Exhibit 99.1
Iowa Telecom Reports Results for Quarter Ended June 30, 2006
NEWTON, Iowa--(BUSINESS WIRE)--Aug. 3, 2006--Iowa
Telecommunications Services, Inc. (NYSE: IWA) today announced
operating results for the quarter ended June 30, 2006. Quarterly
highlights for the Company include:
-- Operating revenues were $57.2 million.
-- Operating income was $20.9 million.
-- Net income was $10.5 million or $0.33 per diluted share.
-- Adjusted EBITDA (as defined herein) was $32.2 million.
"We're very pleased with our results for the quarter, which were
consistent with our expectations and which reflect the relatively
stable nature of our rural telecommunications business," said Alan L.
Wells, Iowa Telecom chairman and chief executive officer. "We continue
to be pleased with the success of our DSL product, as well as with our
bundled product offerings. The increase in our average monthly revenue
per access line, which grew to $74.37 during the second quarter from
$72.76 a year ago, was largely the result of our success with these
offerings. As we expected, our total access line decline was slightly
higher during the quarter as the direct result of two unique factors.
First, we completed a 600-line exchange sale during the period, which
resulted in a reduction in our reported lines for the quarter. Also
negatively impacting our access lines was the one-time effect of the
elimination of the "touch play" gambling devices throughout the state
of Iowa. In May, the Iowa Legislature implemented a ban on 'touch
play' machines throughout Iowa. These devices typically required an
access line, as well as DSL service to transmit data. As a result of
the legislation, during the quarter we experienced a one-time loss of
approximately 500 access lines, as well as approximately 500 DSL
subscribers. However, despite this one-time loss, our DSL subscribers
increased by 2,700 during the quarter.
"Our Adjusted EBITDA for the second quarter was comparable to the
prior quarter's level. As a result of our tax position, the second
quarter of 2006 was the first period we were required to record book
income tax expense. After reflecting a $2.8 million provision for
income tax expense, net income was $1.5 million lower than the
previous quarter. However, this recorded tax expense did not impact
our cash flow. Our actual cash taxes paid through the first six months
of 2006 was only $172,000, reflecting the continued utilization of our
net operating loss carry forwards and continued tax amortization,"
Wells added. "Our year-to-date capital expenditures through the second
quarter were $13.4 million, and we continue to anticipate our 2006
capital expenditures will be between $28 million and $30 million.
Interest expense for the second quarter, excluding amortization of
debt issuance costs, was $7.6 million, consistent with our guidance of
between $30 million and $32 million for 2006. Our balance sheet
remains strong as we continued to use our excess cash flow to reduce
debt. During the quarter, we reduced our net debt by $13.5 million.
"Subsequent to the quarter end, we closed three previously
announced transactions which we believe are very consistent with our
goal of generating strong future cash flows," Wells noted. "Our
acquisition of Montezuma Mutual Telephone Company for $11.8 million,
which included $1.3 million in cash and working capital, adds
approximately 2,100 telephone access lines, approximately 1,350 cable
television subscribers and more than 950 data customers in markets
adjacent to our existing incumbent service area. We also completed a
long-standing sale of four exchanges consisting of approximately 2,000
access lines and approximately 300 DSL subscribers for $8.4 million to
Partner Communications, our competitor in these markets.
"Lastly, earlier this week we acquired all the outstanding stock
of Baker Communications, Inc. for $8.25 million in cash," concluded
Wells. "Baker Communications, headquartered in Des Moines, is a leader
in the sales and support of communications services and data
networking to companies across Iowa and Nebraska. This acquisition is
aligned with our company's goal of providing reliable voice and data
solutions to our customers. We will also further expand our customer
base since Baker Communications' clients are generally located in
communities in which we currently have little presence, and we believe
we will have opportunities to leverage our extensive voice and data
networks for the benefit of these customers. Most importantly the
acquisition of Baker Communications, as well as the Montezuma
acquisition, clearly meets our criteria for acquisitions to be
accretive to cash flow on a per share basis."
FINANCIAL DISCUSSION FOR 2ND QUARTER 2006:
-- Operating Revenues were $57.2 million in the second quarter
compared to $58.0 million in the second quarter of 2005.
Network access services revenues decreased $1.7 million for
the second quarter but were offset by a $916,000 increase in
other services and sales revenues primarily due to growth in
DSL revenues. DSL Internet access service revenues increased
$1.4 million, or 53.4%, due primarily to customer growth. A
$416,000 increase in local service revenues due to the growth
in bundled product offerings and price increases also offset
the network access services decrease.
-- Operating Costs and Expenses decreased $813,000, or 2.2%, in
the second quarter of 2006 as compared to the second quarter
of 2005. Selling, general and administrative costs decreased
$296,000, or 3.4%, for the second quarter. The second quarter
of 2005 included a $2.0 million one-time favorable impact
resulting from past disputes with other carriers. The second
quarter of 2006 included a $1.3 million gain on the sale of
three exchanges during the quarter, and also included a
pension settlement charge of approximately $81,000 for
distributions related to amendments to the pension plan made
during the second quarter of 2005. Non-cash equity based
compensation increased by $236,000 for the quarter.
Depreciation and amortization decreased $457,000, or 3.7%,
during the second quarter compared to 2005.
-- Operating Income was $20.9 million in the second quarter of
2006 as compared to $21.0 million in the same period in 2005.
-- Interest Expense for the second quarter increased $78,000 to
$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.
-- Earnings Before Income Taxes for the second quarter was $13.3
million compared to $13.3 million in the second quarter of
2005.
-- Income Tax Expense for the second quarter was $2.8 million
compared to zero in the second quarter of 2005. Current income
tax expense on earnings for the second quarter was $5.3
million, however, the Company reversed the remaining valuation
allowance on its deferred tax assets, which reduced income tax
expense for the period by $2.5 million. The Company estimates
that future book income tax expense will be recorded at an
effective tax rate of approximately 41% in future periods. The
recorded book tax expense did not impact the cash taxes paid
during the quarter. The Company paid actual cash income taxes
during the quarter of $172,000, reflecting the continued
utilization of net operating loss carry forwards and continued
tax amortization. At the end of the quarter, the Company had a
net operating loss carry forward balance of approximately $192
million.
-- Income Available For Common Stockholders was $10.5 million for
the quarter compared to net income of $13.3 million in the
second quarter of 2005.
-- Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $32.2
million for the second quarter of 2006 as compared with $33.8
million in the same period in 2005.
-- Total Access Lines decreased by 10,600, or 4.0%, for the
second quarter of 2006 as compared to the second quarter in
2005. Total access lines decreased by 2,900 during the second
quarter of 2006 from the first quarter in 2006, as ILEC access
lines declined by 3,600 lines and CLEC lines increased by 700
lines. Approximately 600 of the decline in access lines during
the second quarter were the result of exchange sales that
closed during the period, and approximately 500 were the
result of legislation which eliminated "touch play" gambling
devices throughout the state of Iowa.
Second Quarter 2006 Financial Summary
(Unaudited)
(dollars in thousands, except per share amounts)
2nd Quarter 2nd Quarter Change
2006 2005 ----------------
Amount Percent
- ---------------------------------------------------------------------
Revenue $ 57,172 $ 58,037 $ (865) -1.5%
Operating Income $ 20,922 $ 20,974 $ (52 ) -0.2%
Interest Expense $ 7,784 $ 7,706 $ 78 1.0%
Earnings Before
Income Taxes $ 13,253 $ 13,334 $ (81 ) -0.6%
Income Available for
Common $ 10,496 $ 13,334 $ (2,838 ) -21.3%
Basic Earnings Per
Share $ 0.34 $ 0.43 $ (0.09 ) -20.9%
Diluted Earnings Per
Share $ 0.33 $ 0.42 $ (0.09 ) -21.4%
Adjusted EBITDA (1) $ 32,224 $ 33,780 $ (1,556 ) -4.6%
Capital Expenditures
and Acquisitions $ 8,261 $ 8,038 $ 223 2.8%
(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 2nd Quarter 2nd Quarter
2006 2005 % Change
- ---------------------------------------------------------------------
Telephone Access Lines
ILEC Lines (1) 232,800 246,200 -5.4%
CLEC Lines (2) 22,000 19,200 14.6%
------------- --------------- -----------
Total Telephone Access
Lines 254,800 265,400 -4.0%
Long Distance Subscribers 145,000 141,200 2.7%
Dial-up Internet
Subscribers 37,400 47,200 -20.8%
DSL Subscribers 38,600 22,600 70.8%
Average Monthly Revenue Per
Access Line (3) $ 74.37 $ 72.76 2.2%
2nd Quarter 1st Quarter
2006 2006 % Change
-----------------------------------------
Telephone Access Lines
ILEC Lines (1) 232,800 236,400 -1.5%
CLEC Lines (2) 22,000 21,300 3.3%
------------- --------------- -----------
Total Telephone Access
Lines 254,800 257,700 -1.1%
Long Distance Subscribers 145,000 144,600 0.3%
Dial-up Internet Subscribers 37,400 39,600 -5.6%
DSL Subscribers 38,600 35,900 7.5%
Average Monthly Revenue Per
Access Line (3) $ 74.37 $ 74.15 0.3%
(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 June 30, 2006; 3,200 wholesale lines subscribed at
March 31, 2006; and 4,100 wholesale lines subscribed at June 30,
2005. During the second quarter of 2006, the company completed the
sale of three exchanges resulting in the decline of 600 ILEC
lines.
(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 second quarter results on Thursday,
August 3, 2006 at 9:00 a.m. (Eastern Time). To listen to the call,
participants should dial (913) 981-5520 approximately 10 minutes prior
to the start of the call. A telephonic replay will become available
after 12:00 p.m. (Eastern Time) on August 3, 2006 and will continue
through August 10, 2006 by dialing (719) 457-0820 and entering
Confirmation Code 4052919.
The live broadcast of Iowa Telecom's quarterly conference call
will be available online at www.iowatelecom.com or www.earnings.com on
August 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 435
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
June 30, 2006 December 31, 2005
---------------- ------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,519 $ 26,782
Accounts receivable, net 17,423 18,121
Inventory 3,638 2,722
Prepayments and other assets 2,708 2,402
---------------- ------------------
Total Current Assets 29,288 50,027
---------------- ------------------
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment 509,266 504,662
Accumulated depreciation (204,493) (189,163)
---------------- ------------------
Net Property Plant and
Equipment 304,773 315,499
---------------- ------------------
GOODWILL 458,034 460,113
INTANGIBLE AND OTHER ASSETS, net 33,684 23,993
INVESTMENT IN AND RECEIVABLE FROM
THE RURAL TELEPHONE FINANCE
COOPERATIVE 13,422 14,890
---------------- ------------------
Total Assets $ 839,201 $ 864,522
================ ==================
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 3,000 $ 40,000
Accounts payable 8,618 10,416
Advanced billings and customer
deposits 6,998 6,042
Accrued and other current
liabilities 28,899 29,842
---------------- ------------------
Total Current Liabilities 47,515 86,300
---------------- ------------------
LONG-TERM DEBT 477,778 477,778
DEFERRED TAX LIABILITIES 9,182 -
OTHER LONG-TERM LIABILITIES 20,805 19,913
---------------- ------------------
Total long-term liabilities 507,765 497,691
---------------- ------------------
TOTAL LIABILITIES 555,280 583,991
---------------- ------------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
100,000,000 shares authorized,
31,177,356 and 31,065,963
shares issued and outstanding 312 311
Additional paid-in-capital 319,705 317,877
Retained deficit (45,823) (42,874)
Accumulated other comprehensive
income 9,727 5,217
---------------- ------------------
Total Stockholders' Equity 283,921 280,531
---------------- ------------------
Total Liabilities and
Stockholders' Equity $ 839,201 $ 864,522
================ ==================
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Income Statements
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ---------------------
2006 2005 2006 2005
------------ ---------- ---------- ----------
REVENUE AND SALES
Local services $ 19,437 $ 19,021 $ 38,492 $ 37,828
Network access
services 23,671 25,365 48,419 50,867
Toll services 5,483 5,986 11,002 11,975
Other services and
sales 8,581 7,665 16,698 14,868
------------ ---------- ---------- ----------
Total revenues and
sales 57,172 58,037 114,611 115,538
OPERATING EXPENSES
Cost of services and
sales (exclusive
of items shown
separately below) 15,849 15,909 31,397 31,442
Selling, general and
administrative 8,512 8,808 19,033 18,926
Depreciation and
amortization 11,889 12,346 23,568 24,689
------------ ---------- ---------- ----------
Total operating
costs and expenses 36,250 37,063 73,998 75,057
OPERATING INCOME 20,922 20,974 40,613 40,481
OTHER INCOME (EXPENSE)
Interest and dividend
income 167 133 368 292
Interest expense (7,784) (7,706) (15,608) (15,449)
Other, net (52) (67) (102) (146)
------------ ---------- ---------- ----------
Total other
expense, net (7,669) (7,640) (15,342) (15,303)
EARNINGS BEFORE INCOME
TAXES 13,253 13,334 25,271 25,178
INCOME TAX EXPENSE 2,757 - 2,757 -
------------ ---------- ---------- ----------
INCOME AVAILABLE FOR
COMMON STOCKHOLDERS $ 10,496 $ 13,334 $ 22,514 $ 25,178
============ ========== ========== ==========
COMPUTATION OF EARNINGS
PER SHARE
Basic - Earnings
Per Share $ 0.34 $ 0.43 $ 0.72 $ 0.82
Basic - Weighted
average number of
shares outstanding 31,168 30,879 31,127 30,872
Diluted - Earnings
Per Share $ 0.33 $ 0.42 $ 0.70 $ 0.80
Diluted - Weighted
average number of
shares outstanding 32,063 31,598 32,007 31,596
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------
2006 2005 2006 2005
------- ------- ------- -------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 10,496 $ 13,334 $ 22,514 $ 25,178
Adjustments to
reconcile net income
to net cash provided
by operating activities:
Depreciation 11,325 11,751 22,425 23,501
Amortization of
intangible assets 564 595 1,143 1,188
Gain from sale
of exchanges (1,318 ) - (1,292) -
Deferred income
taxes 2,413 - 2,413 -
Non-cash stock- based
compensation expense 597 361 1,165 715
Changes in operating
assets and liabilities:
Receivables 1,433 (2,384) 698 (1,119)
Inventory (364) (544) (916) (1,144)
Accounts payable 243 (2,119) (1,798) (5,215)
Other assets
and
liabilities 3,956 5,149 2,558 2,810
-------- ------- ------- -------
Net cash provided by
operating activities 29,345 26,143 48,910 45,914
CASH FLOWS FROM
INVESTING ACTIVITIES
Capital expenditures (8,261) (8,038) (13,373) (13,668)
Business acquisitions - (85) - (85)
Proceeds from sale of
exchanges 4,825 - 4,920 -
-------- ------- ------- -------
Net cash used in
investing activities (3,436) (8,123) (8,453) (13,753)
CASH FLOWS FROM
FINANCING ACTIVITIES
Net change in
revolving credit
facility (13,000) (6,500) (37,000) (14,007)
Proceeds from
exercise of employee
stock options 307 384 664 384
Dividends paid (12,704) (12,500) (25,384) (17,901)
-------- ------- ------- -------
Net cash used in
financing activities (25,397) (18,616) (61,720) (31,524)
-------- ------- ------- -------
Net (Decrease)Increase
in Cash and Cash
Equivalents 512 (596) (21,263) 637
-------- ------- ------- -------
Cash and Cash Equivalents
at Beginning of Period 5,007 4,107 26,782 2,874
-------- ------- ------- -------
Cash and Cash
Equivalents at End
of Period $ 5,519 $ 3,511 $ 5,519 $ 3,511
======== ======= ======= =======
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,
------------------- ----------------
2006 2005 2006 2005
---------- -------- -------- -----------
ADJUSTED EBITDA:
Net Income $ 10,496 $13,334 $22,514 $ 25,178
Income Tax Expense 2,757 - 2,757 -
Interest Expense 7,784 7,706 15,608 15,449
Depreciation and Amortization 11,889 12,346 23,568 24,689
Unrealized losses on financial
derivatives 52 67 102 146
Non-cash stock-based
compensation expense (1) 597 361 1,165 715
Extraordinary or unusual
(gains) losses - - - -
Non-cash portion of RTFC
Capital Allocation (2) (33) (34) (66) (67)
Other non-cash losses (gains) - - - -
Loss (gain) on disposal of
assets not in ordinary course (1,318) - (1,292) -
Transaction costs - - - -
---------- -------- -------- -----------
ADJUSTED EBITDA $ 32,224 $33,780 $64,356 $ 66,110
========== ======== ======== ===========
(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: Corporate Communications, 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