreciation and
amortization decreased $664,000, or 5.4%, during the first
quarter due to the elimination of depreciation expense on
certain five-year assets in the latter part of 2005.
-- Operating Income was $19.7 million in the first quarter of
2006 as compared to $19.5 million in the same period in 2005.
-- Interest Expense for the first quarter was $7.8 million
compared to $7.7 million in the same period in 2005. Higher
interest rates on the Company's variable rate debt and an
increase in the rate on the interest rate swap agreement,
resulting from the extension of the term in August 2005, were
partially offset by a lower average balance on the Company's
revolving credit facility.
-- Net Income increased by $174,000 to $12.0 million for the
quarter compared to net income of $11.8 million in the first
quarter of 2005.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $32.1
million for the first quarter of 2006 as compared with $32.3
million in the same period in 2005.
-- Total Access Lines decreased by 8,700, or 3.3%, for the first
quarter of 2006 as compared to the first quarter in 2005.
Total access lines decreased by 1,000 during the first quarter
of 2006 from the fourth quarter in 2005, as ILEC access lines
declined by 1,500 lines and CLEC lines increased by 500 lines.
First Quarter 2006 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
1st 1st Change
Quarter Quarter
2006 2005 Amount Percent
-------------------------------------
Revenue $ 57,439 $ 57,501 $ (62) -0.1%
Operating Income $ 19,691 $ 19,507 $ 184 0.9%
Interest Expense $ 7,824 $ 7,743 $ 81 1.0%
Net Income $ 12,018 $ 11,844 $ 174 1.5%
Basic Earnings Per Share $ 0.39 $ 0.38 $ 0.01 2.6%
Diluted Earnings Per Share $ 0.38 $ 0.37 $ 0.01 2.7%
Adjusted EBITDA (1) $ 32,132 $ 32,330 $ (198) -0.6%
Capital Expenditures and
Acquisitions $ 5,112 $ 5,630 $ (518) -9.2%
(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 1st 1st
Quarter Quarter
2006 2005 % Change
- ----------------------------------------------------------------------
Telephone Access Lines
ILEC Lines (1) 236,400 249,000 -5.1%
CLEC Lines (2) 21,300 17,400 22.4%
------- ------- ------
Total Telephone Access Lines 257,700 266,400 -3.3%
Long Distance Subscribers 144,600 139,200 3.9%
Dial-up Internet Subscribers 39,600 49,300 -19.7%
DSL Subscribers 35,900 19,600 83.2%
Average Monthly Revenue Per
Access Line (3) $ 74.15 $ 71.87 3.2%
1st 4th
Quarter Quarter
2006 2005 % Change
-------------------------------------
Telephone Access Lines
ILEC Lines (1) 236,400 237,900 -0.6%
CLEC Lines (2) 21,300 20,800 2.4%
-------- ---------- ------
Total Telephone Access Lines 257,700 258,700 -0.4%
Long Distance Subscribers 144,600 142,800 1.3%
Dial-up Internet Subscribers 39,600 41,700 -5.0%
DSL Subscribers 35,900 31,200 15.1%
Average Monthly Revenue Per
Access Line (3) $ 74.15 $ 74.73 -0.8%
(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 March 31, 2006; 3,200
wholesale lines subscribed at December 31, 2005; and 4,200 wholesale
lines subscribed at March 31, 2005.
(2) Access lines subscribed by customers of our competitive local
exchange carrier subsidiaries, Iowa Telecom Communications, Inc. and
IT Communications, LLC.
(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.
Investor Call
As previously announced, Iowa Telecom's management will hold a
conference call to discuss the first quarter results on Thursday, May
4, 2006 at 9:00 a.m. (Eastern Time). To listen to the call,
participants should dial (719) 457-2618 approximately 10 minutes prior
to the start of the call. A telephonic replay will become available
after 12:00 p.m. (Eastern Time) on May 4, 2006 and will continue
through May 11, 2006 by dialing (719) 457-0820 and entering
Confirmation Code 9743733.
The live broadcast of Iowa Telecom's quarterly conference call
will be available online at www.iowatelecom.com or www.earnings.com on
May 4, 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.
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Balance Sheets
(Unaudited)
(dollars in thousands, except per share amounts)
As of As of
March 31, 2006 December 31, 2005
---------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,007 $ 26,782
Accounts receivable, net 18,856 18,121
Inventory 3,274 2,722
Prepayments and other assets 3,617 2,402
-------------- ----------------
Total Current Assets 30,754 50,027
-------------- ----------------
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment 510,075 504,662
Accumulated depreciation (200,691) (189,163)
-------------- ----------------
Net Property Plant and
Equipment 309,384 315,499
-------------- ----------------
INTANGIBLE AND OTHER ASSETS, net 29,838 23,993
INVESTMENT IN AND RECEIVABLE FROM
THE RURAL TELEPHONE FINANCE
COOPERATIVE 13,306 14,890
-------------- ----------------
Total Assets $ 843,353 $ 864,522
-------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 16,000 $ 40,000
Accounts payable 8,375 10,416
Advanced billings and customer
deposits 6,945 6,042
Accrued and other current
liabilities 26,387 29,842
-------------- ----------------
Total Current Liabilities 57,707 86,300
-------------- ----------------
LONG-TERM DEBT 477,778 477,778
OTHER LONG-TERM LIABILITIES 27,693 19,913
-------------- ----------------
Total long-term liabilities 505,471 497,691
-------------- ----------------
TOTAL LIABILITIES 563,178 583,991
-------------- ----------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
100,000,000 shares authorized,
31,124,356 and 31,065,963 shares
issued and outstanding 311 311
Additional paid-in-capital 318,802 317,877
Retained deficit (43,560) (42,874)
Accumulated other comprehensive
income 4,622 5,217
-------------- ----------------
Total Stockholders' Equity 280,175 280,531
-------------- ----------------
Total Liabilities and Stockholders'
Equity $ 843,353 $ 864,522
============== ================
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Income Statements
(Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended
March 31,
---------------------------------
2006 2005
---------------------------------
REVENUE AND SALES
Local services $ 19,055 $ 18,807
Network access services 24,748 25,502
Toll services 5,519 5,989
Other services and sales 8,117 7,203
--------------- ---------------
Total revenues and sales 57,439 57,501
--------------- ---------------
OPERATING EXPENSES
Cost of services and sales
(exclusive of items shown
separately below) 15,548 15,533
Selling, general and
administrative 10,521 10,118
Depreciation and amortization 11,679 12,343
--------------- ---------------
Total operating costs and
expenses 37,748 37,994
--------------- ---------------
OPERATING INCOME 19,691 19,507
--------------- ---------------
OTHER INCOME (EXPENSE)
Interest and dividend income 201 159
Interest expense (7,824) (7,743)
Other, net (50) (79)
---------------- --------------
Total other expense, net (7,673) (7,663)
--------------- ---------------
NET INCOME $ 12,018 $ 11,844
================ ===============
COMPUTATION OF EARNINGS
PER SHARE
Basic - Earnings per share $ 0.39 $ 0.38
=============== ===============
Basic - Weighted average number of
shares outstanding 31,085 30,864
=============== ===============
Diluted - Earnings per share $ 0.38 $ 0.37
=============== ===============
Diluted - Weighted average number of
shares outstanding 31,950 31,594
=============== ===============
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended
March 31,
2006 2005
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 12,018 $ 11,844
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 11,100 11,750
Amortization of intangible
assets 579 593
Loss from sale of exchanges 26 --
Non-cash stock based
compensation expense 568 354
Changes in operating assets and
liabilities:
Receivables (735) 1,265
Inventory (552) (600)
Accounts payable (2,041) (3,096)
Other assets and liabilities (1,398) (2,339)
--------------- ---------------
Net cash provided by operating
activities 19,565 19,771
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (5,112) (5,630)
Proceeds from sale of exchanges 95 --
--------------- ---------------
Net cash used in investing
activities (5,017) (5,630)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in revolving credit
facility (24,000) (7,507)
Proceeds from exercise of stock
options 357 --
Dividends paid (12,680) (5,401)
--------------- ---------------
Net cash used in financing
activities (36,323) (12,908)
--------------- ---------------
Net (Decrease) Increase in Cash and
Cash Equivalents (21,775) 1,233
Cash and Cash Equivalents at
Beginning of Period 26,782 2,874
--------------- ---------------
Cash and Cash Equivalents at End of
Period $ 5,007 $ 4,107
=============== ===============
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
EXPLANATION AND RECONCILIATION TO NON-GAAP CONCEPTS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2006 2005
ADJUSTED EBITDA:
Net Income $ 12,018 $ 11,844
Interest Expense 7,824 7,743
Depreciation and Amortization 11,679 12,343
Unrealized losses on financial
derivatives 50 79
Non-cash stock-based compensation
expense (1) 568 354
Extraordinary or unusual (gains)
losses -- --
Non-cash portion of RTFC Capital
Allocation (2) (33) (33)
Other non-cash losses (gains) -- --
Loss (gain) on disposal of assets
not in ordinary course 26 --
--------------- ----------------
ADJUSTED EBITDA $ 32,132 $ 32,330
=============== ================
(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.
Investor Relations Contacts:
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